Chapter Chapter Chapter Chapter 6 Entrepreneurship and Entrepreneurship and Small Business Management 6-1 Becoming an Entrepreneur 6-2 Small Business Basics 6 3 Starting a Small Business 6-3 Starting a Small Business
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ChapterChapterChapterChapter 66pppp
Entrepreneurship andEntrepreneurship and Small Business Management
66--11 Becoming an Entrepreneurg p66--22 Small Business Basics66 33 Starting a Small Business66--33 Starting a Small Business
LESSON 6LESSON 6--11
Becoming an Entrepreneurg pGoals
Id if h i i f f lIdentify characteristics of successful entrepreneurs.Recognize the importance of entrepreneurship in the economy.Describe opportunities and risks of entrepreneurship.p p
Chapter 6Slide 2
Key Terms
entrepreneurhientrepreneurship
venture capitalinnovationimprovementimprovement
Chapter 6Slide 3
Entrepreneur:Someone who takes a risk in starting a businessSomeone who takes a risk in starting a business to earn a profit
Entrepreneurship:Entrepreneurship:Is the process of starting, organizing, managing, and assuming the responsibility for a business.
Assignment 6.1 & 6.2Assignment 6.1 & 6.2
Chapter 6Slide 4
SKey Factors in Starting a Business:Desire to be your own bossGreat PlanSpecial skills and abilities
Chapter 6Slide 5
WHAT DOES IT TAKE?Entrepreneurs are more
persistent self-confidentpersistentinquisitive
self-confidentcreative
energeticgoal oriented
reliablecompetitivegoal oriented
independent
Chapter 6Slide 6
WHAT DOES IT TAKE?
E t h
(continued)
Entrepreneurs haveproblem-solving skillstolerance for ambiguitystrong integritypersonal initiativeability to secure resourcesycapability to learn from failurewillingness to work hard
Chapter 6Slide 7
willingness to work hard
>> C H E C K P O I N T
What personal characteristic are commonWhat personal characteristic are common to most successful entrepreneurs?
Chapter 6Slide 8
ENTREPRENEURSHIP AND THE ECONOMYAND THE ECONOMY
EmploymentE t hi i k t th USEntrepreneurship is a key to the US Economy – 1 in 10 Americans ages 18-64 are involved in some typeare involved in some typeOver 500,000 new businesses are created annuallyannually
Chapter 6Slide 9
NUMBER OF EMPLOYEESIN NEW BUSINESSESIN NEW BUSINESSES
Chapter 6Slide 10
FinancingMost $ comes from the Entrepreneur, family,Most $ comes from the Entrepreneur, family, friends
1 in 5 americans has invested in a business of someone they know welly50% of above are lending to relative
Venture Capital:$ provided by large investors to finance new products &$ provided by large investors to finance new products & businessesLate 90s, very popular – many failed
Loans from banks & other financial institutionsLoans from banks & other financial institutionsCredit given by businesses that sell products & services to the new business.
Chapter 6Slide 11
>> C H E C K P O I N T
***6 3***6.3
1. Personal Charareristics of Entrepreneurs
2. What are the sources of financing that entrepreneurs use for their new businesses?
Chapter 6Slide 12
OPPORTUNITIES
Innovation:A i ti ti th t i BRANDAn invention or creation that is BRAND NEW!
I tImprovement:A design change that increases the
f l f d t iusefulness of a product, service, or process
Chapter 6Slide 13
RISKS
More ne b sinesses fail than s cceedMore new businesses fail than succeed1/3 are profitable1/3 do not profit but continue break even1/3 do not profit but continue – break even1/3 loose money
10 yr. period, 50% of all new businesses discontinue
Chapter 6Slide 14
RISKS
Recognizing risksL k f d t it lLack of adequate capitalLow salesHigher than expected expensesCompetitive pressureAn owner unprepared to manage a growing businessOperations requiring more time than the owner is willing to commit
Chapter 6Slide 15
>> C H E C K P O I N T
Where do entrepreneurship opportunities begin?begin?
Chapter 6Slide 16
LESSON 6LESSON 6--22
Small Business BasicsGoals
Id if i h i i fIdentify important characteristics of small businesses.Recognize the competitive advantages of small businesses.Identify problems faced by many small businesses.
