Explore Entrepreneurship Unit 2 Exam Flashcards

Entrepreneurial opportunity

A favorable set of circumstances that creates a need for a new product, service, or business.

Affordable Loss Principle

Only invest in what you can afford to lose, rather than focusing on expected returns.

Start-up costs

Expenses incurred before a business begins operations, such as remodeling, equipment installation, and legal fees.

Operating costs

Recurring expenses necessary for running a business, including wages, rent, and utilities.

Advantages of acquiring an existing venture

More certainty about future operations, reduced time and effort in starting, and established relationships with suppliers.

Franchising

An arrangement where the owner of a trademark licenses others to use it in selling goods or services.

New-New Approach in entrepreneurship

Entering a new market with a new product or service.

New-Old Approach in entrepreneurship

Entering a new market with an existing product or service.

Risk vs. Reward Analysis

The importance of obtaining an adequate return on the amount of money risked.

Upside Gain

potential profit

Downside Loss

potential loss and defines what one can afford to lose

Causes of venture failures

Product/market problems, poor timing, unclear business definition, and financial difficulties.

Pros of franchising

Training and guidance, brand name appeal, proven track record, financial assistance.

Cons of franchising

Franchise fees, franchisor control, unfulfilled promises.

Common methods to fund a business

Bootstrap, debt financing, grant/non-dilutive equity, private equity, angel/venture capital.

Going public

raising capital through the sale of securities on the stock market

Advantages of going public

Size of capital, liquidity, value, image.

Disadvantages of going public

Costs, disclosure, legal requirements, shareholder pressure.

Seed/Venture Capital

Sources of equity funding for new ventures that provide capital for start-ups and expansion, along with market research and management consulting.

Advantages of venture capital

Larger investments, willingness to wait for returns, further financing rounds, expertise and connections.

Disadvantages of venture capital

Longer timeline to close, potential loss of control over the business.

Angel investors

Accredited, wealthy individuals who invest in start-ups, often local to the venture.

Advantages of angel investors

Engage in smaller deals, prefer start-up stage, invest in various industries, genuinely interested in the venture.

Disadvantages of angel investors

No additional funding, lack of national reputation, desire to be involved in decision-making.

Founder's money

Financing from one's own savings, credit cards, or consulting jobs.

Advantages of using founder's money

No obligations to others, timely access to funds.

Disadvantages of using founder's money

Personal liability for debt, time taken away from business by odd jobs.

What is the purpose of intellectual property law?

To provide a legal monopoly on creations and encourage innovation.

Types of intellectual property

Patents, copyrights, trademarks.

What does a patent provide?

Exclusive rights to hold, transfer, and license the production and sale of a product or process.

Duration of a design patent

15 years.

Duration of a utility patent

20 years.

What qualifies for patent protection?

Processes, machines, products, plants, chemical compounds, and improvements on existing items.

What is a trade secret?

Special formulas or knowledge kept confidential to maintain a competitive advantage.

What does copyright protect?

Literary or artistic productions, providing exclusive rights to reproduce, distribute, and perform the work.

Duration of copyright protection

The life of the author plus 70 years.

What is not copyrightable?

Ideas, procedures, facts, and works in the public domain.

Trademark

A distinctive name, mark, symbol, or motto identified with a company's products.

What are the advantages of trademark registration?

Nationwide notice of rights, protection against importers, and renewal options every 10 years.

Types of trademarks

Fanciful, arbitrary, suggestive, descriptive, and generic.

What is the Fair Use Doctrine?

Allows reproduction of copyrighted works for purposes like criticism, comment, news reporting, teaching, and research without infringement.

What are the criteria for information to be considered a trade secret?

1. Not known by competition. 2. Business would lose its advantage if disclosed. 3. Owner has taken reasonable steps to protect it.

Examples of trade secrets

Customer lists, strategic plans, R&D, pricing information, marketing techniques, production techniques.

Sole proprietorship

A business owned and operated by one person, with no legal distinction from its owner.

Advantages of a sole proprietorship

Ease of formation, sole ownership of profits, control, flexibility, and no corporate business tax.

Disadvantages of a sole proprietorship

Unlimited liability, lack of continuity, limited capital, and difficulty in obtaining long-term financing.

Partnership

An association of two or more persons acting as co-owners of a business for profit.

What is the purpose of Articles of Partnership?

To outline financial and managerial contributions and roles of partners; without it, responsibilities default to equal.

