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6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business Basics 6-3 6-3Starting a Small Business 1 CHAPTER 6 E NTREPRENEURSHIP AND S MALL B USINESS M ANAGEMENT.

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Presentation on theme: "6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business Basics 6-3 6-3Starting a Small Business 1 CHAPTER 6 E NTREPRENEURSHIP AND S MALL B USINESS M ANAGEMENT."— Presentation transcript:

1 Becoming an Entrepreneur Small Business Basics Starting a Small Business 1 CHAPTER 6 E NTREPRENEURSHIP AND S MALL B USINESS M ANAGEMENT

2 2 Goals Identify characteristics of successful entrepreneurs. Recognize the importance of entrepreneurship in the economy. Describe opportunities and risks of entrepreneurship. B ECOMING AN E NTREPRENEUR6-1

3 K EY T ERMS  Entrepreneur ~ someone who takes a risk in starting a business to earn a profit  Entrepreneurship ~ process of starting, organizing, managing, and assuming the responsibility for a business  Venture capital ~ money provided by large investors to finance new products and new businesses that have a good chance to be very profitable.  Innovation ~ an invention or creation that is brand new  Improvement ~ a design change that increases the usefulness of a product, service, or process. C HAPTER 6 3

4 CHARACTERISTICS OF ENTREPRENEURS  Desire to be your own boss  Special skills and abilities C HAPTER 6 4

5 ENTREPRENEURS IN ACTION  Pankaj Arora  Rich Stachowski  Jeffrey Rodriguez and John Serrano  Abbey Fleck C HAPTER 6 5

6 WHAT DOES IT TAKE?  persistent  inquisitive  energetic  goal oriented  independent  self-confident  creative  reliable  competitive C HAPTER 6 6 Entrepreneurs are more

7 WHAT DOES IT TAKE?  problem-solving skills  tolerance for ambiguity  strong integrity  personal initiative  ability to secure resources  capability to learn from failure  willingness to work hard C HAPTER 6 7 (continued) Entrepreneurs have

8 C HAPTER 6 8 C HECKPOINT >> What personal characteristic are common to most successful entrepreneurs? Answer Any characteristics listed in Figure 6-1 are acceptable, such as persistence, inquisitiveness, self-confidence, creativity, and so forth.

9 ENTREPRENEURSHIP AND THE ECONOMY  Employment-  Small businesses are responsible for most new employment. (Over 60% of new jobs were created by businesses with fewer than 500 employees.)  Financing  Most money to needed to start a new business comes from the entrepreneur and his/her friends and family.  Venture capital  Productivity  New and small businesses produce a large volume of goods and services (over $600 billion in sales annually). C HAPTER 6 9

10 E MPLOYMENT G ROWTH BY B USINESS S IZE C HAPTER 6 10 Source: U.S. Bureau of Labor Statistics

11 C HAPTER 6 11 What are the sources of financing that entrepreneurs use for their new businesses? Answer personal savings friends and family venture capital bank loans Checkpoint >>

12 OPPORTUNITIES  Innovation ~ invention or creation of something new  Innovation vs invention  Innovation vs improvement  Innovation Life Cycle  Improvement ~ design change that can increase the usefulness of a product, service, or process C HAPTER 6 12

13 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 C HAPTER 6 13 Recognizing risks

14 C HAPTER 6 14 Where do entrepreneurship opportunities begin? Answer Opportunities begin with innovations (ideas about new products and services) or improvements (ideas for changes to existing products, services, or processes). Checkpoint >>

15 15 Goals Identify important characteristics of small businesses. Recognize the competitive advantages of small businesses. Identify problems faced by many small businesses. S MALL B USINESS B ASICS6-2

16 K EY T ERMS  small business  Small Business Administration (SBA) C HAPTER 6 16

17 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 C HAPTER 6 17

18 COMMON TYPES OF SMALL BUSINESSES C HAPTER 6 18 Source: Small Business Administration and U.S. Census Bureau Common Types of Small Businesses

19 C HAPTER 6 19 What percentage of employees in the United States work for small businesses? Answer Nearly 50 percent of the American workforce is employed by small businesses. Small businesses are also responsible for 60–80 percent of all new jobs. Checkpoint >>

20 SMALL BUSINESS ADVANTAGES  Meeting customer needs  Providing unique services C HAPTER 6 20

21 C HAPTER 6 21 How can small businesses compete successfully with larger businesses? Answer 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. Checkpoint >>

22 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   in-history/ in-history/ C HAPTER 6 22

23 SMALL BUSINESS ASSISTANCE  Faculties of universities and colleges  Local groups of business people  Small Business Administration (SBA)  SCORE  Small Business Failure Example – Kell on Earth on-earth-teaches-about-small-business-failure.html Small Business Failure Example – Kell on Earth on-earth-teaches-about-small-business-failure.html C HAPTER 6 23

24 C HAPTER 6 24 List common reasons for small business failure. Answer 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 Checkpoint>>

25 25 Goals Recognize important factors to be considered when starting a business. Describe the elements of a business plan. Identify types and sources of financing for a small business. S TARTING A S MALL B USINESS 6-3

26 K EY T ERMS  business plan  start-up financing  short-term financing  long-term financing C HAPTER 6 26

27 THE BUSINESS DECISION  An idea plus experience ~ hobbies, interests, and business experiences  Right place and time ~ location should attract a large number of people who are interested in the products and should be in a safe and pleasant area (‘Work as a Team’, p 139)  Team approach ~ employees feel valued and motivated to take personal responsibility for the benefit of the business.  Preparation and research ~ gather enough info to make decisions (info on customers, competitors, operations, gov’t regulations, etc.) C HAPTER 6 27

28 C HAPTER 6 28 Why is it important to use a team approach when starting a new business? Answer 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. Checkpoint >>

29 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.  C HAPTER 6 29

30 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 C HAPTER 6 30

31 ELEMENTS OF A BUSINESS PLAN  Description of Competition  Characteristics of the industry  Condition of the economy  Strengths and weaknesses of major competitors C HAPTER 6 31 (continued)

32 ELEMENTS OF A BUSINESS PLAN  Customer Analysis  Description of customers  Location, number, and resources of customers  Sales forecasts C HAPTER 6 32 (continued)

33 ELEMENTS OF A BUSINESS PLAN  Operations Plan  Organization of the company  Description of major operations  Analysis of resources needed  Human resource plans C HAPTER 6 33 (continued)

34 ELEMENTS OF A BUSINESS PLAN  Marketing Plan  Description of major marketing activities  Description of resources needed  Schedule of marketing activities C HAPTER 6 34 (continued)

35 ELEMENTS OF A BUSINESS PLAN  Financial Plans  Start-up costs  Short- and long-term financial needs  Sources of financing  Budgets and financial statements C HAPTER 6 35 (continued)

36 STEPS IN DEVELOPING THE BUSINESS PLAN  Gather and review information  Develop the strategic alternatives  Write the plan  Ask an expert to review the plan C HAPTER 6 36

37 C HAPTER 6 37 What is the “strategic alternatives” in a business plan? Answer 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. Checkpoint >>

38 FINANCING THE SMALL BUSINESS  Types of financing  Start-up financing ~ amt of $ needed to open (building, equipment, inventory, supplies, licenses, etc)  Short-term financing ~ pays for current operating activities (less than a year)  Long-term financing ~ funds main resources that will last for years (land, building, equipment)  Sources of financing  Owner-supplied funds  Borrowed funds C HAPTER 6 38

39 C HAPTER 6 39 C HECKPOINT >> In addition to owner-supplied capital, what are several other sources of financing for a small business? Answer 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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