CHAPTER
SIX
Entrepreneurship &
Starting a Small
Business
6-1
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How Did They Begin?
He was selling baking soda & decided to
entice customers by putting in two packages of
chewing gum with each sale. The excitement
over the gum started him thinking.
Two Seattle teenagers pooled their money &
came up with $100. They started delivering
messages & parcels for local merchants.
Though he didn’t graduate from college, he
found out college students eat a lot of pizza.
He started his first pizzeria with $900 near a
campus with a promise of 3-minute delivery.
6-2
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© 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Who Starts
New Businesses?
AGE AT START-UP
18 - 24
25 - 34
35 - 44
45 - 54
55+
8%
71%
13%
6%
2%
6-3
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Why People Start
Their Own Businesses
Live Where/How I Like
Like The Challenge
Build For Family
Control My Life
Use My Abilities
0
10
20
30
40
50
60
Source: BFIB/VISA Card Primer
6-4
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© 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Small Business Revival
Shift to Services
CAD/CAM Lessening
Advantages of Big
Manufacturing
Maturation of Baby
Boomers
More Women in
Workforce
1970 1980 1990
McGraw-Hill/ Irwin
2000
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6-5
What is a Small Business?
Independent
Not
<
Dominant
500 Employees
6-6
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Entrepreneurship
Definition
Characteristics
Entrepreneurs
Intrapreneur
of Successful
Corporation
Intrapreneur
6-7
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Entrepreneurial Attributes
A.
B.
C.
D.
E.
Self-Directed &
Self-Disciplined
Self-Nurturing
Action-Oriented
Highly Energetic
Tolerant of
Uncertainty
6-8
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Small BusinessAdvantages
Personalized Service/
Personal Contact
Flexibility
Lower Costs
Innovation Opportunities
6-9
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Small BusinessDisadvantages
- Limited Experience
- Long Hours
- Insufficient Capital
- High Failure Rate
6-10
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Hours Worked per
Week 1st Year
1 - 39 hours
40 - 49 hours
50 - 59 hours
60 - 69 hours
70 - 79 hours
80 + hours
8%
15%
23%
28%
13%
12%
6-11
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© 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Most Common Types of
Home-Based Businesses
Sales &
Distribution
10%
Arts/Design
Creative
13%
Personal
Svcs.
14%
Financial &
Real Estate
5%
Bldg. Trades
31%
Bus.
Services
27%
Source: Independent Insurance Agents of America
6-12
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Small Businesses That…
Have their
own web site
35%
Have no web
site
65%
Source: USA Today
6-13
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Road to Small
Business Success
Business Plan
Know Customer
Sufficient
Funding
Manage Resources
& Employees
Seek Advice &
Assistance
Maintain Records &
Controls
6-14
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Collaborators Who
Help Small Business
Small Business Administration
(SBA)
Microloan program
SBICs
SBDCs
Service Corps of Retired Executives
(SCORE)
Active Corps of Executives (ACE)
6-15
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Capital Sources of
Successful Entrepreneurs
Personal
Savings
80
60
40
Family
&
Charge
Friends Partners Cards
Angels &
Bank Venture
Loans Capital
20
0
SOURCE: INC. Magazine
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6-16
Reasons for a
Banker To Say “No”
$ I don’t know
$ Your collateral is
enough about you
lacking.
or your business.
$ Your business
$ You haven’t
does not support
clearly stated why
the loan on its
you need the
own merits.
money.
$ Your numbers
don’t support the
loan request.
6-17
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Government Efforts
Immigration Act
of 1990
Enterprise
Zones
Incubators
6-18
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Small Business &
International Prospects
1.
2.
3.
4.
Positives
World Market
Absorb Excess
Inventory
Soften U.S.
Downturns
Extend
Product Life
1.
2.
3.
4.
Negatives
Financing
Difficult
How to Get
Started?
Lack of Cultural
Understanding
Paperwork
6-19
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