Deck 6: Small Business Entry: Paths to Full-Time Entrepreneurship

Question 1

If you were able to enter into any small business that you desired, what things would you look for in the business

Answer 1

Starting a business is tough and complicated task, but to let the business survive is yet more difficult. Many a times, business owners are not able to run their businesses efficiently and get failed. This happens because everybody is not prepared for the pitfalls which can become visible at any point of entrepreneurial process. The entrepreneurs are excited about the rewards which they would be getting once the business would get settled. This excitement leads a careless way to the issues and challenges they may face.
The entrepreneurs should be risk-takers, balanced, principled and thinkers. All four attributes are must to be present in an individual who aspires to be an entrepreneur. If somebody gets the chance to start a business which he/she has desired, the following things have to be taken care of:
• The individuals should utilize the opportunity assuming that this is the clean slate on which they can put desired differentiated strategies.
• They should prepare themselves for all possible challenges which can come in the journey, advance preparation will save them from pitfalls.
• They should be careful enough not to enter in a vast market all of a sudden, small businesses are meant to follow small steps if they want a consistent growth approach.
• The rewards and pitfalls are two sides of the same coin, but the tossing of coin is in owners hands. The focus should be on earning rewards but the preparation should be of avoiding pitfalls. When pitfalls will be removed successfully, the road to success will be smooth and flexible.
To get such an opportunity is like a dream come true. The business should be nurtured like a small plant. The optimistic and dedicated approach of converting a plant into tree will provide the desired fruits undoubtedly. This process requires patience and a never-give up attitude. People who get the opportunity to be their own masters that too in the field they want are the luckiest ones. They should utilize this opportunity by earning maximum possible returns.

Question 2

Find out how did the owner of the business where you are employed get into business

Answer 2

NO ANSWER

Question 3

Refer to the list of success indicators on page 146. Which of these indicators does Michael Tease have
(In Reference Success Indicators)

Answer 3

The case depicts the story of a person who decided to open something of his own after a painful back operation. Having experienced in the hospitality industry, he was not able to find out any suitable opportunity. He got an offer to reopen a failed night club which was accepted by him after a series of thoughts.
There are 12 success indicators mentioned in the said list, out of those 12 indicators Person M possesses below 4 indicators:
• Produce a product or service for which there is a proven demand: The nightclub which he opened used to be an iconic place for youth refreshments. There was a proven demand for the business he started.
• Start with more than one founder: He was not the only founder; the actual founder was Person MM who offered Person M to start the business as he was experienced in the same industry.
• Choose the business that produces high margins: it was a proven fact that liquor business has high margins. The maximum sales of the night club were due to the availability of liquor.
• Have industry experience: Person M's father was once the founder of a night club. For many years he himself has worked in the hospitality industry.
The above-mentioned indicators show that the business he has started would provide high returns within a short period of time. This happens as well. Although Person M does not expect the success so soon, he witnesses the same within a limited time-duration.

Question 4

There are twelve indicators of a start-up success. Identify which ones were or could have been potentially utilized by the Beilers. Are these actions must-dos for the new start-ups Explain.

Question 5

What information should Gwendolyn obtain before making a decision to purchase the business

Question 6

Suppose you had arranged enough capital that you could either buy into an existing Outback Steak House or you could start your own independent steak house restaurant. What are the advantages and disadvantages of each alternative Which would you prefer and why

Question 7

Visit the Small Business Administration web site's franchising page at http:///www.sba.gov/starting_business/startup/franchise.html. Using the links on that site, find a franchise business that you believe might be successful, were you to buy it. Contact the franchisor, explain your interest, and find out the specifics of the franchise opportunity. Report your findings to your class.

Question 8

What are the critical success factors for a bar, lounge, or nightclub business

Question 9

What form of franchising would you classify Auntie Anne's business as Does franchising appeal to you Explain.

