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Entrepreneurship and Small Business Chapter 5 pp. 68-83

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5. Chapter. Entrepreneurship and Small Business. pp. 68-83. Learning Objectives. After completing this chapter, you’ll be able to:. Describe an entrepreneurship and a small business. List the advantages and disadvantages of entrepreneurship. continued. Learning Objectives. - PowerPoint PPT Presentation

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Page 1: Entrepreneurship and  Small Business

Entrepreneurship and Small Business

Chapter 5pp. 68-83

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Introduction to Business, Entrepreneurship and Small Business Slide 2 of 56

Learning ObjectivesLearning ObjectivesAfter completing this chapter, you’ll be After completing this chapter, you’ll be able to:able to:

1.1. DescribeDescribe an entrepreneurship and a small business.

2.2. ListList the advantages and disadvantages of entrepreneurship.

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 3 of 56

Learning ObjectivesLearning ObjectivesAfter completing this chapter, you’ll be After completing this chapter, you’ll be able to:able to:

3.3. RecognizeRecognize the advantages and disadvantages of a small business.

4.4. ExplainExplain why small businesses may fail.

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Introduction to Business, Entrepreneurship and Small Business Slide 4 of 56

Why It’s ImportantWhy It’s Important

Entrepreneurs and small businesses bring vital energy and innovation to the economy.

The risks involved energize entrepreneurs and small business owners to become successful.

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Introduction to Business, Entrepreneurship and Small Business Slide 5 of 56

Key WordsKey Words

entrepreneurshipvirtual business or dot-com companysmall businessentrepreneurrisk takerprofit

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Introduction to Business, Entrepreneurship and Small Business Slide 6 of 56

The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

Entrepreneurships and small businesses are the majority of business firms.

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Introduction to Business, Entrepreneurship and Small Business Slide 7 of 56

An entrepreneurship is a business started by someone who notices a need for a product or service.

The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

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Introduction to Business, Entrepreneurship and Small Business Slide 8 of 56

A virtual business or a dot-com company is a business that operates on the Internet.

The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

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Introduction to Business, Entrepreneurship and Small Business Slide 9 of 56

Online FinanceSome new Internet businesses are able to hire people without paying them a salary. LENDX Inc., based in San Francisco, Calif., serves as an online financial hub for businesses interested in leasing or buying equipment.

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 10 of 56

When LENDX started, their first six employees worked for shares of company stock only.

AnalyzeWhy would its employees work without a salary?

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Introduction to Business, Entrepreneurship and Small Business Slide 11 of 56

Figure5.1 ARE YOU ORIGINAL?

Take this quiz and see if you would be a good entrepreneur.

Below are traits of an entrepreneur. Rate yourself by choosing a number that best describes you. At the end you’ll add up your points to see how you fared (1 is the lowest, 5 is the highest).

Rate your score:35-40 points = true entrepreneur30-34 = willing to take risks and try something new25 and under = you take fewer risks

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Introduction to Business, Entrepreneurship and Small Business Slide 12 of 56

The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of a business enterprise, with the intent of increasing the market value of the business.

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Introduction to Business, Entrepreneurship and Small Business Slide 13 of 56

Entrepreneurs are take-charge, self-directed people.

Often an entrepreneur is a risk taker, or someone who likes to take risks.

The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

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Introduction to Business, Entrepreneurship and Small Business Slide 14 of 56

Want tocontroldestiny

Want tocontroldestiny

Desire toearn profitDesire to

earn profit

Areenthusiastic

Areenthusiastic Have self-

confidenceHave self-confidence

Aredetermined

Aredetermined

Recognizeopportunities Recognize

opportunities Desire

achievementDesire

achievement

TakerisksTakerisks

Have highenergy

Have highenergy

SuccessfulSuccessful EntrepreneursEntrepreneurs

SuccessfulSuccessful EntrepreneursEntrepreneurs

Successful EntrepreneursSuccessful Entrepreneurs

Graphic OrganizerGraphic Organizer

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Introduction to Business, Entrepreneurship and Small Business Slide 15 of 56

There are many advantages to being an entrepreneur, including:

Advantages of EntrepreneurshipAdvantages of Entrepreneurship

• Satisfaction from taking a risk and becoming a success

• Showing expertise and skills

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 16 of 56

Advantages of EntrepreneurshipAdvantages of Entrepreneurship • Working from home• Gaining profit

Profit is the money left over after a business has paid all costs of producing its goods or services.

