1. Career Development Relating to Entrepreneurship Opportunities
Instructional Materials Service
IMS #8000A1

2. Objectives
Examine the elements and advantages of the free enterprise system.
Explain the role of a small business in the free enterprise system.
Discuss factors that motivate entrepreneurs and self-employment.
Identify characteristics of a successful entrepreneur.

3. Objectives Identify opportunities for business ownership.
Explain the risk and profit motive factor.
Explain the importance of organizational policies and procedures.
Identify ethical practices and responsibilities.

4. Introduction
The United States is often referred to as the “land of opportunity”.
Our country’s economic system is based on the free enterprise system.
Free enterprise provides everyone with an equal opportunity to make individual dreams a reality.
The free enterprise system is the foundation for entrepreneurship.

5. Key Terms Entrepreneurship Entrepreneur Small Business
The process of getting into and operating one’s own business.
Entrepreneur
An individual undertaking the creation, organization, and ownership of a business.
Small Business
An independently owned business that usually has the owner as the manager.

6. Importance of Entrepreneurship & Small Businesses
Over 25 million small businesses in the U.S. make the following contributions to our economy:
Employ more than half of the total workforce.
Produce about half of the private sector output.
Generate more than half of the nation’s income.
Serve as the principal source of new jobs.

7. Free Enterprise The economic system in the United States.
Ensures people the right to make their own economic decisions.
Sometimes referred to as a consumer economy, market economy, profit system or capitalism.

8. Factors Contributing to Free Enterprise
Private Ownership and Control of Productive Resources
Free Market
Profit Motive
Supply and Demand
Competition
Limited Government Involvement

9. Private Ownership and Control of Productive Resources
Citizens have the opportunity to own resources and decide how to use them.
Productive resources include:
land;
labor;
equipment;
capital; and
other services and materials.

10. Free Market System
Voluntary effort where free trade at all levels can lead to prosperity.
Person has the right to sell skills and abilities to an employer, or be self-employed.
Provides the opportunity for a variety of needs to be met.
Allows people to pursue their own interests while putting themselves at risk for profit or loss.

11. Profit Motive
Profit motive involves the desire to earn a profit when selling a productive resource.
Profit is the amount of money made over the cost of producing the resource.
Profit motive is a vehicle for innovative and expansive thinking.

12. Profit Motive and Risk Profit motive also involves risk.
Risk is making a decision when the outcome of the event is unknown.
Amount of risk can be offset if the person has an idea about the factors that affect the marketability of a product.
Risks must be studied, measured, and analyzed.

13. Supply and Demand
Supply and demand of productive resources for sale drives the free enterprise system.
Supply is the available amount of resources for sale.
Demand is the amount of resources consumers are willing to buy.

14. Supply and Demand
Supply and demand help determine the market price of services and materials.
A product is first made available at a pre-determined price.
If public interest creates a demand for the product, the value and price usually increase.
If there is an increase in supply, or if competitors enter the market, prices usually drop.

15. Competition
Competition is the right of any individual or business to enter the same business as others and compete for a share of the market.
Competition encourages all involved to make a quality product and to market it at a fair and reasonable price with greater efficiency.

16. Competition
Consumers choose from whom to purchase a product based on the quality of the product, price, and attitudes and policies of the supplier.
Competition leads to lower prices, higher quality, and better service.

17. Limited Government Involvement
No market system is entirely free of government involvement.
Government involvement under free enterprise may be necessary to protect both the producer and consumer.

18. Limited Government Involvement
Government ensures fairness in the free enterprise system and strives to protect consumers from unfair or unethical business and marketing practices.

19. Types of Business
Proprietorship
Partnership
Corporation

20. Proprietorship Owned by only one person.
Simplest form of business organization.

21. Advantages of Proprietorships
Business is easy to start.
Business can operate according to personal desires.
Freedom to make all of the decisions.
Profits do not have to be shared with others.

22. Disadvantages of Proprietorships
Full responsibility for business management.
Full responsibility for all business costs.
Unlimited liability.
Individual could lose personal savings and property if business fails.

23. Partnerships
Involve two or more people entering a business together.

24. Partnership Agreement
Written partnership agreement should be developed that outlines the following:
How much money each partner will invest.
How profits will be shared.
How work will be shared.
Plan that allows for remaining partners to buy any partner’s share of the business if the partner wishes to end his/her involvement in the business.

25. Advantages of Partnerships
Business is easy to start.
It is easier to obtain capital for a partnership than for a proprietorship.
Partners bring different skills and experiences to the business that can increase its efficiency and likelihood of success.

26. Disadvantages of Partnerships
Profits must be shared.
If a partner leaves the business, then the business must be reorganized.

27. Disadvantages of Partnerships
Unlimited legal and financial responsibility is shared.
If one partner makes a bad choice financially, all share the loss or debts.
If one partner engages the business in illegal activity, all may suffer legal ramifications.

