EBM 670 New Venture Creation The final submission is due on SATURDAY 03/15/14 by 11:59 PM EST.

Please submit exam on moodle. Note: Each answer should be 2-3 paragraphs long, with each paragraph comprised of 4-6 lines. Cite examples from actual companies to support your answers. Each question carries 2.5 pts.

Question #1: Explain the importance of ethical awareness and high standards in an entrepreneurial career.
Ethics in business are about distinguishing between the right and the wrong and adhering to the ethical principles. Ethics is an important part of life and running a successful business is no exception to this. To become successful, a business needs to be driven by strong ethical values. The mindset of a businessman creates a mindset for his/her company, which in turn sets the work culture of the business organization. For a business to prosper and maintain its wealth, it ought to be founded on certain ethical principles. A business that is based on ethics can run successfully for long years. business ethics always promote healthy competition in the market, & Ethically, you must respect what your rivals do Entrepreneurs are paying a lot more attention to the cultures they create in their businesses. The culture of a business defines and shapes how a companys owners and employees act, think, and feel as they go about their work. Culture sets the behavioral expectations and ethical standards in a company. It guides how employees are expected to interact with each other, with customers, with suppliers, and so forth. Businesses with well-developed cultures tend to have a stronger sense of ethical awareness among their employees. All things being equal, these companies are also are more successful than those that do not intentionally build a strong culture. (Enron unethical)

Business Ethics And Values

http://www.buzzle.com/articles/business-ethics-and-values.html Question #2: Explain what franchising is and discuss the nature of the roles of franchisors and franchise. According to Entrepreneural, Definition: A continuing relationship in which a

franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing and managing in return for a monetary consideration. Franchising is a

form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees).
Franchising is a method of distributing products or services, according to the International Franchise Association, a membership organization for franchisers, franchisees and suppliers. Essentially, and in terms of distribution, the franchisor is a supplier who allows
an operator, or a franchisee, to use the supplier's trademark and distribute the supplier's goods. In return, the operator pays the supplier a fee

In franchising, a franchiser licenses its brand name, product or service and in some cases, its way of doing business, to a franchisee.

There are two types of franchising: product-distribution franchising and business-format franchising. The difference is that in product-distribution franchises, franchisers do not provide the system for running the business, while business-format franchises involve the licensing of not only the product or service but also the method of doing business. Pepsi and Exxon are examples of product-distribution franchises, while KFC, Radio Shack and 7-Eleven are examples of business-format franchises, according to the IFA.
For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.

Entrepreneur. Retrieved: March 12, 2014. http://www.entrepreneur.com/encyclopedia/franchising

Question #3: Describe critical issues in financing new ventures.

for most entrepreneurs, you must prove your concept first before anyone will put up that kind of money. When exploring your funding options, there are several factors to consider:

Are your needs short-term or long-term? How quickly will you be able to pay back the loan or provide return on their investment? Is the money for operating expenses or for capital expenditures that will become assets, such as equipment or real estate? Do you need all the money now or in smaller pieces over several months? Are you willing to assume all the risk if your company doesn't succeed, or do you want someone to share the risk?

Fundamentally, there are two types of business financing: Debt financing - You borrow the money from an outside source and agree to pay it back in a particular time frame at a set interest rate. You owe the money whether your venture succeeds or not. Bank loans are what most people typically think of as debt financing, but we will explore many other options below. An example of debt financincing is : The most popular source for debt financing is the bank, but debt can also be issued by a private company or even a friend or family member.


Equity financing - You sell partial ownership of your company in exchange for cash. The investors assume all (or most) of the risk--if the company fails, they lose their money. But if it succeeds, they typically make much greater return on their investment than interest rates. In other words, equity financing is far more expensive if your company is successful, but far less expensive if it isn't. The process of raising capital through the sale of shares in an

enterprise. Equity financing essentially refers to the sale of an ownership interest to raise funds for business purposes. Franklin Templeton Investments is a company that utilizes
equity financing.

Allen, Scott. Startup Business Financing. March 12, 2014. http://entrepreneurs.about.com/od/financing/a/startupfunding.htm 2020 Vision: Time to Take Stock. Retrieved: Mar 12, 2014. https://www.franklintempleton.com/retail/pages/generic_content/home/splash _PUB/step_earn_income.jsf?nicamp=themes%20%20take%20stock&nichn=google&niadgrp=equity&nipkw=equity%20funding&g clid=CLSw7qXIj70CFWuhOgodbxIAgw Question #4: Discuss informal and formal investment sources of equity capital. Question #5: Discuss key aspects of negotiating and closing deals.

Negotiation techniques to move the buyer and seller closer together

How to negotiate in the external world Give and take. In the real external world you can use give and take negotiating skills.
If you make concessions to the buyer you want something back in return. Always gain agreement to the buyer making a move before giving away any ground yourself. Good negotiation techniques not only close more sales they gain more profitable sales.

