* * Chapter Six Entrepreneurship and Starting a Small Business McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

*

*Chapter Six

Entrepreneurship and Starting a

Small Business

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

*

*The Job-Creating Power of Entrepreneurship in the U.S.

• Entrepreneurship -- Accepting the risk of starting and running a business.

WHAT is ENTREPRENEURSHIP?

6-2

*

*Why People Take the Entrepreneurial Challenge

• Opportunity

• Profit

• Independence

• Challenge

LG1

WHY TAKE the RISK?

6-3

*

*Why People Take the Entrepreneurial Challenge

• Self-directed

• Self-nurturing

• Action-oriented

• Highly energetic

• Tolerant of uncertainty

LG1

WHAT DOES IT TAKE to be an ENTREPRENEUR?

6-4

*

*Turning Your Passion and Problems into Opportunities

• It fills customers’ needs.

• You have the skills and resources to start a business.

• You can sell the product or service at a reasonable price and still profit.

LG1

An IDEA is a GOOD OPPORTUNITY IF…

• You can get your product or service to customers before the window of opportunity closes.

• You can keep the business going.

6-5

*

* Micropreneurs and Home-Based Businesses

• Micropreneur -- Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the work they want to do, and offers a balanced lifestyle.

• Many micropreneurs are home-based business owners – writers, consultants, video producers, architects, bookkeepers, etc.

• Nearly 60% of home-based micropreneurs are men.

LG1

MICROPRENEURS

6-6

*

*Micropreneurs and Home-Based Businesses

• Computer technology has leveled the playing field.

• Corporate downsizing has led many to venture on their own.

• Social attitudes have changed.

• New tax laws have loosened restrictions on deducting expenses for home offices.

LG1

HOME-BASED BUSINESS GROWTH

6-7

*

*

Source: St. Louis Small Business Monthly, February, 2004.

• Ability to start your business immediately• Minimal startup capital needed• No rent or excessive set-up charges• Comfortable working conditions

Micropreneurs and Home-Based Businesses

LG1

BENEFITS of HOME-BASED BUSINESSES

• Reduced wardrobe expenses• No commuting• Tax benefits• Elimination of office politics• Low risk for trial and error

6-8

*

*

Source: St. Louis Small Business Monthly, February, 2004.

• Difficult to establish work habits

• Limited support system

• Isolation

• Work space may be limited

• Disruption of personal life

• Clients may be uncomfortable coming to your home

• Zoning restrictions

• Success is based 100% on your efforts

Micropreneurs and Home-Based Businesses

LG1

DOWNSIDES of HOME-BASED BUSINESSES

6-9

*

*Web-Based Businesses

• Affiliate Marketing -- An Internet-based marketing strategy in which a business rewards individuals or other businesses for each visitor or customer the affiliate sends to its website.

LG1

ONLINE BUSINESS

• Web-based businesses have more unique products than most brick and mortar stores.

• Online sales reached $165.9 billion in 2007, 8% of all retail sales.

6-10

*

*Entrepreneurship Within Firms

• Intrapreneur -- A creative person who works as an entrepreneur within a corporation.

• Intrapreneurs use a company’s existing resources to launch new products for the company.

LG1

INTRAPRENEURS

6-11

*

*Encouraging Entrepreneurship: What Government Can Do

• Immigration Act passed in 1990 created a category of “investor visas” that encourage entrepreneurs to come to the U.S.

• Enterprise Zones -- Specific geographic areas to which governments attract private business investment by offering lower taxes and other government support.

• Incubators -- Offer new businesses low-cost offices with basic services.

LG1

GOVERNMENT and ENTREPRENEURSHIP

6-12

*

*Small Versus Big Business

• Small Business -- Independently owned and operated, not dominant in its field of operation and meets certain standards of size.

• Businesses are “small” in relationship to other businesses in their industries.

LG2

SMALL BUSINESSES

6-13

*

*Importance of Small Business

• More personal customer service.

• The ability to respond quickly to opportunities.

LG2

ADVANTAGES of SMALL OVER BIG BUSINESS

6-14

*

*Learning About Small Business Operations

• Learn from Others – Investigate your local colleges for classes on small business and entrepreneurship; talk to and work for successful local entrepreneurs.

• Get Some Experience – Gain three years experience in the field; then start a part-time small business.

• Take Over a Successful Firm – Serve as an apprentice and eventually take over once the owner steps down.

LG3

LEARNING ABOUT SMALL BUSINESS

6-15

*

*Managing a Small Business

• Planning

• Financing

• Knowing customers

• Managing employees

• Keeping records

LG4

MAJOR BUSINESS FUNCTIONS

6-16

*

*Begin with Planning

• Business Plan -- A detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and owners qualifications.

• A business plan forces potential owners to be specific about what they will offer.

• A business plan is mandatory for talking with bankers or investors.

LG4

BUSINESS PLANS

6-17

*

*Writing a Business Plan

• A good plan takes a long time to prepare.

• A good executive summary catches interest and tempts potential investors to read on.

LG4

WRITING a BUSINESS PLAN

• Getting the plan into the right hands is almost as important as getting the right information in it.

6-18

*

*Getting Money to Fund a Small Business

• Personal savings

• Relatives

• Former employers

• Banks & finance companies

• Government agencies

• Angel investors

• Venture capitalists -- Individuals or companies that invest in new businesses in exchange for partial ownership.

LG4

SOURCES of CAPITAL

6-19

*

*Going International: Small Business Prospects

• Small and medium-sized businesses accounted for 99% of recent export growth.

• Advantages of global trade for small businesses:- Overseas buyers enjoy dealing with individuals.- Small companies can usually begin shipping

much faster.- They provide a wide variety of suppliers.- They can give more personal service and

attention.

LG5

SMALL BUSINESS PROSPECTS ABROAD

6-20