chapter 4 entrepreneurshipsucceeding in the world of work getting started in your own business 4.3...

Chapter 4 • Entrepreneurship Succeeding in the World of Work

Getting Started in Your Own BusinessGetting Started in Your Own Business4.3

SECTION OPENER / CLOSERINSERT BOOK COVER ART

Section 4.3Section 4.3Getting Started in Your Own BusinessGetting Started in Your Own Business



WHAT YOU’LL LEARN

How to identify the different How to identify the different forms of legal business forms of legal business ownershipownership

Key factors that impact the Key factors that impact the success of new businessessuccess of new businesses

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WHAT YOU’LL LEARN

How to prepare the documents How to prepare the documents necessary for financing a new necessary for financing a new businessbusiness



Thoughtful planning and preparation Thoughtful planning and preparation are essential in ensuring the are essential in ensuring the success of a new business. success of a new business.

WHY IT’S IMPORTANT



sole proprietorshipsole proprietorshippartnershippartnershipcorporationcorporationoperating expensesoperating expensesincome statementincome statement

KEY TERMS

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revenuerevenuegross profitgross profitnet profit net profit

KEY TERMS



The three forms of legal business The three forms of legal business ownership are:ownership are:

Forms of Legal OwnershipForms of Legal OwnershipForms of Legal OwnershipForms of Legal Ownership

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sole proprietorship,sole proprietorship,partnership, andpartnership, andcorporation.corporation.



A A sole proprietorshipsole proprietorship is a business that is a business that is completely owned by one person.is completely owned by one person.

About 75 percent of all U.S. businesses About 75 percent of all U.S. businesses are sole proprietorships.are sole proprietorships.

Sole ProprietorshipSole ProprietorshipSole ProprietorshipSole Proprietorship



A A partnershippartnership is a business is a business arrangement in which two or more arrangement in which two or more people share ownership.people share ownership.

Control and profits are divided among Control and profits are divided among partners according to a partnership partners according to a partnership agreement.agreement.

PartnershipPartnershipPartnershipPartnership



A A corporationcorporation is a business owned by is a business owned by people who buy shares in the company.people who buy shares in the company.

Shareholders earn a profit based on the Shareholders earn a profit based on the number of shares they own.number of shares they own.

CorporationCorporationCorporationCorporation



When the location of your business is When the location of your business is important, consider these factors:important, consider these factors:

Location, Location, LocationLocation, Location, LocationLocation, Location, LocationLocation, Location, Location

types of businesses in the area,types of businesses in the area,condition of streets and buildings,condition of streets and buildings,location of the competition, andlocation of the competition, andlocation of your customers.location of your customers.



Working in your home is cheaper and Working in your home is cheaper and more convenient than leasing a location. more convenient than leasing a location.

You’ll also enjoy more flexibility and a You’ll also enjoy more flexibility and a relaxed atmosphere.relaxed atmosphere.

Working at HomeWorking at HomeWorking at HomeWorking at Home



Some communities restrict the kinds of Some communities restrict the kinds of businesses that can operate in businesses that can operate in residential areas.residential areas.

Working at home can be isolating.Working at home can be isolating.

Working at HomeWorking at HomeWorking at HomeWorking at Home



Whatever type of business you launch, Whatever type of business you launch, you’ll need money to get it going.you’ll need money to get it going.

To apply for a loan, you’ll need a To apply for a loan, you’ll need a business plan and a financial plan.business plan and a financial plan.

FinancingFinancingFinancingFinancing



The important points covered in a The important points covered in a business planbusiness plan are: are:


product description,product description,business location,business location,number of employees and their number of employees and their salaries,salaries,

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strengths and weaknesses of strengths and weaknesses of competitors, andcompetitors, andtimetable for starting the business.timetable for starting the business.



A A financial planfinancial plan spells out your start-up spells out your start-up costs, operating expenses, and other costs, operating expenses, and other costs for the first few months.costs for the first few months.

Operating expensesOperating expenses are the costs of are the costs of doing business.doing business.



Getting Started in Your Own BusinessGetting Started in Your Own Business4.3 Graphic OrganizerGraphic Organizer4.3


Opening Your Own BusinessOpening Your Own BusinessOpening Your Own BusinessOpening Your Own Business

Choose aForm of

Ownership

Choose aLocation

Write aBusiness

Plan

ObtainFinancing

Open YourBusiness



Whatever business you choose to start, Whatever business you choose to start, you will need a variety of skills, you will need a variety of skills, including:including:

Operating Your Own BusinessOperating Your Own BusinessOperating Your Own BusinessOperating Your Own Business

reading,reading,writing,writing,math, andmath, andlistening and speaking skills.listening and speaking skills.



An An income statementincome statement is a summary of is a summary of your business’s income and expenses your business’s income and expenses during a specific period such as a during a specific period such as a month, a quarter, or a year.month, a quarter, or a year.




RevenueRevenue is income from sales. is income from sales.

Revenue is the first item on an income Revenue is the first item on an income statement.statement.




Gross profitGross profit is the difference between is the difference between the cost of goods and their selling price.the cost of goods and their selling price.

Net profitNet profit is the amount left over after is the amount left over after operating expenses are subtracted from operating expenses are subtracted from the gross profit.the gross profit.




A balance sheet summarizes a A balance sheet summarizes a business’s assets, liabilities, and the business’s assets, liabilities, and the owner’s equity.owner’s equity.




AssetsAssets, which can be classified as , which can be classified as current or fixed, are anything of current or fixed, are anything of monetary value that the business owns.monetary value that the business owns.




LiabilitiesLiabilities are debts a business owner are debts a business owner owes.owes.




EquityEquity, or ownership interest, is the , or ownership interest, is the amount you have invested in your amount you have invested in your business.business.




A A cash flow statementcash flow statement is a monthly plan is a monthly plan that shows when you anticipate that the that shows when you anticipate that the business will receive cash and when you business will receive cash and when you expect to pay out cash.expect to pay out cash.




Key Concept CheckpointKey Concept CheckpointComprehensionComprehension

1.1. Imagine that you are starting a Imagine that you are starting a trucking company. What form of trucking company. What form of ownership will you choose? Why?ownership will you choose? Why?

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SECTION 4.3 REVIEWSECTION 4.3 REVIEW




2.2. What should you consider in What should you consider in choosing a location for this business?choosing a location for this business?

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3.3. You have decided to organize your You have decided to organize your trucking company as a corporation. trucking company as a corporation. How will you go about financing it?How will you go about financing it?

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Key Concept CheckpointKey Concept CheckpointCritical ThinkingCritical Thinking

4.4. Why might you choose to take a Why might you choose to take a business loan from a bank, even if a business loan from a bank, even if a relative has enough money to finance relative has enough money to finance your venture?your venture?




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End of Section 4.3End of Section 4.3Getting Started in Your Own BusinessGetting Started in Your Own Business

chapter 4 entrepreneurshipsucceeding in the world of work getting started in your own business 4.3...

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