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Introduction to Business, Entrepreneurship and Small Business Slide 17 of 56

DisadvantagesDisadvantagesof Entrepreneurshipof Entrepreneurship

The disadvantages to being an entrepreneur are:

• Long hours• Total responsibility for the business• Financial risks

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Introduction to Business, Entrepreneurship and Small Business Slide 18 of 56

DisadvantagesDisadvantagesof Entrepreneurshipof Entrepreneurship

The main reason why entrepreneurships fail is that they run out of money.

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Introduction to Business, Entrepreneurship and Small Business Slide 19 of 56

Fast Review

1. What are some characteristics of entrepreneurs?

2. What are three advantages of an entrepreneurship?

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 20 of 56

Fast Review

3. What are some disadvantages of an entrepreneurship?

4. What is the main reason that entrepreneurships fail?

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Introduction to Business, Entrepreneurship and Small Business Slide 21 of 56

Small Business:Small Business:What You Need to KnowWhat You Need to Know

The Small Business Administration (SBA) defines a small business as an independently owned business that usually has the owner as its manager.

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Introduction to Business, Entrepreneurship and Small Business Slide 22 of 56

Small Business:Small Business:What You Need to KnowWhat You Need to Know

A small business serves a limited geographic area, employs fewer than 500 people, and is not dominant in its industry.

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Introduction to Business, Entrepreneurship and Small Business Slide 23 of 56

Small Business:Small Business:What You Need to KnowWhat You Need to Know

Small businesses employ more than 50 percent of the total workforce in the United States.

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Introduction to Business, Entrepreneurship and Small Business Slide 24 of 56

Small Business:Small Business:What You Need to KnowWhat You Need to Know

Small businesses generate more than half the nation’s income.

They are the principal source of new jobs.

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Introduction to Business, Entrepreneurship and Small Business Slide 25 of 56

Making an Ethical Decision

1. Are all employees—even those in small businesses—entitled to job benefits?

2. If you were an employee, what kind of benefits would you want?

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 26 of 56

Making an Ethical Decision

3. If you were an employer, what benefits would you want to offer and why? What other job “perks” could you offer your employees that would not directly cost money?

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Introduction to Business, Entrepreneurship and Small Business Slide 27 of 56

Small Business:Small Business:What You Need to KnowWhat You Need to Know

Small businesses account for about 38 percent of jobs in high technology.

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Introduction to Business, Entrepreneurship and Small Business Slide 28 of 56

Figure5.2 SMALL BUSINESS EMPLOYMENT IN THE UNITED STATES

There are 25 million small businesses in the United States.

Which three types of small businesses provide the most jobs?

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Introduction to Business, Entrepreneurship and Small Business Slide 29 of 56

Advantages of Small Business Advantages of Small Business Some of the advantages of owning a small business are:

• Being the boss• Offering services large companies

cannot offer• Ease of formation

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Introduction to Business, Entrepreneurship and Small Business Slide 30 of 56

Disadvantages of Small Business Disadvantages of Small Business

When you’re a small business owner, you’re responsible for decisions.

You often work long hours and have great financial responsibility.

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Introduction to Business, Entrepreneurship and Small Business Slide 31 of 56

About four out of five small businesses fail in their first five years.

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 32 of 56

Small business owners may mistake the freedom of being in business for oneself for the liberty of working or not.

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 33 of 56

A small business may underprice or overprice goods or services.

Going into business with little or no experience may result in the business closing.

