2Learning TargetsSection 5.1 – Rewards and Challenges of EntrepreneurshipDefine entrepreneur and entrepreneurshipList at least five rewards of being an entrepreneurIdentify at least five challenges of being an entrepreneurDiscuss why entrepreneurs are important to the American economy
3Rewards and Challenges of Entrepreneurship What is Entrepreneurship?The process of recognizing an opportunity, testing the market and gathering the resources necessary to go into business.EntrepreneurA person who recognizes a business opportunity and organizes, manages and assumes the risks of starting and operating a businessCreating and running a business venture requires a variety of skills
4Twelve Characteristics of Entrepreneurs PersistentGoal-OrientedCreativeRisk TakingAction-OrientedIndependentSelf-ConfidentResponsibleInquisitiveRestlessSelf-demandingEnthusiastic
5Rewards and Challenges of Entrepreneurship Small BusinessIndependently owned business that usually has its owner as its managerServes a limited geographic area and employs less than 500 peopleInternet BusinessAlso known as a virtual business or dot-com companyOperates on the internetShows how an entrepreneur can make a significant improvement to what already exists (shopping online)Have the potential to attract a huge number of customers
6Rewards and Challenges of Entrepreneurship Rewards of EntrepreneurshipBeing the BossDo not have to consult with others before making a decisionDoing What You EnjoyAn idea usually starts with an activity that you enjoyHaving the Opportunity to be CreativeYou make the proceduresCan be daring and creativeBuilding an EnterpriseMust choose between buying an existing company or starting a new one
7Rewards and Challenges of Entrepreneurship Other ReasonsDeveloping your own scheduleCan work from home (home based business)Make economic contributions to the community through investments and the creation of jobsRewarded for assuming a risk.
8Rewards and Challenges of Entrepreneurship Getting Funds to Start the BusinessMany must borrow money to start businessLoans – Hard to get because of uncertainty of successPrivate investors – must have good idea and business planBeing Fully Responsible for the BusinessMust make sure everything gets doneCleaning, paying bills, hiring employees and repairsOther Challenges for EntrepreneursInsecurity about making the right decisionsWork long hoursFace uncertain income levelsRisk losing investment4 out of 5 small businesses fail within the first 5 years due to inadequate financial planning.
9Learning Targets Section 5.2 – The Business Plan Discuss initial steps insetting up a business planIdentify parts of a business planLearn how to present a business plan to potential investors
10The Business Plan Business Plan Checklist for Starting a Venture 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 moneyChecklist for Starting a VentureWhat will I produce?Who are my competitors?Why is my product or service needed?How much will my product or service cost to produce?How many people will I need to run the business?What physical facilities will I need?What licenses, permits, or other legal documents do I need?How much money will I need to get started?5-2
11The Business Plan Parts of a Business Plan: 1. Executive Summary- is a brief account of the key points contained in a business plan. Less than 2 pages.IntroductionCurrent SituationManagement QualificationsSeeking InvestorsClosing Statement
12The Business Plan2. Management Team Plan - discusses any partners and your teams capabilities.Key ExecutivesKey AdvisorsService Providers3. Company Description- an outline of the business that helps investors understand the size, scope, ad type of business you plan to start.MotivationsEntrepreneurial OpportunityBusiness HistoryBusiness Concept
13The Business Plan4. Product and Service Plan- describes the products or services you want to offer. Also, spin-offs or growth potential can be mentioned.Products and ServicesUnique Selling PropositionCompetitive Products or ServicesProduct Development Milestones
14The Business Plan5. Vision and Mission Statements- states the guiding principles by which the business functions. * Vision Statement- establishes the scope and purpose of a company and reflects its values and beliefs. Focus on tomorrow. * Mission Statement- expresses the specific aspirations of a company, the major goals it will try to reach. Focus on today.
15ExamplesPepsi's Vision Statement PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today." Pepsis Mission Statement"To be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity."
16The Business Plan6. Industry Overview- this section presents your research of the industry.Projected Industry Sales and ProfitsCompetitive SetExternal EnvironmentProduct Life CycleBarriers to Entry
17The Business Plan7. Market Analysis- this section presents the customer profile which includes your overall marketing and sales strategies.Demographic ProfilePsychographic ProfileCustomer BehaviorsTarget Market Opportunity
18The Business Plan8. Competitive Analysis- indicates how the proposed business has an advantage over its competitors.Direct and Indirect CompetitorsValue PropositionStrengths and WeaknessesSustainable Competitive Advantage
19The Business Plan9. Marketing Plan- discusses how a company makes its customers aware of its products or services.Total Product ExperiencePlace StrategyPromotion StrategyPromotion PlanPricing Plan
20The Business Plan10. Operational Plan- includes the business processes that result in production and delivery of the product or service.Location CriteriaFacilities and EquipmentProduct Development ProcessOperational Logistics
21The Business Plan11. Organizational Plan- discusses the people who will run the firm as well as the management’s philosophy.Job DescriptionHuman ResourcesLegal StructuresInsurance
22The Business Plan12. Financial Plan- this section presents forecasts for the business. Data is usually shown in financial statements.Source and uses of FundsCash FlowIncome Statement/Balance SheetRevenues/ExpensesSalary/WagesFinancial Analysis
23The Business Plan13. Growth Plan- this section looks at how the business will expand in the future.Investors and lenders appreciate this section.Growth StrategyEffects of Growth14. Contingency Plan- this section looks at the likely risks to the business.Risks
24Questions Why is a business plan important? Why should entrepreneurs carefully study their competitors before starting a business?Why is a growth plan more important to include in a business plan?