Entrepreneurship
Chapter 4
What is an entrepreneur?
 A person
who runs and organizes their own
business.
 Must make good decisions
 Find inventive solutions
 Lives a challenging life.
 Risks are high but the reward can be great.
Advantages
 You
are in charge!!!—no boss to answer to
 Great job satisfaction
 Can lead to great income.
Disadvantages
 Financial
Risk- you may loose your
investment and more.
 Work long hours
 May have high competition
 No guarantee of success. ½ of all
business fail in the first 4 years.
Traits
 Highly
Motivated- they know what they
want and believe in their ability. They plan
how to achieve their goals.
 Foresight- they are very perceptive. They
see opportunities where others may not.
 Decisive- they make many decisions
every day which must be good for their
business to success.
4 Ways of going into Business
1.
Starting a New Business
Advantages

Don’t have to inherit a previous owners mistakes or
bad reputation

Personal satisfaction of knowing you built that
business.
Disadvantages

Requires more time and effort

Start up costs (the expenses involved with going
into business) are high

Have to convince a lender that your business is a
good idea for them to lend you the $

It is risky. There are no guarantees your business
will be a success.
2. Buying an Existing Business
 A business


may be for sale because:
The owner is retiring
It is losing $
Advantages





No start up costs
You take on the previous owners agreements ex: a
lease- is a contract to use something for a specified
period of time
The goodwill- loyalty of the customers you will get.
A positive reputation
Trained Staff
Disadvantage



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The location may be poor
Competition
Market outlook-potential for future sales may be
poor
Building or equipment may be expensive to repair.
The business may have a poor reputation. “Under
new management” signs
3. Buying a Franchise
A franchise is a legal right to sell a company’s
goods and services in a particular area. Ex:
Panera, Mc Donalds, 7-11
Advantages






Name recognition
Established procedures and management
Business reputation
Training and staff support
Advertising
Financing.
Disadvantages
You must pay a portion of your profits to the
parent company
 You must follow the parent company
guidelines
 There may be less job satisfaction
 Very expensive to buy.
http://www.panerabread.com/about/franchise/

4. Joining a Family Business
Advantages



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Your relatives might help you finance the business
Family members tend to be loyal and trust each
other.
Relatives can teach you the business
Customer are likely to give the same trust and
goodwill to a new owner who is part of the same
family.
Disadvantages


Some family do not work well together
Difficulties at work can affect your family
relationship
3 Legal Forms of Business
1. Sole Proprietorship-a business owned by only
1 person.

The proprietor (owner)- own all the companies
assets and is responsible for all the debts.
Partnership- is a legal arrangement when 2 or
more people share ownership.
2.

All partners are responsible for debts.
Corporation- a business where it runs separate from
the owners. (they are not responsible for debts)
3.
1.
Owners by shares or parts of the company and earn $
based on profit.
Sole Proprietorship

Adv

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
Owner makes all the decisions
Easiest form of business to set up
Least regulated by government
Disadv



Difficult to finance the business
Owners personal assets may be at risk if the business
fails
Owner may not know everything there is to run a
business
Partnership

Adv




Easier to raise funds to open a business
You can draw on the skills and abilities of the other
partners.
Share the responsibility & work
Disadv



Disagreements among partners in decisions
Its more complicated than a sole proprietorship
All owners are liable for all business losses and
personal property may be at risk
Operating Your Business
 Financing



Where will you get money from? Mom, a friend, a
loan?
To apply for a loan you will need a Business &
Financial Plan.
A business Plan describes:
•
•
•
•
•
your business & its location
How many employees you will hire and their salary
your competitors
Marketing Plan
Timeline for starting your business.
Financial Plan
 This


spells out your:
Start up costs
Operating expenses- the costs of doing business
 Financial

Records
You must keep track of your money so you can tell
how well your business is doing.
• Income Statement- is a summary of a business income
and expenses during a specific time period.
• Revenue- Income from sales
• Gross profit- the difference between the cost of goods
and their selling price
• Net profit- the amount left after all operating expenses are
subtracted from the gross profit.