Introduction to Business© Thomson South-Western

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Entrepreneurship and Small Business Management

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Introduction to Business© Thomson South-Western

Chapter 6

Slide 2

CHARACTERISTICS OF ENTREPRENEURS

Entrepreneur One who takes a risk in starting a business

to earn a profit Desire to be your own boss Special skills and abilities

Introduction to Business© Thomson South-Western

Chapter 6

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ENTREPRENEURS IN ACTION

Barbers – Cabin Coffee Creative Graphics Schroeder Plumbing

Introduction to Business© Thomson South-Western

Chapter 6

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WHAT DOES IT TAKE?

Entrepreneurs are more persistent inquisitive energetic goal oriented independent

self-confident creative reliable competitive

Introduction to Business© Thomson South-Western

Chapter 6

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WHAT DOES IT TAKE?Entrepreneurs have problem-solving skills tolerance for ambiguity strong integrity personal initiative ability to secure resources capability to learn from failure willingness to work hard

(continued)

Introduction to Business© Thomson South-Western

Chapter 6

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ENTREPRENEURSHIP AND THE ECONOMY

Employment 1/10 involved in some type of entrepreneurship 60% of these have hired employees

Financing Comes from entrepreneurship 50% also get help from family May use Venture Capital

Money provided by large investors

Introduction to Business© Thomson South-Western

Chapter 6

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ENTREPRENEURSHIP AND THE ECONOMY

Productivity Account for over $600 billion in sales Responsible for nearly half of GDP

Introduction to Business© Thomson South-Western

Chapter 6

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NUMBER OF EMPLOYEESIN NEW BUSINESSES

Introduction to Business© Thomson South-Western

Chapter 6

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OPPORTUNITIES

Innovation Invention or creation that is brand new

(IPOD, IPAD)

Improvement Design change that increase the

usefulness of a product

(Post its – to wall hooks)

Introduction to Business© Thomson South-Western

Chapter 6

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RISKS

Recognizing risks Lack of adequate capital Low sales Higher than expected expenses Competitive pressure An owner unprepared to manage a growing

business Operations requiring more time than the owner is

willing to commit

Introduction to Business© Thomson South-Western

Chapter 6

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SMALL BUSINESS OWNERSHIP Description of a small business

Owner is usually the manager Operates in one or very few locations Typically serves a small market Not dominant in its field

Small business employment Employees nearly 50 of all workers

Introduction to Business© Thomson South-Western

Chapter 6

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SMALL BUSINESS OWNERSHIP Ownership diversity

Women own over ¼ of all small business 16% owned by Ethnic backgrounds Most over 40 years old High School diploma, 30% have college degree Half are operated out of their homes.

Introduction to Business© Thomson South-Western

Chapter 6

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COMMON TYPES OF SMALL BUSINESSES

Introduction to Business© Thomson South-Western

Chapter 6

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SMALL BUSINESS ADVANTAGES Meeting customer needs

Serve those with specific needs

Providing unique services Plan a wedding, design a sound system

Introduction to Business© Thomson South-Western

Chapter 6

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COMMON REASONS FOR SMALL BUSINESS FAILURE Not keeping adequate records Not having enough start-up money Lack of management experience Lack of experience with the type of business Not controlling operating expenses Poor location for the business Failure to manage credit offered to customers

Introduction to Business© Thomson South-Western

Chapter 6

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SMALL BUSINESS ASSISTANCE Faculties of universities and colleges Local groups of business people Small Business Administration (SBA)

Introduction to Business© Thomson South-Western

Chapter 6

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THE BUSINESS DECISION

An idea plus experience Right place and time Team approach Preparation and research

Introduction to Business© Thomson South-Western

Chapter 6

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WHAT IS A BUSINESS PLAN? A business plan is a written

description of the business idea and how it will be carried out, including all major business activities.

Introduction to Business© Thomson South-Western

Chapter 6

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ELEMENTS OF A BUSINESS PLAN1. Description of the Business

a) The business idea

b) Major products and services

c) Ownership structure

d) Strengths/weaknesses

e) Long- and short-term goals

Introduction to Business© Thomson South-Western

Chapter 6

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ELEMENTS OF A BUSINESS PLAN2. Description of Competition

a) Characteristics of the industry

b) Condition of the economy

c) Strengths and weaknesses of major competitors

(continued)

Introduction to Business© Thomson South-Western

Chapter 6

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ELEMENTS OF A BUSINESS PLAN3. Customer Analysis

a) Description of customers

b) Location, number, and resources of customers

c) Sales forecasts

(continued)

Introduction to Business© Thomson South-Western

Chapter 6

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ELEMENTS OF A BUSINESS PLAN4. Operations Plan

a) Organization of the company

b) Description of major operations

c) Analysis of resources needed

d) Human resource plans

(continued)

Introduction to Business© Thomson South-Western

Chapter 6

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ELEMENTS OF A BUSINESS PLAN5. Marketing Plan

a) Description of major marketing activities

b) Description of resources needed

c) Schedule of marketing activities

(continued)

Introduction to Business© Thomson South-Western

Chapter 6

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ELEMENTS OF A BUSINESS PLAN6. Financial Plans

a) Start-up costs

b) Short- and long-term financial needs

c) Sources of financing

d) Budgets and financial statements

(continued)

Introduction to Business© Thomson South-Western

Chapter 6

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STEPS IN DEVELOPING THE BUSINESS PLAN Gather and review information Develop the “game plan” Write the plan Ask an expert to review the plan

Introduction to Business© Thomson South-Western

Chapter 6

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FINANCING THE SMALL BUSINESS

1. Types of financinga) Start-up financing - $ to start

b) Short-term financing - $ for current operations

c) Long-term financing - $ for capital resources

2. Sources of financinga) Owner-supplied funds

b) Borrowed fundsBanks – Family – Angel Investors