Small Business Management, Entrepreneurship, and Ownership

1
Chapter 2

• Small Business Management, Entrepreneurship, and
  Ownership

2
Entrepreneur-Manager Relationship

• Entrepreneurship is the process of identifying
  opportunities for which marketable needs exist
  and assuming the risk of creating an
  organizations to satisfy them.
• Entrepreneurs need vision to spot opportunities
• Small Business Management is the ongoing process
  of owning and operating an established business.
• Business managers must possess skills related to
  moving the business forward.

3
What is an Entrepreneur?

• Entrepreneurs engage in the following behaviors
• Creation starting a new business
• Innovation brining a new product, process or
  market.
• Risk assumption the owner bears the risk of
  potential loss
• General management business guides the
  resources
• Performance intention high levels of growth
  and/or profit are expected.

4
Model of Start-Up Process
Innovation
Growth
Maturity
5
Entrepreneurship Process

• The stage of a businesss life that involves
  innovation, a triggering event, and
  implementation of the business.
• Triggering event is a specific event or
  occurrence that sparks the entrepreneur to
  proceed from thinking to doing.
• Implementation is the stage of the process in
  which the organization is formed.
• Introducing new products
• Introducing new methods
• Opening new markets
• Opening new supply resources

6
Small Business Management Process

• Growth is the stage where the manager nurtures
  the business through a stage of growth and help
  it to reach critical mass
• Maturity is the stage where the business is
  considered to be well established.
• The survival of the business is fairly well
  assured.
• Harvest is where the owner removes
  himself/herself from the business.
• Can be thought of as picking the fruit after
  years of work

7
Self-Employment Pros/Cons

• Pros
• Opportunity for Independence
• Opportunity for a Better Lifestyle
• Opportunity for Profit
• Cons
• Personal Liability
• Uncertain Income
• Long working hours
• Limited compensation while business gets started

8
Traits of Successful Entrepreneurs

• Passion for what you are doing.
• Determination you must realize you have choices
  and are not a victim of fate.
• Knowledge of the area you are working.
• Need to achieve these people are attracted to
  jobs that challenge their skills and
  problem-solving abilities.
• Internal locus of control the belief that you
  are in control of outcomes.
• Risk Taker- MODERATE risk taker.

9
Forms of Business Ownership

• Sole Proprietorship is a business that is owned
  and operated by one person.

Advantages Disadvantages
Independence Unlimited Liability
Easy to set up Limited resources
Easy to close Limited Skills
Tax benefits Lack of Continuity
10
Forms of Business Ownership

• Partnership is defined as an association of two
  or more persons to carry on as co-owners of a
  business for profit.

Advantages Disadvantages
Pooled talent Unlimited liability
Pooled resources Potential for management conflict
Easy to form Less independence than proprietorships
Tax benefits Continuity of ownership
11
Forms of Business Ownership

• Corporation is the most complicated and is
  considered an autonomous entity with legal rights
  of a person.

Advantages Disadvantages
Limited Liability Expensive to start
Increased assess to resources Complex to maintain
Transfer of ownership Double taxation
12
Forms of Business Ownership

• S Corporation provides you with the limited
  liability protection of a corporation while
  enjoying the tax benefits of a partnership.
• To qualify you must
• Shareholders must be individuals, estates or
  trust
• Nonresident aliens may not be shareholders
• Only one class of common stock can be issued
• All shareholders must consent to the election
• State regulations specify the portion of revenue
  that must be derived from business activity.
• There may be no more than 75 shareholders.

13
Forms of Business Ownership

• Limited-Liability Company is a form of business
  established in 1988 and offers the limited
  liability protection of a corporation and the tax
  advantages of a partnership.
• LLCs are becoming very popular because there are
  NO restrictions in becoming one.