How can a successfully growing firm fall into a “growth trap”?
Buying or developing CRM software leads to higher customer retention.
Explain and illustrate the nature of the operations process for production of both
products and services. Include references to both inputs and outputs.
What would be the break-even point if a firm set a unit selling price of $100 when total
fixed costs were $100,000 and variable costs per unit were $80? Draw a graph that
depicts the break-even point.
Startups are more likely to be successful when the entrepreneur first evaluates his or her
own capabilities and then looks for a new product or service idea, as opposed to
beginning with a need in the marketplace and then relating those to personal
capabilities.
Partners always share profits and losses equally.
A florist began asking employees for their ideas about the business. This practice is a
good illustration of empowerment.
Trade credit is extended by businesses to consumers purchasing large volumes of
products.
Clear writing gives credibility to the ideas presented in the business plan.
An Internet innovation known as donuts were developed so that Web sites could
recognize return visitors and thus generate a customized and personalized response.
You Make the CallSituation 2
Matthew Freeman started a business in 1993 to provide corporate training in project
management. He initially organized his business as a sole proprietorship. Until 1999, he
did most of his work on a contract basis for Corporation Education Services (CES).
Under the terms of his contract, Freeman was responsible for teaching 3- to 5-day
courses to corporate clientsprimarily Fortune 1000 companies. He was compensated
according to a negotiated daily rate, and expenses incurred during a course (hotels,
meals, transportation, etc.) were reimbursed by CES. Although some expenses were not
reimbursed by CES (such as those for computers and office supplies), Freeman’s
expenses usually amounted to less than 1 percent of his revenues.
In 1999, Freeman increasingly found himself working directly with corporate clients
rather than contracting with CES. Over the years, he had considered incorporating but
had assumed the costs and inconveniences of this option would outweigh the benefits.
However, some of his new clients said that they would prefer to contract with a
corporation rather than with an individual. And Freeman sometimes wondered about
potential liability problems. On the one hand, he didn’t have the same liability issues as
some other businesseshe worked out of his home, clients never visited his home office,
all courses were conducted in hotels or corporate facilities, and his business involved
only services. But he wasn”t sure what would happen if a client were dissatisfied with
the content and outcomes of his instruction. Finally, he wondered whether there would
be tax advantages to incorporating.
Question 1 What are the advantages and disadvantages of running the business as a sole
proprietorship? As a C corporation?
Question 2 If Freeman decided to incorporate his business, which types of corporations
could he form? Which type would you recommend? Why?
Even though Ford Motor Company is a big business, family considerations are
nonetheless important to the firm.
Accounts receivable are sometimes called near cash because they can be converted to
cash whenever a business needs to do so.
A small business typically lacks the marketing research tools that big corporations have.
Explain the importance of a strong management team for a new venture.