Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE1 CHAPTER 6 6-1 6-1Becoming an...

Intro to Business, 7eIntro to Business, 7e

© 2009 South-Western, Cengage Learning SLIDE 1

CHAPTER 6

6-16-1 Becoming an Entrepreneur

6-26-2 Small Business Basics

6-36-3 Starting a Small Business

Entrepreneurship and Small Business Management

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© 2009 South-Western, Cengage Learning SLIDE 2

Becoming an Becoming an EntrepreneurEntrepreneur

Goals Identify characteristics of successful

entrepreneurs.Recognize the importance of entrepreneurship

in the economy.Describe opportunities and risks of

entrepreneurship.

6-16-1

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Key TermsKey Terms

entrepreneurentrepreneurshipventure capitalinnovationimprovement

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CHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURS

Desire to be your own bossSpecial skills and abilities

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ENTREPRENEURS ENTREPRENEURS IN ACTIONIN ACTION

Pankaj AroraRich Stachowski Jeffrey Rodriguez and John SerranoAbbey Fleck

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WHAT DOES IT TAKE?WHAT DOES IT TAKE?

persistentinquisitiveenergeticgoal orientedindependent

self-confidentcreativereliablecompetitive

Entrepreneurs are moreEntrepreneurs are more

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WHAT DOES IT TAKE?WHAT DOES IT TAKE?

problem-solving skillstolerance for ambiguitystrong integritypersonal initiativeability to secure resourcescapability to learn from failurewillingness to work hard

(continued)

Entrepreneurs haveEntrepreneurs have

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Checkpoint >>Checkpoint >>

What personal characteristic are common to most successful entrepreneurs?

AnswerAny characteristics listed in Figure 6-1 are acceptable, such

as persistence, inquisitiveness, self-confidence, creativity, and so forth.

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ENTREPRENEURSHIP ENTREPRENEURSHIP AND THE ECONOMYAND THE ECONOMY

EmploymentFinancingProductivity

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Employment Growth by Business SizeEmployment Growth by Business Size

Source: U.S. Bureau of Labor Statistics

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What are the sources of financing that entrepreneurs use for their new businesses?

Answerpersonal savings friends and familyventure capitalbank loans

Checkpoint >>Checkpoint >>

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OPPORTUNITIESOPPORTUNITIES

InnovationImprovement

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RISKSRISKS

Lack of adequate capitalLow salesHigher than expected expensesCompetitive pressureAn owner unprepared to manage a growing

businessOperations requiring more time than the

owner is willing to commit

Recognizing risksRecognizing risks

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Where do entrepreneurship opportunities begin?

AnswerOpportunities begin with innovations (ideas about new

products and services) or improvements (ideas for changes to existing products, services, or processes).

Checkpoint >>Checkpoint >>

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Small Business BasicsSmall Business Basics

Goals Identify important characteristics of small

businesses.Recognize the competitive advantages of

small businesses. Identify problems faced by many small

businesses.

6-26-2

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Key TermsKey Terms

small businessSmall Business Administration (SBA)

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SMALL BUSINESS SMALL BUSINESS OWNERSHIPOWNERSHIP

Description of a small businessOwner is usually the managerOperates in one or very few locationsTypically serves a small marketNot dominant in its field

Small business employmentOwnership diversity

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COMMON TYPES OF COMMON TYPES OF SMALL BUSINESSESSMALL BUSINESSES

Source: Small Business Administration and U.S. Census Bureau

Common Common Types of Types of Small Small BusinessesBusinesses

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What percentage of employees in the United States work for small businesses?

AnswerNearly 50 percent of the American workforce is employed by

small businesses. Small businesses are also responsible for 60–80 percent of all

new jobs.

Checkpoint >>Checkpoint >>

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SMALL BUSINESS SMALL BUSINESS ADVANTAGESADVANTAGES

Meeting customer needsProviding unique services

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How can small businesses compete successfully with larger businesses?

