SBA Entrepreneurship & Small Business Fundamentals Flashcards

What is the primary benefit of forming a franchise business model?

Answer: Leveraging an established brand, proven system, and franchisor support

Franchising allows entrepreneurs to open a business using an established brand, tested operating system, and ongoing support from the franchisor in exchange for fees and royalties.

What is 'market segmentation' in small business strategy?

Answer: Dividing the total market into distinct groups of customers with similar needs

Market segmentation divides a broad target market into distinct subgroups of consumers who share similar characteristics, needs, or behaviors.

Which federal agency, partnered with the SBA, requires all employers to verify employees' legal authorization to work in the U.S.?

Answer: Department of Homeland Security (DHS)/USCIS

All U.S. employers must verify employment eligibility using Form I-9, administered by DHS/USCIS (U.S. Citizenship and Immigration Services).

What is 'angel investing' in the context of small business funding?

Answer: High-net-worth individuals investing personal capital in early-stage businesses for equity

Angel investors are wealthy individuals who provide early-stage capital to startups or small businesses in exchange for equity ownership or convertible debt.

What is the primary purpose of conducting competitive analysis for a small business?

Answer: Understand competitors' strengths and weaknesses to identify market opportunities

Competitive analysis helps businesses understand their rivals' products, prices, and strategies in order to identify gaps and opportunities to differentiate themselves.

What is 'gross profit' in a small business income statement?

Answer: Revenue minus the direct costs of producing goods or services (COGS)

Gross profit is calculated by subtracting the cost of goods sold (COGS) from total revenue, showing profitability before operating expenses are deducted.