1. 6 Entrepreneurship and Small Business Management
C H A P T E R 6
Entrepreneurship and Small Business Management
6-1 Becoming an Entrepreneur
6-2 Small Business Basics
6-3 Starting a Small Business

2. 6-1 Becoming an Entrepreneur
Goal 1 Identify characteristics of successful entrepreneurs.
Goal 2 Recognize the importance of entrepreneurship in the economy.
Goal 3 Describe opportunities and risks of entrepreneurship.

3. KEY TERMS entrepreneur entrepreneurship venture capital innovation
improvement

4. CHARACTERISTICS OF ENTREPRENEURS
Desire to be your own boss
Special skills and abilities

5. ENTREPRENEURS IN ACTION
Joshua Moore
Ben Cathers
Rich Stachowski
Abbey Fleck

6. WHAT DOES IT TAKE?
Not all business owners and managers are entrepreneurs.
Entrepreneurs have unique skills and personal characteristics.

7. ENTREPRENEURS ARE MORE
Persistent
Inquisitive
Energetic
Goal-oriented
Independent
Self-confident
Creative
Reliable
Competitive

8. 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

9. Checkpoint 
What personal characteristic are common to most successful entrepreneurs?
Any characteristics listed in Figure 6-1 are acceptable, such as persistence, inquisitiveness, self-confidence, creativity, and so forth.

10. ENTREPRENEURSHIP AND THE ECONOMY
Employment
Financing
Productivity

11. Employment Growth by Business Size, 1990–2005

12. Checkpoint 
What are the sources of financing that entrepreneurs use for their new businesses?
Personal savings
Friends and family
Venture capital
Bank loans

13. OPPORTUNITIES AND RISKS
Before deciding to start a business, you need to think about the opportunities and risks.

14. NEW BUSINESS OPPORTUNITIES
Innovation
Improvement

15. 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

16. Checkpoint  Where do entrepreneurship opportunities begin?
Opportunities begin with innovations (ideas about new products and services) or improvements (ideas for changes to existing products, services, or processes).

17. 6-2 Small Business Basics
Goal 1 Identify important characteristics of small businesses.
Goal 2 Recognize the competitive advantages of small businesses.
Goal 3 Identify problems faced by many small businesses.

18. KEY TERMS
small business
Small Business Administration (SBA)

19. 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

20. Common Types of Small Businesses as Percent of All Small Businesses

21. Checkpoint 
Beyond the formal definition of a small business, what four points can be used to describe a small business?
Owner is usually the manager
Business operates in one or very few locations
Business typically serves a small market
Business is not dominant in its field

22. SMALL BUSINESS ADVANTAGES
Meeting customer needs
Providing unique services

23. Checkpoint 
How can small businesses compete successfully with larger businesses?
Smaller 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.

24. 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

25. SMALL BUSINESS ASSISTANCE
University and college faculty members
Local groups of business people
Small Business Administration (SBA)

26. Checkpoint  List common reasons for small business failure.
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

27. 6-3 Starting a Small Business
Goal 1 Recognize important factors to be considered when starting a business.
Goal 2 Describe the elements of a business plan.
Goal 3 Identify types and sources of financing for a small business.

28. KEY TERMS business plan start-up financing short-term financing
long-term financing

29. THE BUSINESS DECISION An idea plus experience Right place and time
Team approach
Preparation and research

30. Checkpoint 
Why is it important to use a team approach when starting a new business?
A 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.

31. 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.

32. 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

33. ELEMENTS OF A BUSINESS PLAN
(continued)
Description of Competition
Characteristics of the industry
Condition of the economy
Strengths and weaknesses of major competitors

34. ELEMENTS OF A BUSINESS PLAN
(continued)
Customer Analysis
Description of customers
Location, number, and resources of customers
Sales forecasts

35. ELEMENTS OF A BUSINESS PLAN
(continued)
Operations Plan
Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans

36. ELEMENTS OF A BUSINESS PLAN
(continued)
Marketing Plan
Description of major marketing activities
Description of resources needed
Schedule of marketing activities

37. ELEMENTS OF A BUSINESS PLAN
(continued)
Financial Plans
Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements

38. STEPS IN DEVELOPING THE BUSINESS PLAN
Gather and review information
Develop the strategic alternatives
Write the plan
Ask an expert to review the plan

39. Checkpoint  What are the “strategic alternatives” in a business plan?
Strategic 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.

40. FINANCING THE SMALL BUSINESS
Types of financing
Start-up financing
Short-term financing
Long-term financing
Sources of financing
Owner-supplied funds
Borrowed funds

41. Checkpoint 
In addition to owner-supplied capital, what are several other sources of financing for a small business?
Borrowed money may come from banks, finance companies, or other individuals, such as friends and family.
Some suppliers may also be willing to extend credit.