Free Small Business Management Assignment: Discussion Questions From The Book Essay Example
Type of paper: Essay
Topic: Business, Commerce, Entrepreneurship, Company, Corporation, Finance, Failure, Entrepreneur
An entrepreneur is someone who utilizes their creative energies to develop and establish, regardless of risks, by identifying how they can use opportunities in the marketplace to profit. Scarborough explains the above, and that entrepreneurs usually start with an idea, then “organize the resources” to transform the concept into an actual business (4). Scarborough says the profile of an entrepreneur include qualities like: risk-taking and initiatives, an optimistic attitude of confidence to be successful, strong self-reliance, dreaming big, flexibility, and a persistent perseverance (6, 7). Scarborough details profiles that show inventive minds, like the commitment and drive to achievement Stuart Skorman demonstrated in launching his video-rental chain (7).
Several pitfalls and negative aspects. Scarborough suggests that some of most critical potential drawbacks to business ownership are the unknowns associated with income, heightened risks of total capital investment loss, and the stressful anxiety resulting in sleep loss (worry) – given the long hours of hard work (14). These psychological and financial stressors combine as the most critical, along with the heavy weight of responsibility and discouragement.
The statistical rates for small business failure in the United States were recorded in the textbook. Scarborough records that failure rates are high, reflecting 34% of new enterprise failure in the initial two years, with a 50% shutdown-rate “within 4 years” (14). Failure rates for bigger companies is far less.
Advice given to a friend who has just suffered a business failure would firstly include psychological encouragement, and praise for having tried to create an independent business in the first place. Other advice would be to review their mistakes in retrospect, and research how they might tailor a different business related to their original idea to operate as home-based entrepreneurs, since the author explains over half of entrepreneurial efforts are home-based, and generate $427 billion in annual sales (23).
Several reasons compute why strategic planning is important to a small company. Scarborough indicates some reasons why, include: (a) the competitive global economic environment that is fast-pace and “turbulent,” and (b) the shift from financial capital to intellectual capital, like talents, software processes, and cultivating customer relationships (38).
Qualities of effective objectives reflect their characteristics of being goal-oriented, as an ends to the means, embodied within an “action-oriented” plan, as Scarborough notes (56). Setting objectives is important because doing so makes the whole plan come alive.
On pages 56 through 59, the author describes three strategies available to small firms as: (1) cost leadership, (2) differentiation, and (3) focus. Cost advantages work best with high volume. Differentiation as a strategy presents the unique angles of the product or services to engage customer loyalty. A focus strategy realizes markets have segments, and entrepreneurs are able to hone in on a particular niche.
A balanced scoreboard is a reporting system that tracks, collects, and organizes meaningful information that small business managers need, as divulge in the first paragraph of the Scarborough text, on page 64 (64). The scoreboard is balanced when the vision remains at center, while aspects such as customer objectives, financial targets, internal business measurements, and continued learning occurs revolve around it. Scarborough also includes a rubric for social responsibility and good corporate citizenship protocols, shown on a chart (64).
Its value helps entrepreneurs evaluate and consider all elements, and adjust accordingly.
Obviously, a sole proprietorship need not answer to another co-owner. In a partnership model entrepreneurs cannot commit the other to a business deal without consent. First of all, that would be unethical. Scarborough points out that the potential ramifications can skew the “exact status” of their respective responsibility, and so documenting a written legal agreement will help safeguard both their interests, when problems/disagreements arise (75). The Uniform Partnership Act, on page 76, can generally govern disputes in the absence of a formalized partnership agreement.
Scarborough explains that domestic corporations, and foreign corporations are forms of C Corporations, created by state statutes and must abide by their regulations (82). The domestic corporation conducts its business in-state, whereas the foreign one operates its “business in another state” (82). Countries’ corporations outside the U.S. are described as alien corporations.
An S corporation differs from a regular corporation in the way its tax billing is organized, as stated on page 85 of the book.
The main advantage a limited liability company offers over an S corporation, according to a report from Fox Business Center, is protection of “personal property in the event of a judgment against your company” (“Tax Advantages of Filing LLC, S-Corp and More”). Also, an LLC model business does not hold residency requirements, versus a sole proprietorship (“Tax Advantages of Filing LLC, S-Corp and More”).
A joint venture differs from a partnership, according to the Scarborough text, because it entails working on a project, established for a specified purpose (91). Once the job is done, the parties dissolve their union.
A franchise benefits the franchisor by their ability to collect royalty fees. Scarborough explains that the franchisor is the parent-company, and also provides the proven business model and system to make it function (96, 97). In other words, the formula is already laid out.
An independent entrepreneur might be dissatisfied with a franchising arrangement due to their independent spirit of doing things in their own creative way. Scarborough agrees, that the set patterns in franchising must be followed, and “entrepreneurs who insist on doing things their own way” will result in franchise failure (97). The franchise operation styles have already standardized their procedures.
The FTC Trade Regulation Rule functions to legislate “full disclosure guidelines” for sellers of franchises, as Scarborough states, also having a sister document called the Franchise Disclosure Document – or FDD for short (108). The FDD performs outlining guidelines, even in states lacking franchise legislation and usually runs between 100 and 200 pages long (108, 109). Also, the FDD provides an adequate basis for franchise investigations.
The source of most franchisor-franchisee disputes/litigation arise from franchisees mis-interpretation of the contractual terms. Scarborough points this out, and that the standard contract favors franchisors, and the “established franchisors” are unwilling to negotiate, but the small franchises are sometimes willing to bend after a contract has been signed (116). For these reasons and more, it is crucial for potential franchise owners to investigate the contract’s terms.
An entrepreneur might consider franchising to be an attractive growth strategy because of several advantages. According to Scarborough, if the franchise is well-established, an entrepreneur can be assured of: (a) customer base, (b) well-known branding, (c) bugs eliminated out of the system, and as a way to ease into getting accustomed to running his or her own business (116). Myriad other reasons may influence them as well.
“How to Avoid Double Taxation with an LLC.” llc-made-easy LLC Made Easy, n.d. Web.
1 March. 2015.
Scarborough, Norman M. Effective Small Business Management: An Entrepreneurial Approach.
10th ed. Upper Saddle River, NJ: Pearson Prentice Hall, 2012. Print.
“Tax Advantages of Filing as LLC, S-Corp and More.” Smallbusiness.foxbusiness Fox Small
Business Center, March 13 2013. Web. 1 March 2015.