Intro to Business, 7e
CHAPTER 6
Entrepreneurship and
Small Business Management
6-1
Becoming an Entrepreneur
6-2
6-3
Small Business Basics
Starting a Small Business
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
6-1 Becoming an
Entrepreneur
Goals
 Identify characteristics of successful
entrepreneurs.
 Recognize the importance of entrepreneurship
in the economy.
 Describe opportunities and risks of
entrepreneurship.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Key Terms
entrepreneur
entrepreneurship
venture capital
innovation
improvement
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
CHARACTERISTICS OF
ENTREPRENEURS
Desire to be your own boss
Special skills and abilities
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ENTREPRENEURS
IN ACTION
Pankaj Arora
Rich Stachowski
Jeffrey Rodriguez and John Serrano
Abbey Fleck
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
WHAT DOES IT TAKE?
Entrepreneurs are more
persistent
inquisitive
energetic
goal oriented
independent
self-confident
creative
reliable
competitive
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
WHAT DOES IT TAKE? (continued)
Entrepreneurs have
problem-solving skills
tolerance for ambiguity
strong integrity
personal initiative
ability to secure resources
capability to learn from failure
willingness to work hard
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
What personal characteristic are common to most
successful entrepreneurs?
Answer
 Any characteristics listed in Figure 6-1 are acceptable, such
as persistence, inquisitiveness, self-confidence, creativity, and
so forth.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ENTREPRENEURSHIP
AND THE ECONOMY
Employment
Financing
Productivity
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Source: U.S. Bureau of Labor Statistics
Employment Growth by Business Size
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
What are the sources of financing that entrepreneurs
use for their new businesses?
Answer
 personal savings
 friends and family
 venture capital
 bank loans
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
OPPORTUNITIES
Innovation
Improvement
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
RISKS
Recognizing risks
 Lack of adequate capital
 Low sales
 Higher than expected expenses
 Competitive pressure
 An owner unprepared to manage a growing
business
 Operations requiring more time than the
owner is willing to commit
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
Where do entrepreneurship opportunities begin?
Answer
 Opportunities begin with innovations (ideas about new
products and services) or improvements (ideas for changes to
existing products, services, or processes).
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
6-2 Small Business Basics
Goals
 Identify important characteristics of small
businesses.
 Recognize the competitive advantages of
small businesses.
 Identify problems faced by many small
businesses.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Key Terms
small business
Small Business Administration (SBA)
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
SMALL BUSINESS
OWNERSHIP
Description of a small business




Owner is usually the manager
Operates in one or very few locations
Typically serves a small market
Not dominant in its field
Small business employment
Ownership diversity
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
COMMON TYPES OF
SMALL BUSINESSES
Source: Small Business Administration
and U.S. Census Bureau
Common
Types of
Small
Businesses
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
What percentage of employees in the United States
work for small businesses?
Answer
 Nearly 50 percent of the American workforce is employed by
small businesses.
 Small businesses are also responsible for 60–80 percent of all
new jobs.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
SMALL BUSINESS
ADVANTAGES
Meeting customer needs
Providing unique services
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
How can small businesses compete successfully with
larger businesses?
Answer
 Smaller 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.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
COMMON REASONS FOR
SMALL BUSINESS FAILURE
 Not keeping adequate records
 Not having enough start-up money
 Lack of management experience
 Lack of experience with the type of business
 Not controlling operating expenses
 Poor location for the business
 Failure to manage credit offered to customers
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
SMALL BUSINESS
ASSISTANCE
Faculties of universities and colleges
Local groups of business people
Small Business Administration (SBA)
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
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
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
6-3 Starting a Small Business
Goals
 Recognize 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.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Key Terms
business plan
start-up financing
short-term financing
long-term financing
© 2009 South-Western, Cengage Learning
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26
Intro to Business, 7e
Chapter 6
THE BUSINESS DECISION
An idea plus experience
Right place and time
Team approach
Preparation and research
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
Checkpoint >>
Why is it important to use a team approach when
starting a new business?
Answer
 A 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.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
WHAT IS A
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.
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ELEMENTS OF A
BUSINESS PLAN
Description of the Business





The business idea
Major products and services
Ownership structure
Strengths/weaknesses
Long- and short-term goals
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ELEMENTS OF A
BUSINESS PLAN
(continued)
Description of Competition
 Characteristics of the industry
 Condition of the economy
 Strengths and weaknesses of major
competitors
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ELEMENTS OF A
BUSINESS PLAN
(continued)
Customer Analysis
 Description of customers
 Location, number, and resources of
customers
 Sales forecasts
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ELEMENTS OF A
BUSINESS PLAN
(continued)
Operations Plan




Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ELEMENTS OF A
BUSINESS PLAN
(continued)
Marketing Plan
 Description of major marketing activities
 Description of resources needed
 Schedule of marketing activities
© 2009 South-Western, Cengage Learning
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Intro to Business, 7e
Chapter 6
ELEMENTS OF A
BUSINESS PLAN
(continued)
Financial Plans




Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements
© 2009 South-Western, Cengage Learning
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35
Intro to Business, 7e
Chapter 6
STEPS IN DEVELOPING
THE BUSINESS PLAN
Gather and review information
Develop the strategic alternatives
Write the plan
Ask an expert to review the plan
© 2009 South-Western, Cengage Learning
SLIDE
36
Intro to Business, 7e
Chapter 6
Checkpoint >>
What is the “strategic alternatives” in a business plan?
Answer
 Strategic 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.
© 2009 South-Western, Cengage Learning
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37
Intro to Business, 7e
Chapter 6
FINANCING
THE SMALL BUSINESS
Types of financing
 Start-up financing
 Short-term financing
 Long-term financing
Sources of financing
 Owner-supplied funds
 Borrowed funds
© 2009 South-Western, Cengage Learning
SLIDE
38
Intro to Business, 7e
Chapter 6
Checkpoint >>
In addition to owner-supplied capital, what are several
other sources of financing for a small business?
Answer
 Borrowed money may come from banks, finance companies,
or other individuals, such as friends and family.
 Some suppliers may also be willing to extend credit.
© 2009 South-Western, Cengage Learning
SLIDE
39
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Entrepreneurship and Small Business Management