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CHAPTER 5 ENTREPRENEURSHIP. Rewards and Challenges of Entrepreneurship An entrepreneur is a person who recognizes a business opportunity and organizes,

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Presentation on theme: "CHAPTER 5 ENTREPRENEURSHIP. Rewards and Challenges of Entrepreneurship An entrepreneur is a person who recognizes a business opportunity and organizes,"— Presentation transcript:

1 CHAPTER 5 ENTREPRENEURSHIP

2 Rewards and Challenges of Entrepreneurship An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of starting and operating a business. Entrepreneurship is the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business. An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of starting and operating a business. Entrepreneurship is the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business. A venture is a new business undertaking that involves risks. A venture is a new business undertaking that involves risks.

3 12 Characteristics of Entrepreneurs Persistent Persistent Risk-taking Risk-taking Self-confident Self-confident Restless Restless Goal-oriented Goal-oriented Action-oriented Action-oriented Responsible Responsible Self-demanding Self-demanding Creative Creative Independent Independent Inquisitive Inquisitive Enthusiastic Enthusiastic

4 Small Businesses Small business is an independently owned business that usually has the owner as its manager. Small business is an independently owned business that usually has the owner as its manager. A small business serves a limited geographic area and employs fewer than 500 people. A small business serves a limited geographic area and employs fewer than 500 people.

5 Internet Businesses Virtual Business Virtual Business Dot-com company is a business that operates on the internet. Dot-com company is a business that operates on the internet. According to American City Business Journals, small businesses that use the internet have grown more than 45 percent faster than those that do not. According to American City Business Journals, small businesses that use the internet have grown more than 45 percent faster than those that do not.

6 Rewards of Entrepreneurship Being the Boss Being the Boss Ability to be in charge (Main Reason) Ability to be in charge (Main Reason) Entrepreneurs do not have to consult with others before making a decision. Entrepreneurs do not have to consult with others before making a decision. Doing what you Enjoy Doing what you Enjoy Having the opportunity to be Creative Having the opportunity to be Creative Entrepreneurs make the procedure that everyone else follows. Daring or creative ideas. Entrepreneurs make the procedure that everyone else follows. Daring or creative ideas. Building an Enterprise Building an Enterprise Many successful entrepreneurs work in a related business before starting their own business. Many successful entrepreneurs work in a related business before starting their own business. They must research before starting. They must research before starting. Other Reasons Other Reasons Make their own schedule. Make their own schedule.

7 Sole proprietorship vs. Partnership vs. Corporation Sole proprietorships are owned and operated by one person. Sole proprietorships are owned and operated by one person. Do not share their company’s income and expenses, profits or loses. Do not share their company’s income and expenses, profits or loses. All responsibilities and profits and benefits. All responsibilities and profits and benefits. Partnerships are owned and ran by two or more people. Partnerships are owned and ran by two or more people. Corporations are run by a chief executive officer, who answers to a board. Corporations are run by a chief executive officer, who answers to a board.

8 Challenges of Entrepreneurship Getting Funds to Start the Business Getting Funds to Start the Business Most people must borrow money or finance the money to get started. (Go in debt). Most people must borrow money or finance the money to get started. (Go in debt). Difficult to get loans-fear of business succeeding or not, and ability to repay the loan. Difficult to get loans-fear of business succeeding or not, and ability to repay the loan. Being Fully Responsible for the Business Being Fully Responsible for the Business Must make sure that: Must make sure that: Floors swept, bills paid, employees hired, make repairs, handle financial records, train employees, etc. Floors swept, bills paid, employees hired, make repairs, handle financial records, train employees, etc. Other Challenges Other Challenges Feeling alone Feeling alone Making right decisions Making right decisions Work long hours Work long hours Uncertain level of income Uncertain level of income 4 out of 5 small businesses fail in the first five years of existence. Mostly due to poor financial planning and management, and not being able to adapt to change. 4 out of 5 small businesses fail in the first five years of existence. Mostly due to poor financial planning and management, and not being able to adapt to change.

9 Small Businesses Facts More than 99% of the US firms are small businesses. More than 99% of the US firms are small businesses. Small businesses employ more than 50% of the workforce in the US. Small businesses employ more than 50% of the workforce in the US. Majority are one person operations. Majority are one person operations. Estimate: 2/3 of all new jobs are generated by small businesses. Estimate: 2/3 of all new jobs are generated by small businesses. Virtual businesses continues to increase. Virtual businesses continues to increase.

