Business Ownership Business Models Basic Business Ownership 1

Business Ownership Business Models

Basic Business Ownership 1. 2. 3. n n Sole Proprietorship Partnerships Corporations What are the upsides and downsides? Count off by 3’s If you are a 1, you will research the benefits and drawbacks of #1 SP. 10 minutes of research

You’re the expert! n Explain to the class the benefits of: 1. 2. 3. n Sole Proprietorship Partnerships Corporations Explain the drawbacks of each type

Sole Proprietorship n n Upsides Easy to start n n n Customer wants n n n Products/services Management Hours Direction n n Only pay income tax n n Finance Accounting Marketing Etc. Assume all risk n Receive all profits n Downsides Start-up capital/funding Expertise in business areas n Choice n n n Change quickly n n Need a permit n Unlimited liability Loose more than just the business Limited life of business

Partnerships n Upsides n Downsides n Two or more owners n Shared responsibility Starting is easy n Permit or license Expertise in multiple areas Easily acquire money Income taxed only once Contract of responsibilities n Unlimited liability n n n n n Shared (less risk) Any partner can make decisions (bad decisions) Disagreements Partner leaves n n n Buy out agreements Expertise is gone Finding qualified person to replace (if needed)

Corporations n Terms n Stock – shares to the owners. n Stockholders – owners of the company. Vote on company direction with the number of shares they have. 1 stock share = 1 vote. n Corporate charter – license to operate from the state in which you operate. n Board of directors – takes care of day-to-day operations as a manager or owner would do in a partnership or sole proprietorship.

Corporations n Upsides n Downsides n Easily raise capital Limited liability n Stock shares Transferable ownership n Special taxes n Owners taxed n Corporation taxed Regulated by Gov’t Accounting is complex n n

Choosing a Business Model 1. 2. 3. 4. 5. 6. 7. Home-based Brick-and-mortar E-commerce e. Bay Franchising Licensing your product Multi-level-marketing

Home-based n Upsides n n n Less risk and lower start-up costs Easily scaleable Outsourcing n Downsides n n n Zoning ordinances Distractions Impression n Credibility

Brick-and-Mortar n Upsides n n Face-to-face Physical location n n Attract walk-in traffic Dedicated space n n Place of work Mentally/Physically ready for work n Downsides n n n Higher start-up costs Full-time commitment Requires merchandising and inventory

E-Commerce n Upsides n n n Lower risk Lower business cost Full or part time option Easily scaleable Tap into national or global markets Operate 24/7 n Downsides n One person show n n n Shipping Inventory Credit card processing Challenge to get traffic to the website Customer confidence n Release credit card information or personal info.

e. Bay-preneurship n n Upside Lower cost/risk n n Downside n Many tools in place n Pay. Pal Templates Established site n n Stiff competition Shipping Inventory Mgmt.

Franchising n Upsides n n Lower risk than independent brickand-mortar. Business plan is done Establish brand Higher success rates n Downsides n n n Pay upfront fees Strict: guidelines limits your creativity Profits can be low because you must pay franchisor their cut

Licensing your Product n n Upsides Lower risk n n Downsides n n Expense is the prototype Freedom n Receive royalties long after you quit working Time Royalties n Lower cost n n Part-time n n You get a portion from each sale (volume) Licensing agreements are tough n Only 3% of ideas make it to market

Multi-Level-Marketing n Upsides n Limited start-up costs n n n Membership/ Inventory Pre-packaged tools Sales techniques n Downsides n Most lose money n n Can’t sell effectively Credibility n Treating friends like customers

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