Chapter 6Slide 17
Key Terms
small businessA i d d t b i ith d 500An independent business with under 500 employees99 7 % of US B sinesses are “small99.7 % of US Businesses are “small businesses”
Small Business Administration (SBA)Small Business Administration (SBA)Small Business Development Center
Ab K B kAbove Key Bank
Chapter 6Slide 18
SMALL BUSINESS OWNERSHIP
Description of a small businessOwner is usually the managerOwner is usually the managerOperates in one or very few locationsTypically serves a small marketTypically serves a small marketNot dominant in its field
Small business employmentp yOver 50% or all US workers
Chapter 6Slide 19
Ownership diversityOwnership diversity>16% have African-American, Asian-American or Hispanic-AmericanAmerican, or Hispanic American ownershipMajority are owned by someone over 40Majority are owned by someone over 40 years>90% have HS Diplomap>30% have some college½ are home-based½ are home based
Chapter 6Slide 20
COMMON TYPES OF SMALL BUSINESSESSMALL BUSINESSES
Chapter 6Slide 21
SMALL BUSINESS ADVANTAGES
Meeting customer needsP idi i iProviding unique services
Chapter 6Slide 22
>> C H E C K P O I N T
How can small businesses compete successfully with larger businesses?successfully with larger businesses?
Chapter 6Slide 23
COMMON REASONS FOR SMALL BUSINESS FAILUREBUSINESS FAILURE
Not keeping adequate recordsNot having enough start up moneyNot having enough start-up moneyLack of management experienceLack of experience with the type of businessLack of experience with the type of businessNot controlling operating expensesPoor location for the businessPoor location for the businessFailure to manage credit offered to customers
Chapter 6Slide 24
SMALL BUSINESS ASSISTANCE
Faculties of universities and collegesL l f b i lLocal groups of business peopleSmall Business Administration (SBA)
Small Business Development CenterAbove Key Bank in Wasillay
***6 4***6.4
Chapter 6Slide 25
LESSON 6LESSON 6--33
Starting a Small BusinessgGoals
R i i f bRecognize important factors to be considered when starting a business.Describe the elements of a business plan.Identify types and sources of financing for a small business.
Chapter 6Slide 26
THE BUSINESS DECISION
An idea plus experienceRi h l d iRight place and timeTeam approachPreparation and research
Chapter 6Slide 27
>> C H E C K P O I N T
Why is it important to use a team approach when starting a new business?approach when starting a new business?
Chapter 6Slide 28
WHAT IS A BUSINESS PLAN?
A business plan is a written description of the business idea and how it will be carried out,and how it will be carried out, including all major business activitiesactivities.
Chapter 6Slide 29
6 Steps of A Business Plan
1. Description of the Business2. Description of Competition3 Customer Analysis3. Customer Analysis4. Operations Plan5 M k ti Pl5. Marketing Plan6. Financial Plans
Chapter 6Slide 30
ELEMENTS OF A BUSINESS PLANBUSINESS PLAN
Description of the BusinessDescription of the BusinessThe business ideaM j d t d iMajor products and servicesOwnership structureStrengths/weaknessesLong- and short-term goals
Chapter 6Slide 31
ELEMENTS OF A BUSINESS PLANBUSINESS PLAN
Description of CompetitionCh t i ti f th i d t
(continued)Characteristics of the industryCondition of the economyStrengths and weaknesses of major competitors
Chapter 6Slide 32
ELEMENTS OF A BUSINESS PLANBUSINESS PLAN
Customer AnalysisD i ti f t
(continued)Description of customersLocation, number, and resources of c stomerscustomersSales forecasts
Chapter 6Slide 33
ELEMENTS OF A BUSINESS PLANBUSINESS PLAN
Operations PlanO i ti f th
(continued)Organization of the companyDescription of major operationsAnalysis of resources neededHuman resource plans
Chapter 6Slide 34
ELEMENTS OF A BUSINESS PLANBUSINESS PLAN
Marketing PlanD i ti f j k ti ti iti
(continued)Description of major marketing activitiesDescription of resources neededSchedule of marketing activities
Chapter 6Slide 35
ELEMENTS OF A BUSINESS PLANBUSINESS PLAN
Financial PlansSt t t
(continued)Start-up costsShort- and long-term financial needsSources of financingBudgets and financial statements
Chapter 6Slide 36
STEPS IN DEVELOPING THE BUSINESS PLANBUSINESS PLAN
1. Gather and review information2 D l h “ l ”2. Develop the “game plan”3. Write the plan 4. Ask an expert to review the plan
Chapter 6Slide 37
>> C H E C K P O I N T
What is the “game plan” in a business plan?plan?
Chapter 6Slide 38
FINANCING THE SMALL BUSINESSTypes of financingTypes of financing
Start-up financing – amt of $ needed to open the business.
Examples: buildings – rent, equipment, inventory, supplies, licenses & permits
Short-term financing - $ needed to pay for currentShort-term financing - $ needed to pay for current operating activities
A period of less than a year but more than 1 or 2 months
Long-term financing - $ needed for the main resources of the business that will last for many years to come.years to come.
Land, buildings, equipmentPaid for over many years – not all at once
Chapter 6Slide 39
Sources of financing
•Owner-supplied fundspp
•Borrowed funds•Borrowed funds
Chapter 6Slide 40
>> C H E C K P O I N T
In addition to owner-supplied capital whatIn addition to owner supplied capital, what are several other sources of financing for a small business?a small business?
Chapter 6Slide 41
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