Presentation is loading. Please wait.

Presentation is loading. Please wait.

Chapter 5 Small Business, Entrepreneurship, and Franchises.

Similar presentations


Presentation on theme: "Chapter 5 Small Business, Entrepreneurship, and Franchises."— Presentation transcript:

1 Chapter 5 Small Business, Entrepreneurship, and Franchises

2 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 2 Learning Objectives 1.Define what a small business is and recognize the fields in which small businesses are concentrated. 2.Identify the people who start small businesses and the reasons why some succeed and many fail. 3.Assess the contributions of small businesses to our economy. 4.Judge the advantages and disadvantages of operating a small business. 5.Explain how the Small Business Administration helps small businesses. 6.Appraise the concept and types of franchising. 7.Analyze the growth of franchising and franchising’s advantages and disadvantages.

3 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 3 Small Business …one that is independently owned and operated for profit and is not dominant in its field.

4 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 4 Table 5.1: Industry Group Size Standards Source: accessed May 4, 2009.http://www.sba.gov/services/contractingopportunities/owners/basics/GC_SMALL_BUSINESS.html Small-business size standards are usually stated in number of employees or average annual sales. In the United States, 99.7 percent of all businesses are considered small.

5 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 5 Establish a Small Business  4 days and $210  Steps Register name Apply for tax IDs Set up insurance - Unemployment - Workers’ compensation

6 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 6 Table 5.2: Establishing a Business Around the World Source: World Bank (2004); as found in Inside the Vault, Federal Reserve Bank of St. Louis, Fall 2004, p. 1.

7 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 7 U.S. Small Business in Last Decade  Number up 49%  Record-breaking new-business formation in last few years  Nearly 637,000 new incorporations  Part-time entrepreneurs up 5-fold (equal 1/3 of small businesses)  Provides more than 50% of jobs  56% of new businesses fail in first 4 years

8 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 8 Industries That Are and Are Not Attractive to Small Business  Attractive: Growing industries with profit potential (such as outpatient-care facilities)  Not attractive: Industries requiring a huge investment Auto manufacturing Machinery

9 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 9 Small-Business Dominance  Real estate, rental, leasing = 74%  Arts, entertainment, recreational services = 76%  Construction = 90%

10 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 10 Top Small Business Categories  Distribution: 33% small business  Retailing  Wholesaling  Transportation  Communications  Service: 48% small business  Medical/dental  Watch/TV/shoe repair  Haircutting/styling  Restaurants  Dry cleaning  Financial services  Production: 19% small business  Construction  Mining  Manufacturing

11 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 11 Percent of People Who Would Prefer Being an Entrepreneur  U.S.A. = 70%  Western Europe = 46%  Canada = 58%

12 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 12 Entrepreneurial Spirit “Desire to create a new business”  Small businesses are managed by people who start and own them  Owners could be employed elsewhere if they wanted  Owners would rather take risk of starting and operating ─ even if they’ll make less money

13 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 13 Other Factors Driving Entrepreneurs  Independence  Desire to determine own destiny  Willingness to find/accept challenge  Coming from family of entrepreneurs  Age = 24 – 44

14 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 14 Figure 5.1: How Old Is the Average Entrepreneur? People in all age groups become entrepreneurs, but more than 70 percent are between 24 and 44 years of age. Source: Data developed and provided by the National Federation of Independent Business Foundations and sponsored by the American Express Travel Related Services Company, Inc.

15 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 15 5 P’s of Entrepreneurship Planning Persistence Patience People Profit

16 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 16 Motivation to Start a Business  “Enough” of working/earning profit for someone else  Loss of job  New idea for product or sales  Sudden opportunity

17 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 17 Table 5.3: U.S. Business Start-ups, Closures, and Bankruptcies Source: U.S. Department of Commerce, Bureau of the Census; Administrative Office of the U.S. Courts; U.S. Department of Labor, Employment and Training Administration, Small Business Administration, Office of Advocacy, Frequently Asked Questions, September 2008, accessed October 4, 2008, and SBA Quarterly Indicators, First Quarter 2009, released May 8, 2009, p. 1.

18 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 18 Women-Owned Businesses  Population = 51%  Small businesses = 50%  Home-based businesses = 66%  Businesses = 10.4 million  Jobs = 7.1 million  Sales = $941 billion  Payroll = $174 billion  In business 12+ years = 40%

19 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 19 Entrepreneur Must Manage Finances Personnel Day-to-day operations Handle Sales Advertising Purchasing Pricing Other

20 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 20 Why Small Businesses Fail  Lack of capital  Lack of management skills  Lack of planning  Overexpansion

21 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 21 Technical Innovation  New ways to do a job with less effort for less money  Small business vs. large: 2.5 times innovation per employee 41% of high-tech workers 13–14 times more patents  Many inventions that sparked new industries

22 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 22 Small Firms and Employment  U.S. economy created 3+ million jobs 70% in small-business-dominated industries Business services = leisure, hospitality, special trade contractors  Small firms hire greater proportion of Younger/older workers Women Part-time employees  Worker’s first job = 67%  Initial on-the-job training

23 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 23 SBA Statistics on Small Businesses  Employers = 99.7%  Private work force = 50%  Net new jobs = 60–80%