28. Corporations Business type that is owned by many people.
Ownership is determined by selling stocks or shares of ownership.

29. Corporations
For each share of stock owned, the stockholder gets a share of the profits and a vote on how the business operates.
Stockholders are not usually involved in day-to-day operations.

30. Advantages of Corporations
A corporation does not end or require reorganization if a stockholder sells his/her shares.
More capital can be easily earned through sales of more shares.
Limited liability.

31. Limited Liability
Stockholders are only responsible for the amount of money that they invested.
If the business loses money, the stockholder loses no more than he/she invested.
If the business fails, a stockholder will not lose any personal property or savings.

32. Small Businesses
Small businesses are important to the free enterprise system.
They allow for the introduction of new and innovative ideas.
They provide for more competition.
They encourage other businesses to keep stride with new business groups, improve or expand product lines, and/or create new products.

33. Entrepreneurs
An entrepreneur is an individual who undertakes the creation, organization, and ownership of a business.
Entrepreneurs are often self-employed.

34. Characteristics of Entrepreneurs
Entrepreneurs find opportunities and know how to act upon them.
Entrepreneurs see a need or desire for a product, weigh the risks of producing and marketing the product, formulate a plan of action, and proceed to develop and maintain a business.

35. Motivation for Entrepreneurs
Profit Motive
Person has a desire to capitalize on an idea and make money.
Entrepreneur Challenge
Experience is rewarding, exciting, and challenging.
Desire to Work By or For Themselves
Persons who want to work to accomplish their own tasks, experiment with ideas, and take responsibility for their own decisions.

36. Disadvantages of Entrepreneurship
Time commitment often exceeds the 40-hour work week.
Overtime does not involve extra pay.
Extra responsibility, stress, emotional strain, and pressure.
Risk of financial instability and the possibility of failure.

37. Skills of Successful Entrepreneurs
Self Starter
Self-Motivation
Flexibility
Competitiveness
Innovative Thinking
Decision-Making Skills
Goal Setting and Achieving
Anticipation
Risk Taking
Researching
Planning
Management Skills

38. Decisions Required by Entrepreneurs
Choosing the type of business
Choosing a location
Pricing a product and/or service

39. Considerations in Choosing a Business
Personal abilities, skills, and interests.
Idea may develop personal dreams or relate to prior work experience.
Marketing personal skills and abilities may be an option.

40. Considerations in Choosing a Business
Research of consumer market.
Is there a consumer market for this service?
If not, can a market be created?
Will consumer needs be met by this product or service?
Will consumers be willing to purchase the product or service?
If so, at what price?

41. Choosing a Business
Gathering information is vital and should be done with an open mind and with as much scope as possible.
Successful business owners in the same field are an excellent source of information.
A large knowledge base concerning product acceptance and consumer acceptability will aid in making an informed decision about the venture.

42. Considerations in Choosing a Location
Community Setting
Accessibility
Facilities
Home Business

43. Community Setting Considerations
Economic Base
Demographics
Labor Supply
Economic Incentives
Competitors
Character

44. Economic Base
A community’s economic base is its main source of income.
Economic bases are often “primarily industrial” or “primarily service-oriented”.
The community chosen should have an economic base that matches the business.

45. Economic Base The community should have a growing economic base.
This means that more money is coming into the area than leaving it, and that there is enough money in the area to support both established and new businesses.

46. Demographics
Demographics describe characteristics of the human population.
It includes information such as:
Age
Gender
Race
Household Income
Education Level

47. Demographics
By understanding a community’s demographics, a business owner can determine if the location matches the target market for the products and/or services to be offered by the business.
The Census Bureau, local economic development office, or local chamber of commerce may be able to provide information regarding demographics.

48. Labor Supply
Determine if the community can provide an adequate and appropriate labor pool to meet the business’ needs.

49. Financial Incentives
Financial incentives may be offered by the community to attract new enterprises.
Some incentives may be:
Lower taxes.
Cheaper land.
Employee training programs.

50. Competitors
Selecting a site near competitors assures a business owner that customers are already doing business in the area and allows for comparison shopping.

51. Character
Consumers prefer to patronize businesses in areas that are attractive, safe, and flourishing.

52. Accessibility
It is important for consumers to be able to find the business and get to it easily.
Suppliers must have easy access to the business to ensure a continuous supply of goods and materials.

53. Facilities Facility considerations include:
Building Facility vs. Existing Facility
Growth and Expansion
Operational Costs

54. Building Facility v. Existing Facility
May be more expensive, require more financing, and take more time.
Allows the business owner to build it to own specifications.
Existing Facility
Facility must meet business needs or be renovated to meet business needs.

55. Growth and Expansion
Regardless of deciding to build a new facility or to utilize an existing one, facility should allow for growth and expansion.
Building or renovating for growth initially may be too expensive.
Not planning ahead may result in a costly move or restricted business performance.