Question 10

Suppose that you have developed an idea for a new business service. You have limited capital and you do not want to drop out of college. How might you successfully startup a new business to use your idea

Question 11

What do you think about Sly's explanation of the differences between his income statement and his 1040 Schedule C

Question 12

One evening when you went to pick up your child at the KinderKare, the owner mentioned to you that she would like to sell the business. You have always wanted to run a day care, and would like to try to buy her business. What facts should you consider in making this decision

Question 13

What is the best way to get into business Why do you think so

Question 14

After discussing the KinderKare purchase with your banker, you decide to make a determined effort to purchase the business. To make a good decision, what information must you have, and how will you get it

Question 15

Using the resources of your library, find the name and address of an active business broker in your area. Arrange an interview with the broker. Write a report detailing what methods the broker uses to place a value on a business for sale.

Question 16

Based on the information you developed, you have decided that the maximum value of the KinderKare, including the building and lot is $350,000. You have $35,000 that you inherited from your favorite great aunt. Your parents have promised to invest $35,000. Based on the $70,000 that you have available, the banker has promised to make you a SBA guaranteed loan of $70,000. What are your options if you wish to pursue this opportunity

Question 17

What was Michael's motivation for attempting to re-open a failed night club

Question 18

You took a job bagging coffee for a business that purchases directly from Guatemala farmers, thereby getting the coffee at a bargain price, while still paying the farmers above market for the coffee. Working with all that caffeine has got you charged up about going into business for your self. The owner is only 60, but he has told you that he'd like to slow down. He has offered to sell you all or part of the business. What things should you consider in making a decision about what to do

Question 19

How would you classify Auntie Anne's business entry Could they have approached the business entry any other ways Explain.

Question 20

THE GRANDE GENERAL STORE, EST. 1948-IT'S TIME TO SELL
Three generations of Grandes have dedicated their lives and careers to a small general store located on the outskirts of Denver, Colorado. Rocky and Anita Grande, the current owner-operators, have decided to sell the family business. They have declared themselves "tired, burned out, and ready to get out." Their two adult children have no interest in the business, and Rocky and Anita want to spend more time with their three young grandchildren.
They need help with setting a fair price for the business, with finding a qualified buyer, and with preparing a formal prospectus for use by investors, bankers, and others. The Grandes want the highest price possible and at the same time sincerely wish to see the business survive and prosper. It has been in the family for a long time, is a well-established part of the community, and has a dedicated workforce. Most of the employees have been with the company for more than 10 years. The Grandes will allow a buyer to continue to use the family/business name if desired.
What began as an old-fashioned general store (1940s-1960s) carrying everything from food and clothing, to tools, farm supplies, penny candy, and train tickets evolved into a traditional hardware store (1970s-present). The current 4,200 square feet of floor space is divided into four major departments: lawn and garden, paints, electrical and plumbing, and general hardware.
Sales and profits are divided equally between consumers and contractors. The store is located adjacent to a railroad siding with a storage building that allows for large shipments of merchandise to be received, stored, and sold. Building materials of all types (lumber, roofing, siding, Sheetrock, and so on) are picked up and delivered to local construction sites, which represent the mainstay of the contractor business.
The Grande family is well respected by all. Their honesty, loyalty, hard work, and community involvement have come back to bless them on many occasions. During tough economic times, suppliers often extend credit terms far beyond the norm. Customers and contractors are fiercely loyal to the Grande's business even with the presence of modern-day giant warehouse outlets that offer a wider variety of the same products for less money.
While the main buildings date back to 1948, the Grandes have upgraded their fleet of delivery trucks and forklifts. The inside of the store is a mix of the old and the new. State-of-the-art computers, paint processing equipment, and landscape machinery rentals are scattered around the old wooden building that still sports some original display fixtures and the wormy chestnut paneling that Rocky's grandfather Jeb installed during construction of the original building.
The principals have compiled the following summary financials for the past five years of operation:
Income (Profit and Loss) Statement Summary: 1998-2002 (in 000s)



