entrepreneurship and small business management
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Entrepreneurship and Small Business Management. CHAPTER 6. 6-1 Becoming an Entrepreneur 6-2 Small Business Basics 6-3 Starting a Small Business. 6-1. Becoming an Entrepreneur. Goals Identify characteristics of successful entrepreneurs. - PowerPoint PPT PresentationTRANSCRIPT
6-16-1 Becoming an Entrepreneur
6-26-2 Small Business Basics
6-36-3 Starting a Small Business
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CHAPTER 6
ENTREPRENEURSHIP AND
SMALL BUSINESS MANAGEMENT
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BECOMING AN ENTREPRENEUR
6-16-1
KEY TERMS
Entrepreneur~ someone who takes a risk in starting a business to earn a profit
Entrepreneurship~ process of starting, organizing, managing, and assuming the responsibility for a business
Venture capital~ money provided by large investors to finance new products and new businesses that have a good chance to be very profitable.
Innovation~ an invention or creation that is brand new
Improvement~ a design change that increases the usefulness of a product, service, or process.
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CHARACTERISTICS OF ENTREPRENEURS
Desire to be your own boss
Special skills and abilities
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ENTREPRENEURS IN ACTION
Pankaj Arora
Rich Stachowski
Jeffrey Rodriguez and John Serrano
Abbey Fleck
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WHAT DOES IT TAKE?
persistent
inquisitive
energetic
goal oriented
independent
self-confident
creative
reliable
competitive
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Entrepreneurs are moreEntrepreneurs are more
WHAT DOES IT TAKE?
problem-solving skills tolerance for ambiguity strong integrity personal initiative ability to secure resources capability to learn from failure willingness to work hard
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(continued)
Entrepreneurs haveEntrepreneurs have
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CHECKPOINT >>
What personal characteristic are common to most successful entrepreneurs?
AnswerAny characteristics listed in Figure 6-1 are acceptable, such
as persistence, inquisitiveness, self-confidence, creativity, and so forth.
ENTREPRENEURSHIP AND THE ECONOMY
Employment- Small businesses are responsible for most new employment. (Over
60% of new jobs were created by businesses with fewer than 500 employees.)
Financing Most money to needed to start a new business comes from the
entrepreneur and his/her friends and family.
Venture capital
Productivity New and small businesses produce a large volume of goods and
services (over $600 billion in sales annually).
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EMPLOYMENT GROWTH BY BUSINESS SIZE
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Source: U.S. Bureau of Labor Statistics
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What are the sources of financing that entrepreneurs use for their new businesses?
Answerpersonal savings friends and familyventure capitalbank loans
Checkpoint >>Checkpoint >>
OPPORTUNITIES
Innovation~ invention or creation of something new
Innovation vs invention http://wistechnology.com/articles/4184/
Innovation vs improvement http://www.creativityincubator.com/showModule.php?category=10&module=63
Innovation Life Cycle http://www.creativityincubator.com/showModule.php?category=10&module=55
Improvement~ design change that can increase the usefulness of a product, service, or process
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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
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Recognizing risksRecognizing risks
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Where do entrepreneurship opportunities begin?
AnswerOpportunities begin with innovations (ideas about new
products and services) or improvements (ideas for changes to existing products, services, or processes).
Checkpoint >>Checkpoint >>
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SMALL BUSINESS BASICS6-26-2
KEY TERMS
small business
Small Business Administration (SBA)
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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
Ownership diversity
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COMMON TYPES OF SMALL BUSINESSES
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Source: Small Business Administration and U.S. Census Bureau
Common Common Types of Types of Small Small BusinessesBusinesses
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What percentage of employees in the United States work for small businesses?
AnswerNearly 50 percent of the American workforce is employed by
small businesses. Small businesses are also responsible for 60–80 percent of all
new jobs.
Checkpoint >>Checkpoint >>
SMALL BUSINESS ADVANTAGES
Meeting customer needs
Providing unique services
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How can small businesses compete successfully with larger businesses?
AnswerSmaller businesses are able to provide more personalized
products and services to their customers. They are able to provide products and services where smaller
orders and projects are required and tend to fill unique customer needs, which larger companies do not provide.
Checkpoint >>Checkpoint >>
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
http://www.businessknowhow.com/startup/business-failure.htm
http://www.businesspundit.com/the-25-worst-business-failures-in-history/
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SMALL BUSINESS ASSISTANCE
Faculties of universities and colleges
Local groups of business people
Small Business Administration (SBA)
SCORE http://www.score.org/small_biz_stats.html
Small Business Failure Example – Kell on Earth http://www.currentmom.com/currentmom/2010/02/kell-on-earth-teaches-about-small-business-failure.html
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List common reasons for small business failure.
Answer not keeping adequate records insufficient start-up money lack of management experience lack of experience with the type of business not controlling operating expenses poor location failure to manage credit
Checkpoint>>Checkpoint>>
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STARTING A SMALL BUSINESS
6-36-3
KEY TERMS
business plan
start-up financing
short-term financing
long-term financing
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THE BUSINESS DECISION
An idea plus experience ~hobbies, interests, and business experiences
Right place and time ~location should attract a large number of people who are interested in the products and should be in a safe and pleasant area (‘Work as a Team’, p 139)
Team approach ~employees feel valued and motivated to take personal responsibility for the benefit of the business.
Preparation and research ~gather enough info to make decisions (info on customers, competitors, operations, gov’t regulations, etc.)
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Why is it important to use a team approach when starting a new business?
AnswerA team approach allows employees to feel valued and
motivated to take personal responsibility for the benefit of the business.
Owners cannot expect to be able to do everything alone. Building a team will allow the business to increase productivity and, ultimately, profits.
Checkpoint >>Checkpoint >>
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.
www.sba.gov
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ELEMENTS OF A BUSINESS PLAN
Description of the Business
The business idea
Major products and services
Ownership structure
Strengths/weaknesses
Long- and short-term goals
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ELEMENTS OF A BUSINESS PLAN
Description of Competition
Characteristics of the industry
Condition of the economy
Strengths and weaknesses of major competitors
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(continued)
ELEMENTS OF A BUSINESS PLAN
Customer Analysis
Description of customers
Location, number, and resources of customers
Sales forecasts
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(continued)
ELEMENTS OF A BUSINESS PLAN
Operations Plan
Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans
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(continued)
ELEMENTS OF A BUSINESS PLAN
Marketing Plan
Description of major marketing activities
Description of resources needed
Schedule of marketing activities
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(continued)
ELEMENTS OF A BUSINESS PLAN
Financial Plans
Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements
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(continued)
STEPS IN DEVELOPING THE BUSINESS PLAN
Gather and review information
Develop the strategic alternatives
Write the plan
Ask an expert to review the plan
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What is the “strategic alternatives” in a business plan?
AnswerStrategic alternatives are alternative plans for production,
staffing, financing, and so on. Even the best business plan cannot predict every possible
circumstance. An alternate plan allows a business to be prepared for the
unforeseeable.
Checkpoint >>Checkpoint >>
FINANCING THE SMALL BUSINESS
Types of financing
Start-up financing ~amt of $ needed to open (building, equipment, inventory, supplies, licenses, etc)
Short-term financing ~ pays for current operating activities (less than a year)
Long-term financing ~ funds main resources that will last for years (land, building, equipment)
Sources of financing
Owner-supplied funds
Borrowed funds
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CHECKPOINT >>
In addition to owner-supplied capital, what are several other sources of financing for a small business?
AnswerBorrowed money may come from banks, finance companies,
or other individuals, such as friends and family. Some suppliers may also be willing to extend credit.