56. Operational Costs
When selecting a location, also consider operational costs such as:
utilities;
gas;
taxes; and
insurance.

57. Home Business Another possibility may be starting a home business.
Many types of businesses are able to function well from the home of the owner or manager.

58. Home Business
Businesses with the following characteristics may be good candidates for a home business:
Little contact with customers.
Work is picked up or dropped off when completed.
Creates little traffic, noise or pollution.

59. Considerations in Starting a Home Business
Type of business.
Space and equipment available at home.
Effect on others living in the home.
Advantages of a home business.
No rent.
Money saved on taxes.

60. Pricing a Product and/or Service
Price should be based on what people are willing to pay, and not so much on what the item is worth.
Industry looks for products that can be made for only a small amount of money and sold for a lot of money.
These philosophies encourage maximum markup.

61. Factors to Consider When Pricing a Product and/or Service
What is the price in relation to the competition’s price?
Does the price cover the overhead or production costs and still allow for a fair markup?
How much profit will be made per product at that price?

62. Factors to Consider When Pricing a Product and/or Service
How many units can be sold at that price?
Can production costs be cut without sacrificing quality to give the product more consumer appeal?
How much profit does the business want to make?
Can the price be increased and still keep the same market interest?

63. Pricing a Product and/or Service
Most important consideration is the ability to cover costs while making the product available and affordable to consumers.

64. Zoning
Zoning involves the designation a city has set on an area regarding its use or purpose.
Common zoning designations include:
residential;
commercial;
industrial; and
public.

65. Zoning
Once an entrepreneur has selected a location, he/she must determine if the business plans fit the zoning specification of the area.

66. Licenses
Licenses are required for certain types of professions or businesses.
Licenses protect consumers from unskilled or unqualified business operators.
Businesses or professions commonly requiring a license include doctors, accountants, barbers, and counselors.

67. Licenses
Proof of necessary education or training may be required to obtain a license.
Local government and state department of licensing and regulation should be consulted to determine if the business will require a license.

68. Permits
A business permit is required to gain permission to operate and run a business.
Permits are obtained from local government.
Permits must generally be renewed annually.
Fees associated with permits are generally based on how much the business earns.

69. Permits
The State Department of Commerce (DOC) can provide information about what documentation is required to obtain a permit and to operate one’s own business.

70. Financing Financing is a major issue when starting a business.
One must decide where and how start up money will be obtained.

71. Sources of Financing Personal Savings Family and Friends
Financial Lending Institutions
Outside Investors

72. Considerations Regarding Financing
Amount of financial assistance needed.
Type of payment schedule the business can follow.
Interest or payback the business can afford.

73. Financing Agreements
Agreements need to be recorded in writing and should include the following:
Amount of money being borrowed.
Interest rate.
Method of repayment.

74. Advisors for Entrepreneurs
Lawyer
May help structure business and gather necessary documentation.
Assists in the development of employee contracts.

75. Advisors for Entrepreneurs
Accountant
Can help plan business’ finances and give direction on how to borrow and repay money.
Advises in the development of employee contracts.

76. Advisors for Entrepreneurs
Insurance Agent
Helps determine insurance coverage needs.
Fire, theft, product liability, employee injury, and disability, etc.
Helps develop employee benefits package and policies to make benefits available.

77. Advisors for Entrepreneurs
Business Owners
May provide valuable opinions and information based on their experiences.
Family and Friends

78. Business Management
Businesses must be managed with care for both economics and people.
Manager may be owner of the business or a hired manager.
Larger businesses or companies frequently hire individuals to manage specific areas or divisions of the organization.

79. Business Management Common duties of managers are:
Establishing Direction and Goals
Employee Relations
Customer Relations
Financial Management

80. Direction and Goals
Direction and goals provide a map or plan to reach a desired destination and a tool for evaluation.

81. Direction and Goals
They should be implemented and continually emphasized in daily operations.
This emphasis reminds employees of business goals and why they are involved in specific tasks.

82. Employee Relations
Managers must be able to perform the following tasks related to employee relations:
Recruit and hire effective candidates.
Supervise and manage existing employees.
Terminate unproductive employees.

83. Considerations Regarding Recruiting & Hiring Employees
Recruiting From Within or From Outside
Recruiting from within encourages employees to work hard for promotions. It also reduces costs associated with recruiting and training.
However, this may lead to feelings of resentment by those not promoted, and limit opportunities to bring in new thoughts and ideas.
Recruiting from the outside may include advertising in newspapers or at job fairs.

84. Recruiting and Hiring New Employees
Manager is involved in reviewing applications, interviewing applicants, checking references, and offering the position.
Management also designs the training and development programs for new employees.

