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© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 1 6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business.

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Presentation on theme: "© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 1 6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business."— Presentation transcript:

1 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 1 6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business Basics 6-3 6-3Starting a Small Business 6 C H A P T E R Entrepreneurship and Small Business Management

2 © 2012 Cengage Learning. All Rights Reserved. SLIDE 2 6-1Becoming an Entrepreneur Goal 1Identify characteristics of successful entrepreneurs. Goal 2Recognize the importance of entrepreneurship in the economy. Goal 3Describe opportunities and risks of entrepreneurship.

3 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 3 KEY TERMS ●entrepreneur ●entrepreneurship ●venture capital ●innovation ●improvement

4 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 4 CHARACTERISTICS OF ENTREPRENEURS ●Desire to be your own boss ●Special skills and abilities

5 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 5 ENTREPRENEURS IN ACTION ●Joshua Moore ●Ben Cathers ●Rich Stachowski ●Abbey Fleck

6 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 6 WHAT DOES IT TAKE? ●Not all business owners and managers are entrepreneurs. ●Entrepreneurs have unique skills and personal characteristics.

7 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 7 ENTREPRENEURS ARE MORE ●Persistent ●Inquisitive ●Energetic ●Goal-oriented ●Independent ●Self-confident ●Creative ●Reliable ●Competitive

8 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 10 ENTREPRENEURSHIP AND THE ECONOMY ●Employment ●Financing ●Productivity

11 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 11 Employment Growth by Business Size, 1990–2005

12 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 13 OPPORTUNITIES AND RISKS ●Before deciding to start a business, you need to think about the opportunities and risks.

14 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 14 NEW BUSINESS OPPORTUNITIES ●Innovation ●Improvement

15 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. SLIDE 17 6-2 Small Business Basics Goal 1Identify important characteristics of small businesses. Goal 2Recognize the competitive advantages of small businesses. Goal 3Identify problems faced by many small businesses.

18 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 18 KEY TERMS ●small business ●Small Business Administration (SBA)

19 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 20 Common Types of Small Businesses as Percent of All Small Businesses

21 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 22 SMALL BUSINESS ADVANTAGES ●Meeting customer needs ●Providing unique services

23 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 25 SMALL BUSINESS ASSISTANCE ●University and college faculty members ●Local groups of business people ●Small Business Administration (SBA)

26 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. SLIDE 27 6-3 Starting a Small Business Goal 1Recognize important factors to be considered when starting a business. Goal 2Describe the elements of a business plan. Goal 3Identify types and sources of financing for a small business.

28 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 28 KEY TERMS ●business plan ●start-up financing ●short-term financing ●long-term financing

29 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 29 THE BUSINESS DECISION ●An idea plus experience ●Right place and time ●Team approach ●Preparation and research

30 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 33 ELEMENTS OF A BUSINESS PLAN ●Description of Competition ●Characteristics of the industry ●Condition of the economy ●Strengths and weaknesses of major competitors (continued)

34 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 34 ELEMENTS OF A BUSINESS PLAN ●Customer Analysis ●Description of customers ●Location, number, and resources of customers ●Sales forecasts (continued)

35 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 35 ELEMENTS OF A BUSINESS PLAN ●Operations Plan ●Organization of the company ●Description of major operations ●Analysis of resources needed ●Human resource plans (continued)

36 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 36 ELEMENTS OF A BUSINESS PLAN ●Marketing Plan ●Description of major marketing activities ●Description of resources needed ●Schedule of marketing activities (continued)

37 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 37 ELEMENTS OF A BUSINESS PLAN ●Financial Plans ●Start-up costs ●Short- and long-term financial needs ●Sources of financing ●Budgets and financial statements (continued)

38 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 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.


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