Mastery of the Win-Win Negotiation Closing a business deal starts with keeping the end in mind. The most rewarding and profitable outcome is what is known as a Win-Win. According to Steven Covey, the author of The 7 Habits of Highly Effective People, Its not about being nice, nor is it a quick-fix technique. It is a character-based code for human interaction and collaboration.

The single most important part of negotiation is preparation. The groundwork starts with your ability to be specific and transparent about what you want and why someone should negotiate with you. Understanding needs and motivations will help you build bridges to benefit everyone involved. For example, when you decide to work with new vendors open the bidding process with a request for proposal. A RFP is an essential tool that will help you accurately assess the marketplace, define the big picture and paint it. Six Powerful Negotiation Tactics Once you have clearly defined what you want and prepared by acquiring knowledge you are ready to execute on powerful negotiation tactics. Here are a six proven techniques that will change your life and your business: 1. Always ask for more than you expect to get. The results may surprise you. One of the key characteristics of a good negotiator is the courage to ask for the impossible. 2. Never say yes to the first offer. Even if the deal is perfectly aligned with your needs, take a deeper dive into the facts. Emotions, opinions and feelings dilute deals. Focus on the facts. 3. Avoid confrontational negotiations. We all like to do business with people we like and ultimately trust. Affirm the other sides position and then offer factual insights to strengthen your case. If youre out for blood, you may end up crawling from the war room nursing your wounds. 4. Be reluctant. The less eager you are the better off you will be. Often times, the Vise Technique, an initial Im sorry, youll have to do better than that, is highly effective. 5. Leverage urgency and remember the 80/20 rule. Eighty percent of your concessions will be finalized in the last twenty percent of your timetable. Think auction houses going, going gone. 6. Evaluate the competitive landscape. This is where RFP comes to your aid. Dont be afraid to state your observations of competitive activity. Close the Deal There are several ways to close a deal and they are all dependent upon how well you prepare and execute. If a win-win is unattainable, as a last resort, learn to walk away. "Sometimes your best investments are the ones you dont make (Donald Trump)." If however, youve manage to inch out a win-win congratulations. Remember to always get it in writing and follow through. Be firm, honest and fair. If you make promises work diligently to deliver on them.

Barriers to negotiations[edit]

Die hard bargainers. Lack of trust.

Informational vacuums and negotiator's dilemma. Structural impediments. Spoilers. Cultural and gender differences. Communication problems. The power of dialogue

Nicole, Erica. Follow These Six Steps And You'll Close Every Deal. Retrieved: March 12, 2014. http://www.businessinsider.com/six-steps-to-improve-negotiations-and-close-the-deal2011-3

Question #6: Describe key aspects of managing and orchestrating the acquisition of debt capital. Question #7: Discuss how lenders estimate the debt capacity of a company. Debt capacity refers to an assessment of the amount of money owed that a company or individual can pay back within a specified period. Basically, it reflects a companys ability to borrow. The level is different for various sectors and industries. It depends on the composition, type, and nature of cash flows and assets. Debt is regarded as desirable when the value of the shareholders equity is higher than the cost of financing. Most companies operate well and expand when their debt-to-equity ratio is 1:1 or 2:1. Debt capacity measures the amount of money that can be borrowed without any financial problems. Interest rate fluctuations and revenue changes can affect the capacity of a business to borrow. The latter is determined by several factors, including the expendable resources-to-debt ratio, debt service-to-operations, and service coverage
The type of debt is also taken into account when assessing a companys financing capacity. There are different types of financial institutions and non-bank entities such as insurance funds, business development corporations, banks, credit unions, subordinated and mezzanine lenders, commercial finance businesses, and others.
Debt capacity involves the assessment of the amount of debt that the organization can repay in a timely manner without forfeiting its financial viability. It includes the determination of the appropriate limit to the amount of long-term debt that can remain outstanding at any point of time. It also refers to the total amount of debt a firm can incur within the constraints of its articles of association. Lenders often use a Debt Coverage Ratio (DCR) to determine debt capacity. 'Cashflow Available to Pay Debt' or 'Earnings before Interest, Taxes, Depreciation or Amortization' are often used as a numerator. The denominator is the debt payments due (both principal and interest) during that period. Before the economic downturn 1.2 was often considered adequate. In summer of 2009 the lenders are more comfortable with 1.3. The amount of liquidity and other factors can impact the desired DCR. This ratio is also called a Debt Service Ratio.

Debt Capacity http://finance.toolbox.com/wiki/index.php/Debt_capacity

Question #8: Discuss specific signals and clues that can alert entrepreneurial managers to impending crises and approaches to solve these. Question #9: Describe the significant economic and entrepreneurial contribution families make to communities and countries worldwide. http://www.joe.org/joe/2007february/rb4.php Question #10: Explain why harvesting is an essential element of the entrepreneurial process and does not necessarily mean abandoning the company.