85. Importance of Positive Relationships with Employees
A strong business manager with poor people skills will often destroy employee self-esteem and suffer a drop in productivity.
A good people manager will develop respectability and credibility with employees, which nurtures a pleasant working environment that results in higher productivity.

86. Recognizing Employees as an Asset
Management should recognize that employees have important information about their job and input on how to make it better.
Employees may even see a need for changes at a lower level that management may not be able to recognize.

87. Recognizing Employees as an Asset
Employees should be encouraged to make suggestions and be involved in decision-making.
Advantages of this approach include:
Increased productivity.
Increased profits.
Employees becoming less likely disgruntled if they are involved in the decision-making process.

88. Recognizing Employees as an Asset
Employee recognition shows employees that management feels they are important and valued.
Recognition may be given informally on a regular basis by praising a job well done or giving an employee credit for an idea.
Formal recognition, such as plaques or awards, is another option.

89. Performance Evaluations
Performance evaluations are a formal review of how well an employee does his or her job.
They provide an opportunity to recognize employee strengths and weakness, as well as the chance to offer suggestions for improving performance and productivity.

90. Terminating Employees
When an employee does not meet performance expectations, terminating, the employee from the position may become necessary.

91. Handling Employee Resignations
A good manager will allow an employee to explore other employment possibilities and consider resignation.
It is better to have an employee resign than to remain in a position where the person will be unhappy and unproductive.

92. Customer Relations Customer satisfaction is a must for any business.
Satisfied customers result in repeat business and customer referral.

93. Customer Relations Customers should know they are valued.
Asking questions about their needs and suggestions for organizational improvements is also a valuable source of information.
Customer needs, suggestions, concerns, and questions should be responded to immediately.

94. Customer Relations
Businesses should stand by their products and services, but guarantee only what the business can support.
Customers may be able to understand and accept problems like delays or minor mistakes if they are conveyed to them, there is a history of good service, and the business and management is respected.

95. Financial Management Financial management involves tasks such as:
distributing money for payroll and maintenance;
purchasing production supplies and advertisement;
procuring new equipment; and
seeing that taxes are paid to the proper collection agencies.

96. Keys to Management Excellence
They take action, rather than analyze plans to death.
They listen to their customers and put themselves in their customers’ shoes.
They encourage their employees to act independently, be innovative, and treat the business as if it were their own.
They stress respect for the individual.

97. Keys to Management Excellence
They instill commitment to values and objectives by keeping in touch with all employees.
They keep the business focused on what it does best.
They keep their organization simple, flexible, and efficient.
They keep their operations under control and keep an eye on detail.

98. Characteristics of Good Managers
Trustworthy
Dependable
Integrity
Social Skills
Communication Skills

99. Characteristics of Good Managers
These characteristics are vital in developing good relationships with employees and clients.
Characteristics are recognized by others when the manager treats people with respect, leads by example, follows a fair set of rules, stands by his/her word, and does everything well and with the best outcome in mind.

100. Managerial Failures
An unsuccessful manager loses the confidence of employees, resulting in decreased production for the business.

101. Possible Causes for Loss of Employee Respect
Indecisive decision making.
Unclear focus or goal.
Short term planning instead of envisioning the big picture.
Focusing more on the managerial position than on managing.

102. Possible Results of Loss of Employee Respect
Lack of employee support.
Treating employees as a handicap to the company instead of as an asset.
Erosion of trust and the image of integrity as perceived by those who work with and for the manager.

103. Possible Results of Loss of Employee Respect
Employees questioning manager’s authority.
Inefficient, unproductive workplace.

104. Developing Business Ethics
Development and implementation of an ethical guide for the company should be a part of the direction, goals, expectations, and mission of the business.

105. Aspects of Business Ethics to be Recorded
Ethical beliefs of organization.
Treatment of employees.
Employee business ethics.
Employee treatment of supervisors, other employees, and customers.
Contributions of business to community and society.
Measurement of unethical behavior in the organization.
Ethical practice rewards.

106. Benefits of Outlined Business Ethics
Reduced questions concerning ethics.
Possible prevention of unethical activity.
Clear set of guidelines for both employer and employees.
Reduction of repercussions when an employer or employee violates company policy.

107. Summary
Thanks to the free enterprise system, Americans are assured the opportunity to pursue establishment of their own business.

108. Summary
Careful research into the following are important in ensuring business success:
Type of business.
Product or service offered.
Price of the product or service.

109. Summary Formalities of establishing a business include: Permits
Licenses
Financing

110. Summary Tasks associated with managing a business include:
Establishment of Directions and Goals
Employee Relations
Customer Relations
Financial Management

111. Summary
With a great deal of hard work and perseverance, an individual can achieve the dream of starting his/her own business.
An entrepreneur has the satisfaction of bringing an idea to fruition and the contentment of knowing that his/her efforts can have a positive impact on the economy, clients served, and people employed.