10 5.2 The Business Plan Business Plan is a written description of a new business venture that describes ALL aspects of the business. It is used by potential investors and financing agencies that new entrepreneurs go to for start-up funds. Business Plan is a written description of a new business venture that describes ALL aspects of the business. It is used by potential investors and financing agencies that new entrepreneurs go to for start-up funds.

11 Checklist for Starting a Business What will I produce? What will I produce? Who are my main competitors? Who are my main competitors? Why is my product or service needed? Why is my product or service needed? How much will my product or service cost to produce? How much will my product or service cost to produce? How many people will I need to run the business? How many people will I need to run the business? What physical facilities will I need? What physical facilities will I need? What licenses, permits, or other legal documents do I need? What licenses, permits, or other legal documents do I need? How much money will I need to get started? How much money will I need to get started?

12 16 Essential Parts of a Business Plan Executive Summary Executive Summary Management Team Plan Management Team Plan Company Description Company Description Product and Service Plan Product and Service Plan Vision and Mission Statements Vision and Mission Statements Industry Overview Industry Overview Market Analysis Market Analysis Competitive Analysis Competitive Analysis Marketing Plan Marketing Plan Operational Plan Operational Plan Organizational Plan Organizational Plan Financial Plan Financial Plan Growth Plan Growth Plan Contingency Plan Contingency Plan Cover Page, Title Page, Table of Contents, and Supporting Documents Cover Page, Title Page, Table of Contents, and Supporting Documents

13 Executive Summary Brief account of key points. Brief account of key points. Not more than 2 pages. Not more than 2 pages. Most important information from each section. Most important information from each section. Should persuade the reader that the business will succeed. Should persuade the reader that the business will succeed. Evidence gathered through market research. Evidence gathered through market research.

14 Management Team Plan Your qualifications. Your qualifications. Description of team capabilities. Description of team capabilities. How you will fill gaps in expertise. How you will fill gaps in expertise. Hire consultants Hire consultants Form partnerships Form partnerships Advisory Boards Advisory Boards

15 Company Description Outline of the business. Outline of the business. Size, scope, and type of business. Size, scope, and type of business. Why the business will succeed?? Why the business will succeed??

16 Product and Service Plan Description of the product or service you want to offer. Description of the product or service you want to offer. Nature of the business should be clear. Nature of the business should be clear. Unique features of the product. Unique features of the product. Spin-offs are additional products that may be offered when the business gets established. Spin-offs are additional products that may be offered when the business gets established.

17 Vision and Mission Statements Guiding principles by which a business functions. Guiding principles by which a business functions. Vision Statement-the scope and purpose of a company, and it beliefs and values. Vision Statement-the scope and purpose of a company, and it beliefs and values. Mission Statement-specific aspirations of a company, the major goals. Mission Statement-specific aspirations of a company, the major goals.

18 Industry Overview Present your research. Present your research. Discuss trends and growth within the industry. Discuss trends and growth within the industry. (Industry is the companies that provide similar, complimentary, or different products) (Industry is the companies that provide similar, complimentary, or different products)

19 Market Analysis Research about your customer profile. Research about your customer profile. Overall marketing and sales strategies. Overall marketing and sales strategies. Analyze your customers and the competition. Analyze your customers and the competition. Target market information-geographics, economics, and demographics. Target market information-geographics, economics, and demographics.

20 Competitive Analysis How the business has an advantage over its competitors. How the business has an advantage over its competitors.

21 Marketing Plan How a company makes its customers aware of it products or services. How a company makes its customers aware of it products or services. Market niche, pricing, company image, marketing tactics, media plan, and marketing budget. Market niche, pricing, company image, marketing tactics, media plan, and marketing budget.

22 Operational Plan Production and delivery of the product or service. Production and delivery of the product or service.

23 Organizational Plan People who will run the firm as well as management’s philosophy. People who will run the firm as well as management’s philosophy. Form of business organization- proprietorship or corporation, etc. Form of business organization- proprietorship or corporation, etc.

24 Financial Plan Forecast for the business. Forecast for the business. Data Data Proof that the business will be financially healthy. Proof that the business will be financially healthy.

25 Growth Plan How the business will expand in the future. How the business will expand in the future.

26 Contingency Plan Likely risks to the business. Likely risks to the business. Lower than expected sales. Lower than expected sales. Emergencies. Emergencies. Ways to minimize risks. Ways to minimize risks.

27 Cover Page, Title Page, Table of Contents, and Supporting Documents Company’s Name Company’s Name Address Address Phone Number Phone Number Website Website Logo Logo The date the plan was submitted The date the plan was submitted Name of the preparer Name of the preparer


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