ENTREPRENEURSHIP and SMALL BUSINESS MANAGEMENT

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ENTREPRENEURSHIP and SMALL BUSINESS MANAGEMENT

• Chapter 6

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BECOMING AN ENTREPRENEUR

• Characteristics of Entrepreneurs
• Takes risks in starting a business for profit
• Desire to be your own boss and developing a good
  initial plan
• Having special skills and abilities and coming up
  with innovative ideas
• Entrepreneurship
• The process of starting, organizing, managing,
  and assuming the responsibility for a business
• Partners share the profits and losses

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BECOMING AN ENTREPRENEUR

• Entrepreneurs in Action
• Computer software
• Water Talkies
• Latin Artist
• Makin Bacon microwave bacon pan
• What Does It Take?
• Unique skills and personal characteristics to
  develop a new idea for a product or service
• Confidence and capability to turn it into a
  business

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PERSONAL CHARACTERISTICS of SUCCESSFUL
ENTREPRENEURS
Entrepreneurs are more
They have

• Problem-solving skills
• Tolerance for ambiguity
• Strong integrity
• Personal initiative
• Ability to secure resources
• Capability to learn from failure
• Willingness to work hard

• Persistent
• Inquisitive
• Energetic
• Goal oriented
• Independent
• Self-confident
• Creative
• Reliable
• Competitive

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ENTREPRENERUSHIP and the ECONOMY

• Employment
• 40 of new business owners run their own
  businesses with no help
• 60 have one or more employees
• Financing
• Start up money mostly comes from the entrepreneur
  or family and friend
• Venture capital is money provided by large
  investors to finance new products and new
  businesses that have a good chance to be very
  profitable.
• Productivity
• Businesses with just a single owner and no staff
  account for over 600 billion in sales annually
• Small businesses are responsible for nearly half
  of the U.S. gross domestic product each year
• Small businesses account for 55 percent of all
  innovative products and services developed

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OPPORTUNITES and RISKS

• New Business Opportunities
• Consumers are always looking for new and better
  choices to meet their wants and needs
• The American private enterprise economy promotes
  innovation and new business development
• Innovation an invention or creation that is
  brand new
• Improvement a designed change that increases
  the usefulness of a product, service, or process

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OPPORTUNITES and RISKS

• Recognizing Risks
• The National Federation of Independent Business
  reports that of all new businesses, about
• 1/3 are profitable,
• 1/3 do not make a profit, but continue to
  operate, and
• 1/3 lose money
• Primary reasons that businesses started by
  entrepreneurs close are
• 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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SMALL BUSINESS BASICS

• According the to Small Business Administration
  (SBA), a small business is an independent
  business with fewer than 500 employees.
• 99.7 of the 24 million U.S. businesses are
  small businesses

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SMALL BUSINESS BASICS

• Small business description
• The owner is usually the manager
• It operates in one or very few locations
• It typically serves a small market
• It is not dominant in its field

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SMALL BUSINESS BASICS

• Small Business Ownership
• Small Business Employment
• Nearly 50 of all workers
• Responsible for creating 60-80 of all new jobs
• Ownership Diversity
• Women gt 25
• Minorities gt16
• Majority gt40 years old
• Under age 25, nearly 20
• Half are home-based businesses

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SMALL BUSINESS BASICS

• Small Business Advantages
• Meeting Customer Needs
• Serve customers where the number of products and
  services needed is small or
• The requirements are too specialized for large
  businesses to make a profit
• Providing Unique Services
• Small business representatives must take a
  special interest in their customers
• They spend time determining needs and discussing
  alternatives
• They have the expertise to plan and deliver the
  services that satisfy the customer
• Large businesses may not find it profitable to
  spend that much time with each customer

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SMALL BUSINESS BASICS

• Common Small Business Problems
• Reasons for 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

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SMALL BUSINESS BASICS

• Common Small Business Problems
• Small Business Assistance
• Universities and colleges
• Local groups such as Chambers of Commerce
• Small Business Administration (SBA)
• Service Corps of Retired Executives

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STARTING A SMALL BUSINESS

• The Business Decision
• An Idea Plus Experience
• Right Place and Time
• Team Approach
• Preparation and Research

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STARTING A SMALL BUSINESS

• Developing a Business Plan What is a Business
  Plan?
• A written description of the business idea and
  how it will be carried out, including all major
  business activities
• By developing a business plan, the owner is
  forced to think about important activities, the
  amount of time they will take, and their cost
• Helps keep a business on track

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STARTING A SMALL BUSINESS

• Developing a Business Plan What is a Business
  Plan?
• Description of the Business
• Description of Competition
• Customer Analysis
• Operations Plan
• Marketing Plan
• Financial Plans

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STARTING A SMALL BUSINESS

• Financing the Small Business
• Types of Financing
• Start-up financing
• The amount of money needed to open the business
• It includes the cost of buildings, equipment,
  inventory, supplies, licenses, etc.
• Short-term financing
• The money needed to pay for the current operating
  activities of a business
• Is obtained for a period of less than a year and
  often for one or two months
• Long-term financing
• Money needed for the main resources of a business
  such as lands, buildings, and equipment that will
  last for many years
• These resources usually require large amounts of
  money and will be paid for over many years

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STARTING A SMALL BUSINESS

• Financing the Small Business
• Sources of Financing
• Owners money
• Sole proprietor
• Partners
• Corporations -- shareholders
• Borrowed funds
• Financial institutions
• Family and friends
• Business credit buying on credit