Entrepreneurial Small Business Katz 5e - Test Bank

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FALSE

Part-time employment refers to working for 35 or fewer hours a week.

TRUE

Most entrepreneurs start out working part time on their new business. According to the Panel Study of Entrepreneurial Dynamics (PSED), three-quarters of new businesses start on a part-time basis.

TRUE

This is true. Delegation is not for everyone and every situation. It makes the most sense when you have people who are good at their jobs and trustworthy.

TRUE

The more time and energy one spends preparing for a small-scale part-time business, the longer it takes to make a profit. The good news is that in most cases, the cost to start-up and the time to market are closely related.

FALSE

The limitations imposed on one’s property by his or her neighborhood group are known as covenants.

TRUE

Most small businesses—even part-time ones—need to have a website regardless of whether or not they use it for actual sales. First of all, potential customers will use it to find the business. Second, if they’ve heard about the business from something other than the Internet, they will use the site to find out more information about the business and to decide if they want to actually contact the business.

FALSE

E-commerce is big and getting bigger.

FALSE

The advantage of stand businesses is that one can start with little investment. Stands can be a box or ground cloth. They also do not require a lot of investment in inventory. There are a variety of locations where a stand can be set up, such as flea markets.

TRUE

Intellectual property (often abbreviated IP) refers to original works like inventions, visual and performing art works, books, and computer programs.

TRUE

The advantage of consignment approaches is that they permit full-time sales with only a part-time involvement from the owner, low setup cost, a low risk level, and the flexibility that comes from the variety of consignment agents and agencies available.

TRUE

The majority of part-time businesses are based in the home. The business takes space, uses resources the family also uses, and generally places stress on the household. Keeping a clean boundary, like an area known as the “business corner,” helps make sure that family and business are protected from each other.

FALSE

There are two key groups outside an owner’s business with whom the owner must deal—government and customers. Even part-time businesses have to deal with government, and three issues pop up repeatedly: registration or licensing, taxes, and zoning.

FALSE

Pricing is also often seen as a challenge by part-time businesses. Even if the business is part time, that does not mean the prices have to be cut-rate. One good way to get an idea of realistic pricing is to price competitors’ offerings.

FALSE

This is the definition of delegation, not outsourcing.

TRUE

When you decide to pursue part-time entrepreneurship, these are usually the two major questions.

TRUE

Moonlighting is working on one’s own part-time job after one’s regular job.

FALSE

This is the definition for a conflict of interest.

FALSE

Aggrandizing is attempting to make one’s business or self seem more accomplished or grander than reality.

FALSE

In deciding whether to make the move from part-time to full time entrepreneurship, the key question is usually financial.

TRUE

The way to determine the financial situation of a business is through crafting a business plan. Having a business plan helps the owner work out all the major details of the business and how he or she plans to organize it as he or she is growing it.

Part-time employment refers to working for self for 35 or fewer hours a week.

Part-time businesses refer to a business in which the owner either participates for 35 or fewer hours a week or operates on a temporary or seasonal basis while maintaining employment elsewhere for wages or salary.

When considering how to organize your new part-time business, there are usually three key considerations: The cost to start-up your new part-time business. The time to start-up your business. The permanence of the business you are creating.

In most cases, the cost to start-up and the time to market are closely related.

The majority of part-time businesses are based in the home, using the same space as the family. Keeping a clean boundary helps make sure that the family and business are protected from each other.

There are two key groups outside your business with whom you must deal – government and customers.

Most entrepreneurs start out working part time on their new business. According to the Panel Study of Entrepreneurial Dynamics (PSED), three-quarters of new businesses start on a part-time basis. The ease and low cost of entry and exit make part-time entrepreneurship a great way to try a variety of different businesses without “betting the farm” each time they start a business.

The frequency of business starts and stops is referred to as volatility. Many people jump into and out of self-employment (a change called volatility by economists) for a few weeks at a time, perhaps because they do project-based work like taking on a single consulting project in their spare time, or doing someone’s taxes, or selling an item or two on eBay or at a garage sale.

The frequency of business starts and stops is referred to as volatility. Many people jump into and out of self-employment (a change called volatility by economists) for a few weeks at a time, perhaps because they do project-based work like taking on a single consulting project in their spare time, or doing someone’s taxes, or selling an item or two on eBay or at a garage sale.

One situation in which it might make better sense to undertake a part-time business first is when someone is new to business and needs to gain basic experience.

There are three situations in which it might make better sense to first undertake a part-time business. One of these is when you are new to business and need to gain basic experience. A second type of situation is one in which you lack resources to pursue a full-scale business or create a business plan. The third type of situation is a narrow window of opportunity.

A situation in which it might make better sense to undertake a part-time business first is one in which if one lacks resources to pursue a full-scale business or create a business plan. Time is probably the ultimate resource, and starting a business can tax it heavily.