AnswerSmaller businesses are able to provide more personalized

products and services to their customers. They are able to provide products and services where smaller

orders and projects are required and tend to fill unique customer needs, which larger companies do not provide.

Checkpoint >>Checkpoint >>

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COMMON REASONS FOR COMMON REASONS FOR SMALL BUSINESS FAILURESMALL BUSINESS FAILURE

Not keeping adequate recordsNot having enough start-up moneyLack of management experienceLack of experience with the type of businessNot controlling operating expensesPoor location for the businessFailure to manage credit offered to customers

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SMALL BUSINESS SMALL BUSINESS ASSISTANCEASSISTANCE

Faculties of universities and collegesLocal groups of business peopleSmall Business Administration (SBA)

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List common reasons for small business failure.

Answer not keeping adequate records insufficient start-up money lack of management experience lack of experience with the type of business not controlling operating expenses poor location failure to manage credit

Checkpoint >>Checkpoint >>

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Starting a Small BusinessStarting a Small Business

GoalsRecognize important factors to be considered

when starting a business.Describe the elements of a business plan. Identify types and sources of financing for a

small business.

6-36-3

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Key TermsKey Terms

business planstart-up financingshort-term financinglong-term financing

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THE BUSINESS DECISIONTHE BUSINESS DECISION

An idea plus experienceRight place and timeTeam approachPreparation and research

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Why is it important to use a team approach when starting a new business?

AnswerA team approach allows employees to feel valued and

motivated to take personal responsibility for the benefit of the business.

Owners cannot expect to be able to do everything alone. Building a team will allow the business to increase productivity and, ultimately, profits.

Checkpoint >>Checkpoint >>

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WHAT IS A WHAT IS A BUSINESS PLAN?BUSINESS PLAN?

A business plan is a written description of the business idea and how it will be carried out, including all major business activities.

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ELEMENTS OF A ELEMENTS OF A BUSINESS PLANBUSINESS PLAN

Description of the BusinessThe business ideaMajor products and servicesOwnership structureStrengths/weaknessesLong- and short-term goals

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ELEMENTS OF A ELEMENTS OF A BUSINESS PLANBUSINESS PLAN

Description of CompetitionCharacteristics of the industryCondition of the economyStrengths and weaknesses of major

competitors

(continued)

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ELEMENTS OF A ELEMENTS OF A BUSINESS PLANBUSINESS PLAN

Customer AnalysisDescription of customersLocation, number, and resources of

customersSales forecasts

(continued)

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ELEMENTS OF A ELEMENTS OF A BUSINESS PLANBUSINESS PLAN

Operations PlanOrganization of the companyDescription of major operationsAnalysis of resources neededHuman resource plans

(continued)

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ELEMENTS OF A ELEMENTS OF A BUSINESS PLANBUSINESS PLAN

Marketing PlanDescription of major marketing activitiesDescription of resources neededSchedule of marketing activities

(continued)

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ELEMENTS OF A ELEMENTS OF A BUSINESS PLANBUSINESS PLAN

Financial PlansStart-up costsShort- and long-term financial needsSources of financingBudgets and financial statements

(continued)

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STEPS IN DEVELOPING STEPS IN DEVELOPING THE BUSINESS PLANTHE BUSINESS PLAN

Gather and review informationDevelop the strategic alternativesWrite the plan Ask an expert to review the plan

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What is the “strategic alternatives” in a business plan?

AnswerStrategic alternatives are alternative plans for production,

staffing, financing, and so on. Even the best business plan cannot predict every possible

circumstance. An alternate plan allows a business to be prepared for the

unforeseeable.

Checkpoint >>Checkpoint >>

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FINANCING FINANCING THE SMALL BUSINESSTHE SMALL BUSINESS

Types of financingStart-up financingShort-term financingLong-term financing

Sources of financingOwner-supplied fundsBorrowed funds

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Checkpoint >>Checkpoint >>

In addition to owner-supplied capital, what are several other sources of financing for a small business?

AnswerBorrowed money may come from banks, finance companies,

or other individuals, such as friends and family. Some suppliers may also be willing to extend credit.