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CHAPTER 6: BUSINESS FORMATION, Family Business Advantages, Family Business…
CHAPTER 6: BUSINESS FORMATION
Starting from scratch
:squid: The most popular method among entrepreneurs
:squid: Has to make decisions on:
a) Appropriate form of business
b) Business or trade name
c) Business and product/service image
d) Suitable location of the business
e) Appropriate funding to kick-start the business
g) Proper business planning for everything that needs
to be take into consideration.
Advantages
:star: Entrepreneurs are free to make his/her own
decisions.
:star: Have the opportunities to try and
practice his/her own ideas.
:star: Free to choose suitable business
location and premise.
:star: Free to develop business image
and personality that suits their desire and interest.
Disadvantages
:no_entry: Need to put in a lot of efforts.
:no_entry: Higher chances of losses
:no_entry: Not able to accurately estimate sales, cost and
profit as zero business history
:no_entry: No track record hence difficult to convince the
financial institutions in getting the financing
Buying Existing Business
:bee: Start a new venture buy taking over an existing business either buying the whole business or partial shares in the existing business.
:bee: Must “investigate” before
buying.
Advantages
:star: time spent to start the business is faster compared to starting a new venture form scratch
:star: The probability of getting the financing is greater if the existing business has a good track record.
:star: Existing market and loyal customers of
existing business.
:star: Established networking with suppliers,
supporting agencies and communities.
Disadvantages
:no_entry: Buying existing business requires bigger amount of capital.
:no_entry: Need to put in a lot of
efforts, money and time to improve the situation if the previous owner was not well managed.
:no_entry: have to respect and abide the agreements that have been made by the previous owner with related parties.
:no_entry: Conflicts could arise between the new owner and
existing employees.
Family Business Succession
:beetle:: The successor of the business which was started by the
:beetle: Entrepreneur did not face the
difficulties of starting-up a new venture.
Challenges
:butterfly: Financing
:butterfly: Liquidity/Cash
:butterfly: Transition period
:butterfly: Succession
:butterfly: Emotion
:butterfly: Rivalry
:check: freedom and flexibility in decision making
:check: Pride of family culture, high commitment
and motivation lead to business stability.
:check: Family members have good exposure to
business environment.
:red_flag: Unstructured early-stage business organization.
:red_flag: Early-stage limited financial resources.
:red_flag: Family conflicts such as siblings and/or cousins
rivalry.
:red_flag: Difficulty in getting the right successor.
:check: Another alternative of starting a
new business
:check: A franchise is a product and/or
service distribution system which is
governed by a contract
:check: Made between two parties namely,
the franchisor and thefranchisee
:check: Franchise Fee
:check: Royalty
:check: Advertising and Promotional
Contribution
Franchisee
:recycle: Lower business risks as franchisee shares the business
risks with the franchisor.
:recycle: Benefits of economies of scales
:recycle: Guidance by the franchisor’s management team
Franchisor
:<3: The franchisor’s business expansion can be donethrough recruitment of new franchisees.
:<3: Lower business risks as shares business risks with thefranchisees.
:<3: Problems related human resource management isreduced.
Franchisor
:!: difficult to manage the franchisees especially in ensuring the conformity of the operational methods of all franchisees in the system.
:!: may have different business objectives with franchisee.
:!: competition through imitation of business concept and model.
Franchisee
:forbidden: Limited freedom and flexibility to manage the
business according to franchisees’ desire
:forbidden: the franchise right granted by the franchisor has it's price to pay; the franchise fee, royalty and advertising & promotional contribution.
:forbidden: limited product varieties; the franchisees are allowed to market and sell only the franchisor's products.
Family Business Advantages
Family Business Disadvantages
Acquiring Franchise
Franchising Advantages
Franchising Disadvantages