1. Entrepreneurship: A Business of Your Own
Workforce Essentials
Fall 2011

2. Do you know any business owners?
Examples:
Florists
Barbers/Hair Dressers
Restaurant Owners
Printing Press Owners

3. Entrepreneur
A person who organizes and manages a business.

4. Entrepreneurship
The organization and management of a business.

5. Importance of Small Business
Helps keep the economy strong by creating JOBS!
Helped the US have a higher standard of living
People working = more $ to spend!
More $ to spend = more demand for goods & services of small businesses
Small businesses hire more people to fill demand
More people working + More $ to spend = increased standard of living
Can do what corporations can’t!
Create competition between each other and corporations to keep prices in line

6. Opportunities for Entrepreneurs
Being an entrepreneur involves:
Organizing a business,
Planning its direction, and
Taking the risks.

7. Advantages People go into business for themselves because:
Can be exciting/rewarding
Gives a sense of accomplishment
“Be Your Own Boss!”
Freedom to make decisions
In charge of setting own schedule
Opportunity to try out new ideas
If new ideas are accepted – the entrepreneur gets credit! $$$$$$$$$$ Credit=Profit
Profit – the money left from business income after paying all expenses (Entrepreneurs get to keep!!!!)

8. Disadvantages
Must be willing to do EVERYTHING connected with a new business
Must do the jobs of bookkeeper, manager, & salesperson
May have to do the jobs of secretary & janitor
May require lots of work hours (about 60 hours per week)
Emotional strain – decision making, profitability
Pressure of knowing business could fail

9. Types of Business Ventures
Possibilities are almost endless
Examples:
Sell homemade products (clothing, artwork, food)
Offer a service (house-cleaning, child care, car repair)
Build a factory and manufacture items (tools, toys, furniture)
Established business concept or new concept (dry cleaners, restaurants vs. computer software)

10. Franchises
The right to marker another company’s product or service. Purchasing this right usually costs thousands or more!
Examples: fast food restaurants, convenience stores, dry cleaners
Advantages
Proven track record of success
Exclusivity – no one else could buy into the same franchise in the same area
Franchiser support (training, tips, location, etc.)

11. Franchises Continued…
Disadvantages
Large initial investment $$$
Pay ongoing fees to retain right to use name
May not be free to run as you wish
May be required to follow guidelines
Investigate carefully!
Talk with other franchisees (people who own same franchise) about franchisor (one who sells a franchise) and success

12. Franchises

13. For more info on Franchises…
Contact the Federal Trade Commission at:

14. Buying an Existing Business
Already established
Owners sell because they want to: change careers, move, or retire
Can eliminate much of the work and expense
Location is already chosen
Business already known in community
Already have loyal customers
Investigate first!!!! (Reputation? Equipment? New Laws? New Competition?

15. Business Planning Ever had a lemonade stand or paper route?
Review Business Planning Checklist
How to Succeed?
Key quality – Optimism (believing in yourself and your business. Positive attitude!)
Self Starter – one who had initiative to see what needs to be done and do it! Time, Energy, & Interest = Success
Innovative – ability to come up with new ideas
Decision-making Skills – must be able to decide on routine issues & major problems
Risk taker (money, self-esteem, respect)
Goal setter

16. Use Resources Wisely
Human Resources – include both employees & customers
Material Resources – include the supplies & other items needed to run a business
Financial Resources – refer to the money needed to start the business and keep it going. Also includes profits.

17. Planning Resources One textbook chapter is NOT enough!
Community College classes
U.S. Small Business Administration (SBA) – agency providing assistance to small business owners in a number of ways.
Est. in 1953
Provides financial, technical, & management assistance to help start, run, and enlarge a business
Offers a start-up kit
Can help develop business plan for lending institutes and applying process

18. SBA Offers workshops, seminars/course on:
Marketing
Purchasing
Planning a small business
Available online at
Another information source is
Contains links to important topics such as business planning, management, financial matters, government resources, sales, and marketing.

