An idea assessment is the process of examining a need in the market, developing a solution

for that need, and determining the entrepreneur’s ability to successfully turn the idea into a
business.
feasibility analysis an analysis of the viability of a business idea that includes four interrelated
components: an industry and market analysis, the product or service analysis, a financial
analysis, and an entrepreneur analysis

Industrial analysis
Product Analysis

Conducting primary research involves collecting data firsthand and analyzing it; secondary
research involves gathering data that has already been compiled and is available, often at a
reasonable cost or sometimes even free.

An in-home trial involves sending researchers into customers’ homes to observe them as they
use the company’s product or service

Bootstrapping is the process of finding creative ways to exploit opportunities to launch and
grow businesses with the limited resources available for most start-up ventures.
Entrepreneur feasibility

Many new businesses require that an entrepreneur have a certain set of knowledge,
experiences, and skills to have any chance of being successful. This is called entrepreneurial
readiness

Business model

business prototyping the process by which entrepreneurs test their business models on a
small scale before committing significant resources to launch a business that might not work.

A process that can guide testing early versions of a product or service is known as lean start-
up, which is defined as a process of rapidly developing simple prototypes to test key
assumptions by engaging real customers

minimal viable product the simplest version of a product or service with which an entrepreneur
can create a sustainable business.

pivots the process of making changes and adjustments to a business model on the basis of the
feedback a company receives from customers.
In franchising, semi-independent business owners (franchisees) pay fees and royalties to a
parent company (franchisor) in return for the right (license) to become identified with its trade-
mark, to sell its products or services, and often to use its business format and system

sole proprietorship a business owned and managed by one individual.

unlimited personal liability a situation in which the owner of a business is personally liable for
all of the business’s debts.

partnership an association of two or more people who co-own a business for the purpose of
making a profit.

limited partnership a partnership composed of at least one general partner and at least one
limited partner.

partnership agreement a document that states in writing the terms under which the partners
agree to operate the partnership and that protects each partner’s interest in the business.

general partners partners who have unlimited liability for the partnership’s debts and usually
take an active role in managing the business.

limited partners partners who are financial investors in a partnership, cannot participate in the
day-to-day management of a company, and have limited liability for the partnership’s debts.

silent partners partners who are not active in a business but generally are known to be
members of the partnership.

dormant partners partners who are neither active nor generally known to be members of the
partnership.

limited liability partnerships (LLPs) partnerships in which all partners in the business are
limited partners, giving them the advantage of limited liability for the partnership’s debts.

corporation a separate legal entity apart from its owners that receives the right to exist from the
state in which it is incorporated.

double taxation a disadvantage of the corporate form of ownership in which the corporation’s
profits are taxed twice, once at the corporate rate and again at the individual rate on the portion
of profits distributed to shareholders as dividends.

S corporation a corporation that retains the legal characteristics of a regular C corporation but
has the advantage of being taxed as a partnership if it meets certain criteria.
1/3, 1/3, 1/3 rule of thumb a guideline that calls for an S corporation (and other pass-through
entities) to distribute one-third of its earnings to shareholders to cover the taxes they will owe,
retain one-third to to fund its growth, and earmark one-third to pay down debt, add to funding for
growth, or distribute to shareholders as a return on their investment.

limited liability company (LLC) a form of ownership that, like an S corporation, is a cross
between a partnership and a corporation; it is not subject to the restrictions imposed on S
corporations.

articles of organization the document that creates an LLC by establishing its name and
address, method of management, its duration, and other details.

operating agreement the document that establishes for an LLC the provisions governing the
way it will conduct business.