FUNDING FOR A BUSINESS How To fund Your Business
BUSN105: Scenario
You are an inventor who enjoys working around the home, cleaning, cooking, and doing minor home
repairs and remodeling. You have little financial skills and no management skills. You have a great idea
for a new kind of home appliance that meets everyday consumer needs. Your net worth is not very high
so you have no idea if you’ll be able to “fund†this start-up. You know that currently there are similar
products that meet the consumers’ needs, but those products are inherently dangerous. You know nothing
about manufacturing other than that it costs lots of money to set up a plant. You are convinced that this
new technology idea would be applicable in a wide range of other products.
Your spouse, knowing how much time this venture will take away from family time, has asked you for an
example of what you mean to make sure your idea isn’t some harebrained scheme. You mention the
following as two similar ideas that were developed for one application but proved to have VERY
widespread applications:
a. The “clicker†was initially invented for use with TV-, but now has widespread applications
for a host of electronic applications, just like your technology could potentially do.
b. The 3-prong power cord for electrical appliances was invented for higher quality appliances.
Lower quality appliances have a 2-prong cord, which is a safety issue. Better quality power
cords have the 3
rd
“ground†wire, so now it has widespread application, just like your
technology could potentially do.
Marketplace
The market for your new product (which will use a special technology) is quite saturated with annual
growth of only 2%. It is expected that the new technology in this invention will jumpstart sales growth as
it will make it far easier to handle and use around the house. You fully expect that once this product-
acceptance is established, the technology can be leveraged into other products and/or markets. While each
of these FUTURE products and/or market opportunities is sure to generate significant sales, there will be
significant new investment required for each opportunity as well as some risk.
Scenario Glossary
Saturated: Every market place has a certain number of potential customers; as more and more product is sold to
those customers, the market reaches a point where the only continued sales might be replacement sales; this would
be considered 100% saturation; on the other hand, for brand new products like a Blackberry, iPhone, etc, the day
these were introduced, the saturation rate was 0%; this concept is especially important for firms introducing products
to a market already having a number of suppliers supplying this product category.
Annual growth: usually used when describing the growth rate of a particular product category; for example, until
this year, the auto industry was growing about 4% per year; the housing industry was growing a little faster. Both of
those industries growth rates have not only slowed, but have also seen a downturn or negative growth
Funding a Business Venture
Continuing with the scenario from Unit 1, you now need to make a management decision about how to fund your business. You have several options. You can borrow money, sell stock, or license the technology. Chose the type of funding which you prefer. Then, write a 2-3 page paper that reflects your decision-making analysis. In this paper, be sure to include the following:
• Using your own words (no quotations), write a series of short paragraphs describing the meaning, function, and importance of each of the following four terms:
• Investment Banker
• Stock Market
• Financial Management
• Risk Financing
• Identify your preferred source of funds.
• Describe your decision for choosing this form of funding.
• Explain the pros and cons of your decision.
• Describe one other possible option for this funding decision.
Please submit your assignment of 2-3 pages in APA format.
Submitting your assignment in APA format means, at a minimum, you will need the following:
TITLE PAGE. Remember the running head: AND TITLE IN ALL CAPITALS.
ABSTRACT. A summary of your paper, not an introduction. Begin writing in third person voice.
BODY. The body of your paper begins on the page following the title page and abstract page and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The type face should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics except as required for APA level headings and references. The deliverable length of the body of your paper for this assignment is 2-3 pages. In-body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.
REFERENCE PAGE. References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hang indention, italics, and upper and lower case usage as appropriate for the type of resource used. Remember, the Reference Page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body citation.
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