CDAE 266

Decision Making:Community Entrepreneurship

Fall 2006

CDAE 266 - Class 01August 29

Today:SyllabusStudent information sheet1. Introduction

Next class: 1. Introduction 2. Review of economic and business concepts

Assignment: Visit the web page: http://www.sba.gov

1. Introduction 1.1. Small businesses in the U.S. economy 1.2. A global perspective of entrepreneurship 1.3. Quantitative methods for business decision making 1.4. Decision making process 1.5. Applications of quantitative methods 1.6. Decision making for community entrepreneurs 1.7. Writing business reports (memos)

1.1. Small businesses in the U.S. economy 1.1.1. What is the definition of a small business? 1.1.2. Small businesses in the U.S. 1.1.3. Contributions of small businesses in the U.S.

Small businesses in the U.S. economy

• What is the definition of a “small business”? -- A business that is independently owned and operated and not dominant in its field of operation with the following upper limits:

• Large business: more than 500 employees• Medium business: 100 to 500 employees• Small business: less than 100 employees

Small businesses in the U.S. economy

• How many small businesses are in the U.S.?-- There are about 22 million U.S. businesses-- More than 98% of them are small businesses -- 5.7 million firms with employees and 16.5 million

without employees in 2000 -- Less than 7000 businesses employ more 500 people

• Most of small businesses are really small!

Small businesses in the U.S. economy

0%

10%

20%

30%

40%

50%

60%

70%

1 - 4 5 - 9 10 - 19 20 - 49 50 - 99 100+

Employment by Size of Business

Most Businesses Are Small Businesses

Small businesses in the U.S. economy

• How many businesses open and close in the U.S. each year?

• Estimates for businesses with employees indicate there were 550,100 new firms and 584,500 closures (both about 10 percent of the total) in 2002.

Small businesses in the U.S. economy

Starts and Closures of Employer Firms, 1990-2002 (million)

1990 1995 2000 2001 2002New firms 0.58 0.59 0.57 0.54

0.55Firm closures 0.53 0.50 0.54 0.57 0.58Bankruptcies 0.06 0.05 0.04 0.04

0.04

Small businesses in the U.S. economy

• Importance of small businesses-- Quotations:

• “Small business is America”• “Small business is a quiet giant”• “Small business is the engine of the U.S. economy”

…..-- Facts:

• provide 75% of the net new jobs • represent 98% of all employers • employ 55% of the private work force • provide 47% all sales in the country • provide 55% of innovations

Small businesses in the U.S. economy

• Importance of small businesses -- Facts:

• account for 35% of federal contract dollars • account for 38% of jobs in high technology sectors • account for 51% private sector output • represent 96% of all U.S. exporters • account for almost 50% of the GNP …..

Small businesses in the U.S. economy

• Factors contributing to the development of small businesses in the United States: -- History-- Social respect of people who run their own businesses-- Education-- Policy and regulations -- easy to start a business-- Competitive markets-- Horizontal and vertical integrations-- Government support: Small Business Administration (SBA)-- Support and assistance from many other organizations-- Diversified customers -- Relatively inelastic demand with respect to prices …...

Small businesses in the U.S. economy

• Survey: groups that have had mainly good influence on America:-- Movies and TV shows (30%)-- Congress (38%)-- Business executives (40%)-- Unions (48%)-- Courts (52%)-- Local and state government (60%)-- Women’s movement (67%)-- Newspapers (72%)-- Churches (85%)-- People who run their own businesses (90%)