New Venture Management: Advantages of Acquiring an Ongoing Business

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Advantages of Acquiring an Ongoing Business
1.Already operational normally leads to success
2.The time and effort to start a new venture is eliminated
3.Possibility of buying an on going venture @ bargain price The next step
1.Business environment
2.Profits, Sales & Ratios
3.Business Assets ( Inventory, equipment, trademarks, goodwill) Questions 2 Ask
1.Why is the business being sold?
2.What is the current state of the business?
3.What is the current condition of the inventory
4.What is the current state of the assets
5.What is the current state of the employees
6.Goodwill
7.Competition
8.How profitable is the company
9.Negotiation
Franchise
Franchising is an arrangement is which the owner of a trademark, trade name, or copyright has licensed others to use in selling goods and services.

Advantages
1.Training & Guidance
2.Brand name appeal
3.Proven track record
4.Financial Assistance
Disadvantages
1.Franchising Fees
2.Control of Franchise
3.Unfulfilled Promise
Copyrights
A copyright provides exclusive rights to creative individuals for the protection of their literary or artistic productions. •Must be in tangible form
Protected for the duration of the author’s life and 70 years after death; 95 publishers, 120 after creation •Fair use doctrine
Material can be used for non profit educational purposes. •The amount used in relation to the whole work
The effect of the use on the market value of the copyrighted work Trademark
This is a distinctive name, mark, symbol, or motto indentified with a company’s products and registered at the Patent and Trademark office. Trade Secrets
Customer lists, plans, research and development, pricing info, marketing techniques, and production are examples of potential trade secrets. Duration – as long as it is not revealed to others. Patents

A grant from the government that gives an inventor exclusive rights to an invention. Duration – 20 years from the date of application; 14 for design patents.


Legal structures for entrepreneurial ventures
Sole Proprietorships
Adv
Ease of formation
All profits belong to him
Exemption from corporate taxes
Disadvantages
All losses go to him
Lack of continuity
Hard to access capital
Partnership
Adv
Ease of formation
Direct rewards
Little government interference
Disadvantages
Unlimited liability for 1 partner
Lack of continuity
Difficulty raising large sums of capital
Corporations
Adv
Limited liability
Transfer of ownership
Unlimited life
Disadvantages
Activity restrictions
Double taxation

Search for capital
Debt financing

Advantages
Unlimited ownership
More borrowing allows for potentially higher returns on equity Cheaper than equity
Disadvantages
Monthly interest payments are required
Heavy use of cash can inhibit growth
Continual cashflow can be intensified because of payback responsibility Equity Financing
This is money in the venture with no legal obligation for entrepreneurs to repay the principal amount or pay interest on it. It requires sharing of ownership and profits with a funding source. Advantages

Unlimited funds
Enhanced business image
Hire more competent staff
Disadvantages
Diluted ownership
Reduced control
Usually most expensive financing
Firm can be taken over
Personal financing
Advantages
Most readily available funds
Cheapest form of acquiring funds
Undiluted ownership
Total control
Easy exit plan
Disadvantages
Limited quantities
Delay of growth/reduced business scope
Internet risks
Inadequate analysis

Why New Ventures Fail
Poor timing. Premature entry contributed to a failure of 40%. Product design problems. The essential makeup of the product or service has changed, failure results Inappropriate distribution strategy.

Unclear business definition. Uncertainty about the exact business they were in. Overreliance on...
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