Advantages of partnerships

Ease of formation, direct rewards, facilitated growth, flexibility, and possible tax advantages.

Disadvantages of partnerships

Unlimited liability for at least one partner, lack of continuity, difficulty in obtaining capital, and bound by the acts of one partner.

Corporation

An artificial being, existing only in law, and separate from its owners.

Advantages of forming a corporation

Limited liability, transfer of ownership, unlimited life, and ease of securing capital.

Disadvantages of corporations

Activity restrictions, lack of representation, regulations, organizing expenses, and double taxation.

S Corporation

A corporation that avoids income taxes at the corporate level while retaining limited liability.

Limited Liability Company (LLC)

A hybrid business structure offering limited liability of a corporation and tax advantages of a partnership.

Certified B Corporation

A corporation certified for meeting high standards of social and environmental performance.

L3C Corporation

A type of LLC designed to attract investment for social benefit ventures.

Bankruptcy

A situation where a venture's financial obligations exceed its assets, making it unable to meet obligations.

Liquidation

The process requiring the debtor to surrender all property to a court-appointed trustee.

Reorganization in bankruptcy

A plan formulated by the debtor to pay a portion of debts while discharging the remaining sum.

The four Ps of marketing

Product, Price, Place, Promotion.

The 4 Cs of entrepreneurial marketing

Cocreated, Communities, Customizable, Choice.

What is the first phase in developing a marketing plan?

Determine your purpose and define research objectives.

The type of data is collected directly by the researcher for a specific study

Primary Data

Examples of primary data collection methods

Surveys, experiments, interviews, focus groups, and observations.

Secondary Data

sales records and financial statements

Market segmentation

Specific characteristics that differentiate one group of consumers from others.

Three key financial statements every entrepreneur should know

Balance Sheet, Income Statement, Cash Flow Statement.

Balance Sheet

A snapshot of what a business has, who has a claim on it, including assets, liabilities, and owners' equity.

ALOE equation

Assets = Liabilities + Owners' Equity.

Accrual Accountin

_____ accounting records transactions when they occur

Cash accounting

_____ accounting records transactions when cash changes hands.

Income statement

Results of the firm's operations, including revenues, cost of goods sold, and expenses.

Net income

revenues minus expenses.

Three categories of cash flow?

Operations, Investing, and Financing.

Purpose of budgeting in business?

To forecast uncontrollable factors and make decisions about controllable factors.

Cash flow statement

Inflows and outflows of cash over time, indicating the company's liquidity.

Role of social media marketing

To use online platforms to promote products and engage customers.

Gross income

Gross income is calculated as revenues minus cost of goods sold (COGS).

Demographics

Characteristics such as age, marital status, sex, occupation, income, and location.

Owners Equity

Represents what the owners have a claim on in the business, including common stock and retained earnings.

Break-Even Point

The point where you're selling enough product/service that you are not losing money anymore.

Variable Costs

Costs or expenses that vary directly with the level of production/revenues.

Fixed Costs

Costs that remain the same, no matter how many products are made or sold.

Contribution Margin (Unit)

Unit selling price minus unit variable cost.

Break-Even Point (units)

Fixed costs divided by contribution margin per unit.

Break-Even Point (revenue)

Break-even point units multiplied by selling price per unit.

PMF

Product-Market Fit

Business Model

Explains the logic of the firm, how it operates, and how it creates and captures value for its stakeholders.

Business Model Canvas

A visual tool for illustrating how a business works, including its value proposition and customer segments.

Value Proposition

A bundle of products and services that create value for a customer segment, solving their problems or satisfying their needs.

Customer Segments

Groups of people an organization aims to reach and serve, segmented according to needs, channels, relationships, and profitability.

Business Channels

Ways a business communicates with and reaches its customer segments to deliver its value proposition.

Revenue Streams

Cash generated from each customer segment, including various pricing strategies like fixed and dynamic pricing.

Key Resources

The most important assets required to make a business model work, categorized into physical, intellectual, human, and financial.

Key Activities

The most important things a company must do to make a business model work, such as production and marketing.

Key Partnerships

A network of suppliers and partners that make a business model work, including alliances and joint ventures.

Cost Structure

Describes all costs incurred to make the business model work, categorized into cost-driven and value-driven.

Business Brief

A 2-3 page document describing the company overview, value proposition, customer, and milestones.

Feasibility Study

An assessment of the viability of a business concept, focusing on market size, suppliers, and entrepreneur skills.