Permanence is the impression of a long-term continuity a business gives others. It is a key consideration for part-time small business start-ups. Permanence is related to the concept of legitimacy.

There were about 9 million home-based businesses in the United States in 2012, and they represented 33 percent of all firms. The reason for these large numbers is because the home-based business meets at least two of the three criteria for start-up. It is inexpensive, since you are already living somewhere and you can quickly get your business going where you live.

Although home-based businesses do not always give customers the strongest sense of legitimacy, the idea that a customer knows where the entrepreneur lives can be a point in favor of trusting in the potential permanence of the firm.

Table 5.2 shows that professional and business services had the most establishments and was the largest percentage of all industries in the U.S.

Cities, counties, neighborhoods, apartment complexes, and dorms pass regulations which limit the ways residents can use or modify their space. The government restrictions are called zoning laws, while the ones set up by other organizations are called covenants.

Cities, counties, neighborhoods, apartment complexes, and dorms pass regulations which limit the ways residents can use or modify their space. The government restrictions are called zoning laws, while the ones set up by other organizations are called covenants.

A variance is a permission from a government organization to act differently than the laws state.

E-commerce is the use of the Internet to conduct business transactions.

The informational website is an important type of website which informs possible customers about a firm.

Products like music and cell phones are examples of the kind of goods individuals buy online. That type of e-commerce is called business-to-consumer (B2C).

In business-to-business transactions, one firm sells to another firm.

For most people, the B2B market is invisible. B2C e-commerce is large, B2B e-commerce is larger.

A consumer is a private individual or household that is the end-user of (the entity that “consumes”) a product or service.

A hosting package for an informational site should include at least 1 gigabyte of traffic a month. It should give you at least 10 web pages of space to tell your story. The hosting package should also include at least five e-mail accounts using your domain name.

A blog is a web page in which entries are posted in reverse chronological order (i.e., the most recent at the top of the page). Many blogs let readers respond online, so the entrepreneur and the potential customers can interact directly.

RSS feed is an Internet messaging service that pushes (sends) whatever web material you specify to subscribers to that feed. Today website packages include the ability to push content, like your blog, out to customers who register at your site. Some sites do this by using an RSS feed.

Multichannel marketing is the use of several different channels to reach your customers, for example, a website, direct mail, and traditional retailing.

Reciprocal link is a listed, live connection to a different website, which in turn displays a similar link to the first website.

Search engine optimization is a general approach to website design intended to result in the site being displayed toward the beginning of a search engine’s (e.g., Google, Yahoo!, etc.) listing for that term.

Sponsored link is a form of paid advertising that gets a company’s website at the top of a search list.

Some of the next best things to a home-based business are virtual offices, executive offices, or incubators. A separate room with a door describes a home office.

Chargeback is a fee the service levels on a person or firm for any variety of problems related to the sale, for example, a lost, stolen, or fraudulent card was used, the customer reports nothing was received, the product was not the one promised, or there were problems with the product. While chargebacks in stores is around 0.1 percent of sales, online chargeback rates can be as much as five times higher.

A reverse auction is an auction in which the low bid gets the business or wins.

Most online transactions use a credit card or an online payment system like PayPal (which originated as a division of eBay). eBay allows a bit of anonymity. One can list a single item for sale on eBay, without creating a website or a company to support his or her effort.

Reserve price is a minimum acceptable selling price in an auction. If the bidding does not exceed the price, the sale will not go through.

There is a free way to get one’s name (and business) known, and that is by making informed comments on blogs and discussion forums related to one’s business. There are also several advertising channels that come with costs. Obviously, the traditional approaches to advertising, like business cards, stationery, printed newsletters, and brochures, cost money (although these days you can print just the quantity you need on a good color printer).

There are several approaches closely identified with part-time businesses. Historically, two methods have been mentioned most often—home retail (which consists of home parties and door-to-door selling), and stands.

The advantages of home businesses are the speed and ease of setup, the low cost of getting started, and the ability to do the work away from home and employer, thus minimizing potential conflicts.

The disadvantages come from always working “on the road,” lacking a base from which one can organize and work, having a highly variable income, and finding ways for customers to get in touch with the person concerned (although cell phones and e-mail have made a major difference).

The fundamental success factor in door-to-door selling is closing the sale. Closing means getting the customer to agree to buy.

The fundamental success factor in door-to-door selling is closing the sale. Closing means getting the customer to agree to buy.

One variation on the home model is network marketing efforts, also called multilevel marketing or MLM. Network marketing is an approach to selling in which the salesperson recruits customers to become distributors of the product or service to others.