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 34 of 56

The following are three specific reasons why a small business might not work:

continued

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 35 of 56

Why a small business might not work:1. Effect of Change

Consumers’ tastes change. If flexibility and change are not part of the business, then it’s likely to fail.

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 36 of 56

2. Managerial Skills NeededA small business owner must have multiple skills including:• Financing• Employee relations

continued

Why a small business might not work:

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 37 of 56

Managerial Skills Needed

• Production• Customer Relations

Disadvantages of Small Business Disadvantages of Small Business

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Introduction to Business, Entrepreneurship and Small Business Slide 38 of 56

Starting with little money, spending carelessly, borrowing money without planning, and forgetting about taxes and insurance may result in a failure.

3. Inadequate Financial Planning

Disadvantages of Small Business Disadvantages of Small Business Why a small business might not work:

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Introduction to Business, Entrepreneurship and Small Business Slide 39 of 56

Fast Review

1. How does the Small Business Administration (SBA) define a small business?

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 40 of 56

Fast Review

2. Give an example of a service that a small business may offer that a large company cannot offer.

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 41 of 56

Fast Review

3. Which is more difficult to form: a large business or a small business?

4. Give examples of special skills that a small business owner needs.

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 42 of 56

Fast Review

5. List two financial reasons that small businesses fail.

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Introduction to Business, Entrepreneurship and Small Business Slide 43 of 56

Preparing for Your Own Preparing for Your Own BusinessBusiness

A business plan is a written description of a new business venture that describes all aspects of the business.

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Introduction to Business, Entrepreneurship and Small Business Slide 44 of 56

Checklist for Starting a VentureChecklist for Starting a VentureSome questions to consider before starting your own business are:

• What will I produce?• Who are my main competitors?• Why is my product needed?

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 45 of 56

Checklist for Starting a VentureChecklist for Starting a Venture

• How much will my product cost to produce?

• How many people will I need to run the business?

• What physical facilities will I need?

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 46 of 56

Checklist for Starting a VentureChecklist for Starting a Venture

• What licenses, permits, or other legal documents do I need?

• How much money will I need to get started?

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Introduction to Business, Entrepreneurship and Small Business Slide 47 of 56

Parts of a Business PlanParts of a Business PlanThe essential parts of the business plan are:

• Summary• Company description• Products and services

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 48 of 56

Parts of a Business PlanParts of a Business Plan

• Marketing plan• Legal plan• Management and operating plan• Financial plan

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Elements of a Business Plan

1. The summary is a one- to three-page overview of the plan.

2. The company description explains the type of company.

continued

Business Building BlocksBusiness Building Blocks

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Introduction to Business, Entrepreneurship and Small Business Slide 50 of 56

3. Describe products or services in the products and services section.

4. The marketing plan describes your customers and your competition.

5. A legal plan points out how you will organize your company. continued

Elements of a Business PlanBusiness Building BlocksBusiness Building Blocks

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Introduction to Business, Entrepreneurship and Small Business Slide 51 of 56

6. The management plan and operating plan detail the company’s key personnel.

7. Complete a financial plan.

continued

Elements of a Business PlanBusiness Building BlocksBusiness Building Blocks

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Introduction to Business, Entrepreneurship and Small Business Slide 52 of 56

• Be brief and relevant.• Don’t inflate the importance or

possible success of your business.• “Write short and be honest,” is a good

rule of thumb.

Tips for Writing an Effective Business Plan

Business Building BlocksBusiness Building Blocks

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Introduction to Business, Entrepreneurship and Small Business Slide 53 of 56

Fast Review

1. What is a business plan?

2. Name the essential elements of a business plan.

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Introduction to Business, Entrepreneurship and Small Business Slide 54 of 56

continued

What makes a person an entrepreneur?

What makes a company successful?

continued

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Introduction to Business, Entrepreneurship and Small Business Slide 55 of 56

Identify some reasons why a small business might be hard to manage.

What are some benefits of selling online?

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End of Chapter 5Entrepreneurship and Small Business