24 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 24 Small Businesses Provide Competition  Challenge large firms  Force big firms to be More efficient More responsive to customer

25 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 25 Small Businesses Fill Needs  Satisfy niche consumers  Provide variety of goods/services to other businesses (outsourcing)

26 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 26 Advantages of Smallness Personal relationships Ability to adapt to change Simplified record keeping Independence

27 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 27 Disadvantages of Small Business Risk of failure Limited potential Limited ability to raise capital

28 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 28 Weekly Hours Worked by Small Business Owners Source: Inc. Magazine, “It’s Good to Be King,” December 2003, p % 19% 38% Fewer Than to 50 More Than 50

29 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 29 Figure 5.2: Sources of Capital for Entrepreneurs Small businesses get financing from various sources; the most important is personal savings. Source: Data developed and provided by the National Federation of Independent Business Foundations and sponsored by the American Express Travel Related Services Company, Inc..

30 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 30 Business Plan …a carefully constructed guide for the person starting a business.

31 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 31 Business Plan Purposes 1.Communication ─ helps potential investors decide whether to invest in new venture 2.Management ─ helps track, monitor, evaluate progress 3.Planning ─ guides businessperson through business phases

32 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 32 Table 5.4: Components of Business Plan Source: Adapted from Timothy S. Hatten, Small Business Management: Entrepreneurship and Beyond, 3d ed. (Boston: Houghton Mifflin, 2006), pp. 108–120.

33 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 33 Business Plan Should Answer 1.What is the nature/mission of new venture? 2.Why is it a good idea? 3.What are the businessperson’s goals? 4.How much will it cost?

34 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 34 Table 5.5: Business Plan Checklist Source: Kathleen R. Allen, Launching New Ventures: An Entrepreneurial Approach, 4th ed. (Boston: Houghton Mifflin, 2006), p. 197.

35 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 35 Small Business Administration (SBA) …a government agency that assists, counsels, and protects the interests of small businesses in the United States.

36 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 36 SBA Management Assistance  Free individual counseling  Courses  Conferences  Workshops  Publications

37 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 37 SBA Resources  Management courses/workshops  Service Corps of Retired Executives (SCORE)  Help for minority-owned businesses  Small Business Institutes  Small Business Development Centers  Publications

38 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 38 SBA Financial Assistance  Regular business loans  Small-business investment companies

39 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 39 Venture Capital …money that is invested in small (sometimes struggling) firms that have the potential to become very successful.

40 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 40 Franchise …a license to operate an individually owned business as though it were part of a chain of outlets or stores.

41 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 41 What Is Franchising? Franchise Agreement Franchisee Franchisor John Q.

42 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 42 Types of Franchising  Manufacturer authorizes retail store to sell brand-name item  Producer licenses distributors to sell given product to retailers  Franchisor supplies brand names, techniques, or other services instead of complete product

43 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 43 Table 5.7: Entrepreneur’s Top Ten Franchises (2009) Source: accessed May 11, 2009, with permission of Entrepreneur.com, 2009 by Entrepreneur.com, Inc. All rights reserved.

44 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 44 Dual-Branded Franchise …two franchisors offer their product together...

45 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 45 Advantages of Franchising Franchisor  Fast/well-controlled distribution of products  No high cost of construction/ operation  Highly motivated franchisee Franchisee  Ability to start business with limited capital  Access to others’ business experience  Nationally recognized name  Local and national advertising

46 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 46 Disadvantages of Franchising Franchisee  Contract dictating every aspect of business  Lawsuit by franchisor for violation of contract

47 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 47 Qualities Franchisors Seek in Franchisee Entrepreneur, “The 28 th Annual Franchise 500- Top 10 Franchises for 2007”, January 2007, p. 128.

48 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 48 Global Perspectives in Small Business  Internet most favored growth strategy = 50+%  Technology gives reach/power  U.S. Commercial Service ─ aids small and medium-sized businesses in selling overseas  Businesses must adapt to demographic/economic changes in world marketplace

49 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 49 Chapter Quiz 1. A government agency that was created to assist, counsel, and protect the interests of small businesses in the United States is called a)Small Business Institutes. b)Small Business Investment Companies. c)the Small Business Administration. d)Small Business Development Centers. e)Small Business Guidance Centers.

50 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 50 Chapter Quiz (cont.) 2. Small businesses cluster in which of the following industries? a)Service industries b)Distribution industries c)Production industries d)Financial industries e)All of the above

51 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 51 Chapter Quiz (cont.) 3.A group of retired businesspeople who volunteer their time to help small-business owners is known as a)SCORE. b)ACE. c)SBDC. d)SBI. e)SBIC.

52 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 52 Chapter Quiz (cont.) 4. A privately owned company that provides venture capital to small firms is a(n) a)small-business association. b)small-business investment company. c)small-business institute. d)active corps of executives. e)small-business development center.

53 Copyright © Cengage Learning. All rights reserved. Chapter 5 | Slide 53 Chapter Quiz (cont.) 5. One advantage of a small business is a)no risk of failure. b)unlimited potential for employers. c)personal relationships with customers and employees. d)unlimited potential for employees. e)limited ability to raise capital.


Download ppt "Chapter 5 Small Business, Entrepreneurship, and Franchises."

Similar presentations


Ads by Google