Describe the role trade intermediaries play in assisting small businesses that choose to
go global. Identify the types of trade intermediaries that are most useful to small
businesses.
Three shortcomings of franchising include cost, restrictions on operations, and loss of
independence.
The firm will have difficulty attracting investors if investments in the firm have internal
rates of return below an investor’s required rate of return.
Although management consultants can be helpful to business performance, they do not
serve small businesses.
Businesses that operate on the Internet can safely ignore the ethical standards that exist
in other countries.
You Make the CallSituation 2
At the beginning of 2005, Mary Abrahams purchased a small business, the Turpen
Company, whose income statement and balance sheets are shown below.
The firm has been profitable, but Abrahams has been disappointed by the lack of cash
flows. She had hoped to have about $10,000 a year available for personal living
expenses. However, there never seems to be much cash available for purposes other
than business needs. Abrahams has asked you to examine the financial statements and
explain why, although they show profits, she does not have any discretionary cash for
personal needs. She observed, “I thought that I could take the profits and add
depreciation to find out how much cash I was generating. However, that doesn”t seem
to be the case. What’s happening?”
Question 1 Given the information provided by the financial statements, what would you
tell Abrahams? (As part of your answer, calculate the firm’s cash flows.)
Question 2 How would you describe the cash flow pattern for the Turpen Company?
Sales endeavors generate the second largest amount of customer contact.
Association with a well-respected franchisor is often helpful to a franchisee, but it is
unlikely to improve the new business’s prospects for obtaining bank loans.
Accounts payable, accrued expenses, 5-year notes payable, and 90-day notes are
short-term liabilities.
Family retreats are best handled by an outside facilitator, who can help develop an
agenda and establish ground rules for discussion.
SWOT analysis provides a concise overview of a firm’s strategic situation.
Every communication has a receiver, a source, and a channel through which the
message is passed.
You Make the CallSituation 4
An increasing number of Web sites promise entrepreneurs everything they need to run
their businesses, including expert advice on management, finance, technology, and
recruiting. The owner of a local bakery (selling mostly specialty breads and cookies)
senses a need for advice concerning his business operations. The business does little
more than break even, but the owner believes it could be much more profitable. Using
the Internet to get the expertise he needs seems to be an economical approach, and he
has started reading the information available at http://www.allbusiness.com.
Question 1 How effective do you think this or similar Web sites will be in helping this
business owner?
Question 2 What other types of managerial assistance would be practical for such a
business?
List three sales promotional tools discussed in the textbook and briefly explain the
unique characteristics of each.
You Make the CallSituation 3
At age 63, Michael Lipper sold his firm to Reuters. His assessment of the sale follows:
One of the reasons we sold our business to Reuters was because we knew we probably
couldn”t manage the technology of the future by ourselves. Any entrepreneur who
builds a business for as long as I have would be dishonest if he did not suffer a certain
sadness [from selling]. If [Reuters] make a wonderful success out of this, there may be
some ego pain. If they muck it up, they”ve damaged our name and hurt our people.
Lois Silverman co-founded CRA Managed Care (now known as Concentra Managed
Care). When the firm went public in 1995, Silverman’s stake was over $10 million.
After taking Concentra public, Silverman gave up all involvement in day-to-day
operations. Along with 12 other successful businesswomen, she formed the
not-for-profit Commonwealth Institute, to help women entrepreneurs set up boards and
secure capital. She also became involved with a newspaper called Women’s Business.
She later told this story:
The other day a man said to me on a golf course, “I hope I hit this ball, because since
I”ve left my business, I don”t know what to do with myself.” And I said to myself, “I”m
so lucky.”
Question 1 Compare the people in the above true stories in terms of their feelings about
exiting their firms.
Question 2 What might explain the difference between those who have positive feelings
about cashing out and those who do not?
Lines of credit are legal obligations to provide capital.