Suburban Denver is considered a moderate- to high-growth region of the state and is projected to stay that way for years to come. New housing, new neighborhoods, new schools, new malls, and the like are under construction and in the planning stages throughout the area.
The Grande business sits on seven acres of land and includes room for growth, in terms of new buildings, increased parking, and other business options. The business was recently appraised by certified professionals. The assessed values are as follows:

The Grandes have compiled all their data into a prospectus and are about to formally put the business on the market. They have yet to settle on an asking price.
Two local area banks have indicated a willingness to offer a 15-year note to a qualified buyer for a maximum of $624,000 (which represents 80 percent of the assessed value of the land, buildings and equipment).
Use your entrepreneurial skills to evaluate this investment opportunity. Is this a business worth buying If so, why How much would you be willing to invest Why

Question 21

Suppose that the income statement is reasonably accurate. What do you think about the purchase price

Question 22

THE GRANDE GENERAL STORE, EST. 1948-IT'S TIME TO SELL
Three generations of Grandes have dedicated their lives and careers to a small general store located on the outskirts of Denver, Colorado. Rocky and Anita Grande, the current owner-operators, have decided to sell the family business. They have declared themselves "tired, burned out, and ready to get out." Their two adult children have no interest in the business, and Rocky and Anita want to spend more time with their three young grandchildren.
They need help with setting a fair price for the business, with finding a qualified buyer, and with preparing a formal prospectus for use by investors, bankers, and others. The Grandes want the highest price possible and at the same time sincerely wish to see the business survive and prosper. It has been in the family for a long time, is a well-established part of the community, and has a dedicated workforce. Most of the employees have been with the company for more than 10 years. The Grandes will allow a buyer to continue to use the family/business name if desired.
What began as an old-fashioned general store (1940s-1960s) carrying everything from food and clothing, to tools, farm supplies, penny candy, and train tickets evolved into a traditional hardware store (1970s-present). The current 4,200 square feet of floor space is divided into four major departments: lawn and garden, paints, electrical and plumbing, and general hardware.
Sales and profits are divided equally between consumers and contractors. The store is located adjacent to a railroad siding with a storage building that allows for large shipments of merchandise to be received, stored, and sold. Building materials of all types (lumber, roofing, siding, Sheetrock, and so on) are picked up and delivered to local construction sites, which represent the mainstay of the contractor business.
The Grande family is well respected by all. Their honesty, loyalty, hard work, and community involvement have come back to bless them on many occasions. During tough economic times, suppliers often extend credit terms far beyond the norm. Customers and contractors are fiercely loyal to the Grande's business even with the presence of modern-day giant warehouse outlets that offer a wider variety of the same products for less money.
While the main buildings date back to 1948, the Grandes have upgraded their fleet of delivery trucks and forklifts. The inside of the store is a mix of the old and the new. State-of-the-art computers, paint processing equipment, and landscape machinery rentals are scattered around the old wooden building that still sports some original display fixtures and the wormy chestnut paneling that Rocky's grandfather Jeb installed during construction of the original building.
The principals have compiled the following summary financials for the past five years of operation:
Income (Profit and Loss) Statement Summary: 1998-2002 (in 000s)



Suburban Denver is considered a moderate- to high-growth region of the state and is projected to stay that way for years to come. New housing, new neighborhoods, new schools, new malls, and the like are under construction and in the planning stages throughout the area.
The Grande business sits on seven acres of land and includes room for growth, in terms of new buildings, increased parking, and other business options. The business was recently appraised by certified professionals. The assessed values are as follows:

The Grandes have compiled all their data into a prospectus and are about to formally put the business on the market. They have yet to settle on an asking price.
Two local area banks have indicated a willingness to offer a 15-year note to a qualified buyer for a maximum of $624,000 (which represents 80 percent of the assessed value of the land, buildings and equipment).
Given the economic outlook in the Denver area, the land and physical plant, and the competition, what short- and long-term operational and growth strategies would you consider