1
CHAPTER 6
E NTREPRENEURSHIP AND
6-2 Small Business Basics
S
MALL B USINESS
6-3 Starting a Small Business
M ANAGEMENT
6-1 Becoming an Entrepreneur
6-1
B ECOMING AN E NTREPRENEUR
2
K EY T ERMS
3

Entrepreneur~ someone who takes a risk in starting a
business to earn a profit

Entrepreneurship~ process of starting, organizing,
managing, and assuming the responsibility for a business

Venture capital~ money provided by large investors to
finance new products and new businesses that have a good
chance to be very profitable.

Innovation~ an invention or creation that is brand new

Improvement~ a design change that increases the
usefulness of a product, service, or process.
CHAPTER 6
CHARACTERISTICS OF
ENTREPRENEURS
4

Desire to be your own boss

Special skills and abilities
CHAPTER 6
ENTREPRENEURS
IN ACTION
5

Pankaj Arora

Rich Stachowski

Jeffrey Rodriguez and John Serrano

Abbey Fleck
CHAPTER 6
WHAT DOES IT TAKE?
6
Entrepreneurs are more
persistent
self-confident
inquisitive
creative
energetic
reliable
goal oriented
competitive
independent
CHAPTER 6
WHAT DOES IT TAKE?
7
(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
CHAPTER 6
8
C HECKPOINT >>
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.
CHAPTER 6
ENTREPRENEURSHIP
AND THE ECONOMY
9

Employment


Small businesses are responsible for most new employment. (Over 60%
of new jobs were created by businesses with fewer than 500
employees.)
Financing

Most money to needed to start a new business comes from the
entrepreneur and his/her friends and family.

Venture capital
Productivity

CHAPTER 6
New and small businesses produce a large volume of goods and
services (over $600 billion in sales annually).
10
Source: U.S. Bureau of Labor Statistics
E MPLOYMENT G ROWTH BY B USINESS S IZE
CHAPTER 6
11
Checkpoint >>
What are the sources of financing that entrepreneurs use for
their new businesses?
Answer
 personal savings
 friends and family
 venture capital
 bank loans
CHAPTER 6
OPPORTUNITIES
12

Innovation~ invention or creation of something new

Innovation vs invention


Innovation vs improvement


http://www.creativityincubator.com/showModule.php?category=10&module=63
Innovation Life Cycle


http://wistechnology.com/articles/4184/
http://www.creativityincubator.com/showModule.php?category=10&module=55
Improvement~ design change that can increase the
usefulness of a product, service, or process
CHAPTER 6
RISKS
13
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
CHAPTER 6
14
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).
CHAPTER 6
6-2
S MALL B USINESS B ASICS
15
K EY T ERMS
16

small business

Small Business Administration (SBA)
CHAPTER 6
SMALL BUSINESS
OWNERSHIP
17

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
CHAPTER 6
COMMON TYPES OF
SMALL BUSINESSES
18
Source: Small Business Administration
and U.S. Census Bureau
CHAPTER 6
Common
Types of
Small
Businesses
19
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.
CHAPTER 6
SMALL BUSINESS
ADVANTAGES
20

Meeting customer needs

Providing unique services
CHAPTER 6
21
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.
CHAPTER 6
COMMON REASONS FOR
SMALL BUSINESS FAILURE
22

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

http://www.businessknowhow.com/startup/business-failure.htm

http://www.businesspundit.com/the-25-worst-business-failuresin-history/
CHAPTER 6
SMALL BUSINESS
ASSISTANCE
23

Faculties of universities and colleges

Local groups of business people

Small Business Administration (SBA)

SCORE
http://www.score.org/small_biz_stats.html

Small Business Failure Example – Kell on Earth
http://www.currentmom.com/currentmom/2010/02/kellon-earth-teaches-about-small-business-failure.html
CHAPTER 6
24
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
CHAPTER 6
6-3
S TARTING A S MALL B USINESS
25
K EY T ERMS
26

business plan

start-up financing

short-term financing

long-term financing
CHAPTER 6
THE BUSINESS DECISION
27

An idea plus experience ~hobbies, interests, and business
experiences

Right place and time ~location should attract a large number
of people who are interested in the products and should be in a
safe and pleasant area (‘Work as a Team’, p 139)

Team approach ~employees feel valued and motivated to take
personal responsibility for the benefit of the business.

Preparation and research ~gather enough info to make
decisions (info on customers, competitors, operations, gov’t
regulations, etc.)
CHAPTER 6
28
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.
CHAPTER 6
WHAT IS A
BUSINESS PLAN?
29

A business plan is a written description of the
business idea and how it will be carried out,
including all major business activities.

www.sba.gov
CHAPTER 6
ELEMENTS OF A
BUSINESS PLAN
30

Description of the Business

The business idea

Major products and services

Ownership structure

Strengths/weaknesses

Long- and short-term goals
CHAPTER 6
ELEMENTS OF A
BUSINESS PLAN
31
(continued)

Description of Competition

Characteristics of the industry

Condition of the economy

Strengths and weaknesses of major competitors
CHAPTER 6
ELEMENTS OF A
BUSINESS PLAN
32
(continued)

Customer Analysis

Description of customers

Location, number, and resources of customers

Sales forecasts
CHAPTER 6
ELEMENTS OF A
BUSINESS PLAN
33
(continued)

Operations Plan

Organization of the company

Description of major operations

Analysis of resources needed

Human resource plans
CHAPTER 6
ELEMENTS OF A
BUSINESS PLAN
34
(continued)

Marketing Plan

Description of major marketing activities

Description of resources needed

Schedule of marketing activities
CHAPTER 6
ELEMENTS OF A
BUSINESS PLAN
35
(continued)

Financial Plans

Start-up costs

Short- and long-term financial needs

Sources of financing

Budgets and financial statements
CHAPTER 6
STEPS IN DEVELOPING
THE BUSINESS PLAN
36

Gather and review information

Develop the strategic alternatives

Write the plan

Ask an expert to review the plan
CHAPTER 6
37
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.
CHAPTER 6
FINANCING
THE SMALL BUSINESS
38

Types of financing

Start-up financing ~amt of $ needed to open
(building, equipment, inventory, supplies, licenses, etc)

Short-term financing ~ pays for current operating
activities (less than a year)

Long-term financing ~ funds main resources that
will last for years (land, building, equipment)

Sources of financing

CHAPTER 6

Owner-supplied funds
Borrowed funds
39
C HECKPOINT >>
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.
CHAPTER 6
Download

Entrepreneurship and Small Business Management