Small businesses are major contributors to the nation’s GDP and serve as a major source of new and ongoing employment opportunities. In addition they are a source of innovation and supply many large businesses with the services, supplies, and raw materials they need.

2. What is the basic difference between a small business owner and an entrepreneur?

A small business is essentially a description of the business entity. Where as, entrepreneurship describes the proprietor (The person). Entrepreneurs aspire to expand their business, are resourceful, maintain closer customer relationships, and are willing to take risks.

3. From the standpoint of the franchisee, what are the primary advantages and disadvantages of most franchise arrangements?

Advantages: Can grow business rapidly, enjoy the support of an already existing enterprise, have access to management skills, do not have to build the business step-by-step, possible reduced risk of failure.

Disadvantages: Start-up cost, royalty payments to franchisor, many rules to follow.

4. Which industries are easiest for start-ups to enter? Which are hardest? Why?

Services are the easiest industries for small business to enter because they require few resources to get started. Manufacturing and transportation are among the most difficult because they require enormous resources.

5. Why might a closely held corporation choose to remain private? Why might it choose to be publicly traded?

Decision to remain private: Stock is held by only a few people which creates feeling of ownership and enables them to stay in control.

Decision to be publicly traded: Raising additional capital, dispersion of financial risk, possible incentives offered by the government to go public.

8. Under what circumstances might it be wise for an entrepreneur to reject venture capital? Under what circumstances might it be advisable to take more venture capital than he or she actually needs?

If the venture capital has strings attached that would interfere with the entrepreneur’s plan or vision for the firm, it might be wise to seek another source of funds instead. Accepting more venture capital than needed might make sense if the terms were particularly favorable, such as low interest rate and long life of the loan, and if the entrepreneur had intentions of expanding that would put the funds to use.