In multilevel marketing, extra caution is necessary because illegal pyramid schemes are often made to look like legal MLMs. For example, where the fees paid by newly recruited network members are paid directly to more senior network members, there is a good chance that one is seeing an illegal pyramid scheme.

Stand retailing—the roadside, flea market, farmers’ market, or craft fair business—is one of the most ancient forms of small business. It is mentioned in the Bible, and marketplaces full of stands have been found in virtually all archaeological digs.

The advantage of stand businesses is that one can start with little investment. Stands can be a box or ground cloth. They also do not require a lot of investment in inventory. There are a variety of locations where a stand can be set up, such as flea markets.

The key success factor for a stand is having a location where there is enough foot or vehicle traffic to sustain the business. High traffic concentrations are why flea markets, farmers’ markets, and craft fairs are popular locales for stands.

The key success factor for a stand is having a location where there is enough foot or vehicle traffic to sustain the business. High traffic concentrations are why flea markets, farmers’ markets, and craft fairs are popular locales for stands.

The advantage of consignment approaches is that they permit full-time sales with only a part-time involvement from a person, low setup cost, a low risk level, and the flexibility that comes from the variety of consignment agents and agencies available to the person concerned.

The advantage of consignment approaches is that they permit full-time sales with only a part-time involvement from a person, low setup cost, a low risk level, and the flexibility that comes from the variety of consignment agents and agencies available to the person concerned.

The disadvantages of the consignment approach can include little effort being put forth to sell your product, high potential for competing offerings, long amount of time before payouts, and lower profitability because of agent’s fees.

For businesses run from a home or commercial venue like a fair or consignment shop, most states and localities require some form of registration, but the requirements vary so it is important to check. Registration refers to information provided to the government concerning the existence of, name of, nature of, and contact information for one’s business.

Part-time businesses have to deal with government, and three issues that pop up repeatedly are: registration or licensing, taxes, and zoning. Licensing is the documented permission from the government to run a business.

Delegation happens when you assign work to those over whom you have power, usually people you employ, those volunteering to help you out, or family members.

Outsourcing is contracting with people or companies outside one’s business to get work done for the business.

Central to figuring the real cost of your product is recognizing that your own time has value and then price enough to pay yourself.

In deciding whether to move your part-time business to a full-time business, the key question is usually financial.

Time is central to balancing home and business. Time management is the crucial skill for juggling your part-time business and the rest of your life.

All of these are aspects unique to part-time entrepreneurship except finding suppliers to fit your needs. This is needed for both part-time and full-time entrepreneurship.

Delegation makes sense in two situations. The first is when others can do things better than you. The second is when you want your business top operate when you are not present, or operate in two places at once.

Working on one’s own part-time business after a regular job is called moonlighting. The two ethical challenges of part-time businesses are moonlighting and aggrandizing.

The major concerns of moonlighting include conflict of interest, cannibalizing sales, and poisoning the well.

Cannibalizing means taking business away from one’s employer. It can come from taking sales away from one’s employer or taking working hours away to do one’s own business.

Poisoning the well refers to creating a negative impression among one’s employers’ customers.

Attempting to make one’s business or self seem more accomplished or grander than reality is known as aggrandizing. This misleading impression, called aggrandizing, can spell the death of a firm if discovered at an inconvenient time.

The most typical form of aggrandizement is implying that a firm is a full-time one when it is only part time.

Conflict of interest refers to a situation when what is best for one’s part-time business is different from what is best for his or her full-time employer. The key is to keep ones full-time and part-time jobs clearly separate.

Cannibalizing means taking business away from ones employer. This can come from your taking sales away from your employer or taking working hours away to do your own business. This is a real problem if your part-time business is similar to your full-time occupation, for example, if you are a painter for a building contractor in your day job and do similar sorts of painting as your part-time moonlighting enterprise.

Working on one’s own part time after his or her regular job is called moonlighting, and it poses particular risks. The major concerns are conflict of interest, cannibalizing sales, and poisoning the well.

Conflicts of interest happen when what is best for one’s part-time business is different from what is best for his or her full-time. The key is to keep full-time and part-time jobs clearly separate.

Occasionally, an entrepreneur sees an opportunity that is possible, but a stretch. If it looks like a stretch to the customers, the entrepreneur may start thinking about making the firm seem bigger, more substantial, or more capable than it really is. This misleading impression is referred to as aggrandizing.

People working for themselves for less than 35 hours a week are practicing what is called a part-time business. There are two important reasons for working in part-time businesses. First, most entrepreneurs start out working part time on their new business. The ease and low cost of entry and exit make part-time entrepreneurship a great way to try a variety of different businesses without “betting the farm” each time they start a business. Second, the sheer number of part-time self-employed individuals make them a major force in the U.S. economy. Officially, of the 25.9 million small businesses in the United States in 2012, almost half (10.8 million) were part-time businesses.

