Nickels
Cover
Nickels
McHugh
McHugh
With help
from
Timothy
6-1
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Chapter
Entrepreneurship
and
Starting a Small
Business
6-2
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Learning Goals
1. Entrepreneurship
2. Small businesses’ role in the
economy
3. How to learn and avoid early mistakes
4. What it takes to start a small business
5. Small businesses selling outside the
USA
6-3
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1. Entrepreneurship
• Entrepreneurship- Accepting the risk of
starting and running a business.
• Entrepreneurial teams: group of experienced
managers from different skills/fields
• Intrapreneurs: working as an entrepreneur
but inside a large company
• Micropreneurs: home-based business, no
less job security than working for large firm
6-4
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Entrepreneurship
• Definition
• Characteristics of
Successful
Entrepreneurs
• Intrapreneur
Corporation
Entrepreneur
• Micropreneur vs.
Home-Based
6-5
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Entrepreneurial Attributes
A. Self-Directed & SelfDisciplined
B. Self-Nurturing
C. Action-Oriented
D. Highly Energetic
E. Tolerant of
Uncertainty
6-6
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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
6-7
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Reasons Women Leave Jobs in Big
Companies to Start Business
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
B
rB
e
t
et
its
f
e
en
e
or
M
m
Fa
ily
m
Ti
e
Source: FSB, March 2001
R
n
g
o
ec
n
ti io
ss
e
L
cs
i
t
li
o
P
/C
s
er
n
rt
a
P
o
es
u
ag
e
ll
ce
n
e
lu
f
In
y
g
e
at
r
St
e
or
M
ey
n
o
M
R
ng
i
k
a
-T
k
is
6-8
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Who Starts
New Businesses?
AGE AT START-UP
18 - 24
25 - 34
35 - 44
45 - 54
55+
8%
71%
13%
6%
2%
6-9
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Hours per Week
Entrepreneurs Worked 1st Year
1 - 39 hours
8%
40 - 49 hours
15%
50 - 59 hours
23%
60 - 69 hours
28%
70 - 79 hours
13%
80 + hours
12%
6-10
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Government Support
• Good legal and economic environment
(Ch2)
• SBA
• Enterprise zones
• Incubators
6-11
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Government Efforts

Immigration Act of
1990- Investor Visa
 Enterprise Zones
 Incubators
6-12
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2. Small Business’s Role In The
Economy
• Create 75% of the new jobs in the US
• Generate 45% of GDP (Ch2)
• Offer more personalized customerservice than large companies, so fill
niches in markets
6-13
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What is Small Business?
Independent
Not Dominant
( Except in
small niche market)
< 500 Employees
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U.S. Small Businesses
20 Million Full/Part-Time Businesses
75% of New Jobs
45% of Gross Domestic Product
Jobs
 80% of Americans = 1st Job in Small Business
 75% of New Jobs = Small Business
Women-Owned Growing Rapidly
6-15
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Small BusinessAdvantages
Personalized Service/
Personal Contact
Flexibility
Lower Costs
Innovation Opportunities
6-16
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Small BusinessDisadvantages
- Limited Experience
- Long Hours
- Insufficient Capital
- High Failure Rate
6-17
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3. How to learn and avoid early
mistakes
• Classes like this one and those more
oriented to small business
practicalities
• Talk to experienced small business
owners and gain from their experiences
• Gain experience in same field working
fro someone else
6-18
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Small Business Success
Learn from Others
Get Experience
Take Over Successful Firm
6-19
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4. What it Takes to Start a Small
Business
• Business Plan (see page 191):
– Nature of business: what good or service
you will provide
– Target market: what need you will fill
– Advantages over competition
– Resources available: money, capital,
people
– Skills available
6-20
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What it takes (part 2)
• Financing:
– Bank loan
– Venture Capitalist: part-ownership as
condition of financing
• Venture Capitalists: Individuals or
companies that invest in new business
in exchange for partial ownership of
those businesses.
6-21
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Capital Sources of
Successful Entrepreneurs
By Company Age
100%
80%
60%
40%
20%
0%
Venture
Capital
SOURCE: FSB, March 2001
Family
Bank
Loan
Credit
Cards
Personal
Funds
< 3 Years
6+ Years
6-22
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What it takes (part 3)
• Define Your Market: People with
unsatisfied needs who have both the
resources and willingness to buy.
• Keep track of how you are
doing(profit/loss): record keeping and
accounting
• Staff: pick people you can trust and
make it worth their while
6-23
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Successful Business
Management Requirements
 Business Plan
 Adequate Funding
 Lenders/Investors
 “Angels”
 Venture Capitalists
 Professional Advice/Help
 Know Your Customer
 Manage Human Resources
 Keep Good Records
6-24
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Advantages of Working for a
Small Firm
• More empowerment to use own ideas
and take initiative, as boss has to rely
on you for more tasks and a more
important proportion of all work done
(than in a large company)-> boss
shows more respect and job is more
challenging
6-25
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Help From:
• Small Business Administration
• SCORE: Service Corps of Retired
Executives
6-26
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Small Business Collaborators
 Small Business Administration (SBA)
 Microloan program
 SBICs
 SBDCs
 Service Corps of Retired Executives
(SCORE)
 Active Corps of Executives (ACE)
6-27
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Small Business Administration
(SBA):
• A U.S. government agency that advises
and assist small businesses by
providing management training and
financial advice and loans.
6-28
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5) Small Businesses Selling
Outside the USA
• World market is many times larger than
US
• Internet allows small businesses to
reach potential customers all over the
globe
6-29
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