Being a Business Owner

1. Being a Business Owner Section 4.2

2. Read to Learn • The four main ways to become a business owner and the advantages and disadvantages of each • The different forms of legal business ownership

3. Read to learn • How to prepare to finance a new business • Factors that can affect business success

4. Main idea • Knowing the factors that affect a business’s success will help you to launch a successful business

5. Key Concepts • Going into Business • Owning a Business • Operating Your Business

6. Key Terms Operating expenses Income statement Revenue Gross Profit Net Profit • Start up costs • Lease • Goodwill • Market outlook • Franchise • Sole proprietorship • Partnership • corporation

7. Going into Business Four Main Ways to Go into Business

8. Starting a New Business

9. Starting a new business • Examples of start up costs include: • Renting or buying space • Buying equipment and supplies • Buying insurance • Key Term: • Start-up Costs: • The expenses involved in going into business

10. Buying an existing business • Before buying an existing business, determine whether the problems of the business can be fixed, and at what costs

11. Buying an Existing business

12. Buying an existing business

13. Buying an existing business • When buying an existing business, you may be able to keep the existing lease. • Key Term: • Lease – a contract to use something for a specified period of time

14. Buying an existing business • When buying an existing business, you may be able to take advantage of existing goodwill of existing customers. • Key Term: • Goodwill - Loyalty

15. Buying an existing business • When buying an existing business, you should be aware of the market outlook • Key Term: • Market Outlook – The potential for future sales

16. Buying a franchise • Buying a franchise offers specific advantages • You agree to pay a percentage of your profits to the parent company • Key Term: • Franchise – • The legal right to sell a company’s goods and services in a particular area

17. Buying a franchise

18. Buying a Franchise

19. Joining a family business

20. Joining a family business

21. Owning a business • As a business owner, you will have to decide if you will run the business yourself, or if you will share the work and risks.

22. Forms of legal ownership Sole Proprietorship Three basic forms of legal ownership Partnership Corporation

23. Forms of legal ownership • Most businesses begin as a sole proprietorship. • The owner is responsible for all the business’s assets and debts • Key Term: • Sole Proprietorship- when the business is completely owned by one person

24. Forms of legal ownership • In a partnership, all partners are liable for the debts of the business • Key Term: • Partnership- a legal arrangement in which two or more people share ownership

25. Corporation • In a corporation, shareholders earn a profit based on the number of shares they own • Key Term: • Corporation – a business chartered by a state that legally operates apart from the owner(s)

26. Operating your business • Whatever type of business you launch, you will need money to finance …. Financing

27. Financing • A business plan gives specific information about your business

28. financing • A financial plan spells out your start-up costs, operating expenses, and other costs for the first few months • Key Term: • Operating Expenses- the costs of doing business, such as the costs of manufacturing and selling the product

29. Ongoing operations • Financial records are needed for tax purposes and for seeding additional financing • The income statement is an essential business record • Key Term: • Income statement- • A summary of a business’s income and expenses during a specific period

30. Ongoing operations • The first item in an income statement is revenue • Another item in the income statement is gross profit • The net profit is an important part of the income statement • Key Terms: • Revenue – The income from sales • Gross Profit – The difference between the cost of goods and their selling price • Net Profit – The amount left after operating expenses are subtracted from the gross profit

31. Ongoing operations • The balance sheet summarizes a business’s assets, liabilities, and owners equity • Assets are anything of monetary value • Liabilities are debts a business owes • Net worth is the difference between assets and liabilities • A cash flow statement is a monthly plan that shows when you anticipate cash coming into the business and when you expect to pay out cash

32. Succeeding in business Financing Location Factors of Succeeding in Business Management Competition

33. Location • Factors that contribute to a successful business location include: • The type of businesses in the area • The condition of the streets and buildings • The cost of property • The location of competition • The location of your customers

34. Competition • To compete successfully, you must be familiar with your competitor’s product or service • You must also produce a better product than your competitors

35. Management • Poor management is one of the main reasons for business failure

36. Exit Ticket • 1. Name the four ways to become a business owner. Which one would you choose? Why? • 2. Explain the differences between a partnership and a corporation 3. Describe one of the documents you would need to prepare to apply for a business loan.