There are three situations in which it would be better to first undertake a part-time business. One of these is when someone is new to business and needs to gain basic experience. If one has not been involved in pricing, buying, and selling, learning how to do such things makes a lot of sense before launching the business. One might want to obtain other types of experience before starting a full-scale business or writing a business plan.
A second type of situation is one in which a person lacks resources to pursue a full-scale business or create a business plan. Time is probably the ultimate resource, and starting a business can tax it heavily. Starting a full-time business can absorb 70 hours a week or more in its early stages. One might not be able to commit the time to work that way, and pursuing a precursor makes a lot of sense. It also makes sense if one is missing other resources.
The third type of situation is a narrow window of opportunity. Part-time businesses can generally be created quickly, and they offer a concrete example of a business to customers, suppliers, and others. When there is not enough time to do a business plan or get the entire business going, pursuing a part-time business to capture the attention of others makes a lot of sense.

There are usually three key considerations for part-time small business start-ups:

1. The cost to start-up your new part-time business.
2. The time to start-up your business.
3. The permanence of the business you are creating.

For part-time businesses, one wants a low cost of start-up, since there is not a lot of money to invest, and may not get great returns to pay off expensive start-up efforts. Time to start-up is also best when shortest, since one is looking for a basic idea of what might and might not work. The more time and energy one spends in preparing for a small-scale part-time business, the longer it takes to make a profit. In most cases, the cost to start-up and the time to market are closely related.
Permanence is related to the concept of legitimacy. For a small-scale, part-time firm, it may be hard to have a lot of the indicators of legitimacy. What customers want to know is that the firm is likely to be around for a while, to provide customer service and future sales. That is the fundamental idea of permanence. The three considerations are at the heart of most peoples’ decisions about their mode of entry to part-time entrepreneurship.

Most small businesses—even part-time ones—need to have a website regardless of whether or not they use it for actual sales. First of all, potential customers will use it for finding the business. Second, if they’ve heard about the business from something other than the Internet, they will use the site to find out more information about the business and to decide if they want to actually contact.

Historically, two approaches closely identified with part-time businesses that have been mentioned most often are—home retail (which consists of home parties and door-to-door selling), and stands.
The advantages of home businesses are the speed and ease of setup, the low cost of getting started, and the ability to do the work away from one’s home and employer, thus minimizing potential conflicts. The disadvantages come from always working “on the road,” lacking a base from which one can organize and work, having a highly variable income, and finding ways for customers to get in touch with the person concerned.
Stand retailing—the roadside, flea market, farmers’ market, or craft fair business—is one of the most ancient forms of small business. Today stands tend to be either semi-permanent ones that remain in one place and are built to be sturdy or movable ones that can be quickly assembled and disassembled for use.
The advantages of stand businesses are that one can start with little investment. Stands can be a box or ground cloth. They do not require a lot of investment in inventory. There are a variety of locations where a stand can be set up. Stands can be quickly established and easily ended as a business. Stands vary widely in the products they sell. The disadvantages of stands are the variable income they provide; the difficulty of making sure one’s stand and business meet legal requirements; the problem of knowing how to price goods; and building up a customer base for one’s stand.

There are two key groups outside business with whom one must deal—government and customers. Even part-time businesses have to deal with government, and the three issues that pop up include registration or licensing, taxes, and zoning. For businesses run from a home or commercial, most states and localities require some form of registration, but the requirements vary so it is important to check. It is also important to check whether the business needs special licensing.
Even when one does not have to register a business, there is a need to keep track of sales in order to pay income taxes later. One should keep track of costs because if one has to itemize their deductions on Schedule C, one can deduct their costs from income. In many states and localities, one must also pay sales taxes, and these often need to be kept in a separate bank account and tracked as well.

The most successful entrepreneurs in high-growth ventures are those who learn to get and leverage other people’s money (OPM), for entrepreneurs in part-time businesses the key is leveraging other people’s time (OPT). There are two major ways to do this—delegation and outsourcing. Delegation happens when one assigns work to those over whom one has power, usually people one employs, those volunteering to help out, or family members. Contracting with people or companies outside one’s business to do work for the business is known as outsourcing.

Aggrandizing is attempting to make your business or yourself seem more accomplished or grander than reality. Aggrandizing can spell the death of a firm if discovered at an inconvenient time. With credit reports and business directories available online, the potential for being found out is high, and the risk is great. The most typical form of aggrandizement is implying that a firm is a full-time one when it is only part time. There can be a strong temptation to make the firm sound like it is a regular nine-to-five business in order to build legitimacy. However, the biggest risk is that of losing the trust of your current and potential customers. In a small business, especially a part-time one, the owner is the business. If you cannot trust the owner, you cannot trust the firm.