2What is Entrepreneurship? Think of some of your favorite things….clothes, shoes, stores, food, etc?Who started the business?Small businesses, usually those with fewer than 500 employees, represent 99% of American businesses.They employ more than 50% of the nonmilitary workforce.A person who organizes and then runs a business is called an entrepreneur.
3What is Entrepreneurship? An entrepreneur’s life is challengingPlanning is a big part of getting the business up and runningMust make good decisionsFind inventive solutions to problemsRisks are high but the rewards can be greatDoes this challenge appeal to you?Are you willing to take the risks?
4Advantages of Entrepreneurship You are in chargeDecide when and how hard to workHow the business will operateGreat job satisfactionCan lead to good income
5Disadvantages of Entrepreneurship Financial riskLose initial start up money and moreWork long hoursCompetition can be difficult to overcomeNo guarantees of successAlmost half of new businesses fail within their first four years.
6Traits of Entrepreneurs Self-motivationThey know what they want and believe in their ability to achieve itThey stay motivated by setting short and long-term goals.They make a plan how to achieve those goalsPerceptiveThey see opportunities where others do notThey look at problems and see opportunitiesFollow trendsDo your research by talking to customers to see how to meet their needs
7Traits of Entrepreneurs DecisiveMake decisions every dayMust be good decisionsLook at the whole pictureHow can the decision helpHow can the decision hurt
8Being a Business Owner Four main ways to go into business Start a new businessBuy an existing businessBuy a franchiseJoin a family business
9Starting a New Business Chance to work hard and put your business ideas to the testRewardsDo not inherit a pervious owner’s mistakes or poor reputationDevelop your own reputationBuild the business your wayUse your experiences and information you have gained from studying other businessesPersonal satisfaction from knowing you built the business
10Starting a New Business ChallengesRequires more time and effortStart-up costs are often high (rent / buy space, equipment, office supplies and insurance)You will have to convince lenders that your business idea is soundIt is risky = no guarantees that your business will succeed
11Buying an Existing Business A successful may be for sale because the owners are retiring or starting a new businessAn unsuccessful business might be for sale for many reasonsLosing moneyBefore buying, see if the problems can be fixed and at what expenseAdvantagesCan put you several steps aheadSave on start-up costs (jump in on leases, purchase existing equipment)Can build on the successesGoodwill or loyalty of existing customersPositive reputationTrained staff
12Buying an Existing Business DisadvantagesLocation may be poorCompetition may be taking business awayMarket outlook (potential for future sales) may be poorBuilding or equipment may need expensive repairs or replacementMay have a poor reputation
13Buying a FranchiseFranchise – legal right to sell a company’s goods and services in a particular areaExample: restaurants, hair salons, real estate offices, etc.Buy the right to sell another company’s productsIn addition to paying for the franchise you agree to pay a percentage of your profits to the parent company
14Buying a Franchise Advantages Disadvantages A recognized product name Established procedures and management systemsA business reputation and customer goodwillTraining and support servicesAdvertisingFinancingDisadvantagesPay a portion of the profits to the parent companyMay be less profitableMust follow the parent company’s guidelinesMay be less satisfaction because you did not build it
15Joining a Family Business AdvantagesRelatives might help you finance the businessFamily = Loyal + TrustFamily members working as a team can achieve more than individualsRelatives can teach you the businessCustomers are likely to give the same trust and goodwill to a new owner who is part of the previous owner’s familyPotential DisadvantagesSome families work well together / others do notDifficulties at work can affect family relationships
16Owning a BusinessOne of the first questions – how to organize your business?Most businesses begin as a sole proprietorship – owned by one person. The owner owns all the assets and debts.A partnership is a legal arrangement in which two or more people share ownership. Control and profits are divided among the partners according a an agreement. All partners are liable for the debts.A corporation is a business chartered by a state that legally operates apart form the owner(s). The owners buy shares of the company. Shareholders have only limited responsibility for the debts.
17Forms of Legal Ownership Forms of Business OwnershipAdvantagesDisadvantagesSole ProprietorshipOwner makes all decisionsEasiest form of business to set upLeast regulated formLimited by the skills, abilities, and financial resources of one personDifficult to raise funds to finance businessOwner has sole financial responsibility for company; personal assets may be at riskPartnershipCan draw on the skills, abilities, and financial resources of more than one personEasier to raise funds than in sole proprietorshipMore complicated than sole proprietorshipTensions may develop among partnersOwners liable for all business losses; personal property may be at riskCorporationEasier to finance than other forms of businessFinancial liability of shareholders limitedExpensive to set upRecord keeping can be time consuming and costlyCan pay more taxes than other forms
18FinancingBusiness Plan – gives specific information about your businessDescribes your product and states where your business will be locatedHow many employees you will hire and what their salaries areDescribes your competitors and points out their strengths and weaknessesDescribes your marketing plan and timetableFinancial Plan – spell out your start-up costs, operating expenses and other costs for the first few monthsOperating expenses are the cost of doing business (ex. manufacturing and selling the product)
19Ongoing Operations Must keep accurate financial records Tax purposesSeeking additional financingTells you how your business is doingIncome statementSummary of a business’s income and expenses during a specific periodRevenue – income from salesGross profit – difference between the cost of goods and their selling priceNet profit – amount left after operating expenses are subtracted from the gross profit
20Ongoing OperationsBalance Sheet – summarizes a business’s assets, liabilities and owner equityAssets – anything of monetary value that you own (current assets - money in the bank , inventory, etc. / fixed assets – land, equipment, furniture and fixtures)Liabilities = debts a business owesCurrent liabilities must be paid during the current yearLong-term liabilities are not due in the next 12 monthsNet Worth – difference between assets and liabilitiesThe savings you invest in your business are your equity, or ownership interest, in the business.
21Ongoing OperationsCash flow statement – a monthly plan that shows when you anticipate cash coming into the business and when you expect to pay out cashThis helps you see if you will have enough money to pay your bills
22Succeeding in Business Location –Are you near your potential customers?Can you work at home to reduce expenses?Online business – location not as importantFactors to considerType of businesses in the areaCondition of streets and buildingsCost of propertyLocation of competitionLocation of your customers
23Succeeding in Business CompetitionKnow your competitor’s product or serviceProduce your product better and have better service!ManagementSuccessful businesses are usually managed wellPoor management is one of the main reasons for business failureEntrepreneurships need skills: reading, writing, listening, speaking, and MATH (setting prices to calculating payroll)