19. Choosing a Business What is best for YOU? Answer this first
Your business should:
Involve your interest and abilities
Relate to your work experience or favorite hobby
Fill needs and wants of consumers in your area
Conduct a survey to determine consumer interests
Investigate

20. Avoiding Fraud Fraud – the act of deceiving or tricking
Victims are those who rush into a franchise or business opportunity by illegal or unethical marketers
What ads or signs have you seen for business opportunities that seem “to good to be true?”
Contact the BBB (Better Business Bureau) to determine if it is a scam and discover any complaints

21. Location, Location, Location
Is where you are located important?
Keep several factors in mind:
Close to customers
Close to suppliers
Neighboring businesses
Competition
Room Capacity
Parking facilities
Electical and Plumbing Capacity

22. Work from Home Keeps costs down
Do you know anyone who works from home?
Can move later as they grow
41+ million people own businesses from home (2004)
7.6 million are telecommuters
Telecommuter – a person working from home and maintaining contact via computer, fax, & phone.
Close to 2 million people make over $100k a year working from home (2004)

23. Well Suited Home-Based Businesses
Caterers
Garment Makers
Artists
Photographers
Architects
Graphic Designers
Consultants
Computer programmers/repairers/engineers/marketers/technical writers

24. Salary vs. Commission
Salary – the same amount every pay period regardless of hours worked
Commission – a percentage of sales paid to a salesperson
No sales = No pay!

25. Advantages of Working from Home
Not committed to pay rent or a lease
No travel time
No parking expense or problems
Can handle home responsibilities too
Tax advantages

26. Disadvantages of Working from Home
Family concerns may disrupt your business
Neighbors may object
Traffic concerns
Clients may not take your business seriously
Clients may feel your worksite is unprofessional
Check with any zoning ordinances
Loneliness from working alone

27. Setting Up a Home Office
More than a desk and chair
Involves very organized & detailed recordkeeping
Tax Accountant or Attorney can assist in recordkeeping information for:
Business-related receipts, bank statements, charge account statements, mileage logs, and cash receipts
Keep personal and business finances separate
All records should be kept in locked file cabinet
Have electrician check wiring as large equipment can exceed capacity of regular home wiring.
Have good lighting inside & out
Light colored walls

28. Pricing Your Product/Service
Are you charging enough or too much?
Tips:
Survey others working in same area. Determine highest and lowest acceptable rates.
If your field isn’t crowded, you can charge more
In busy season, you may consider raising rates
You can charge more for the “can’t live without it!” items
Overhead expenses – any expenses beyond materials and labor (i.e., rent, utilities, supplies, postage, advertising)

29. Legal & Financial Issues
Choose business structure
Meet zoning & licensing requirements
Obtain financing
Maintain accurate financial records
Check on insurance policy

30. Business Structure How to set up your business
3 basic business structures –
Proprietorships, Partnerships, & Corporations
Each has advantages and disadvantages

31. Proprietorship Simplest type of business
Least costly structure to form
You – sole owner
Gives freedom to run any way you want
Makes you entirely responsible

32. Partnership
Has the advantage of giving you someone to share business responsibilities
May be able to borrow more money
Must reach agreement(s)
Your responsible if something happens to the partner

33. Corporation Easier to raise money Less risk to personal assets
Costs more to set up
Subject to more taxes
Less freedom of action for entrepreneur

34. Zoning, Licensing, & Permits
Zoning Laws – regulate what types of business activities can be performed in certain areas.
License – a certificate showing that you have been granted permission to practice your occupation.
Alabama Department of Commerce can tell how to register a business

35. Financing Sources of Financing Savings Family/Friends Bank Lending
Avoid Interest Costs
Shows Confidence
Family/Friends
Agree to repay principal plus interest on when
Bank Lending
Usually difficult
Outside Investors

36. Applying for a Loan Provide detailed business information
Outline product type or service
List location(s)
Identify Competitors
Who your customers are
Promotional Plan
Specify needs for space, equipment, & employees
List of Financial Needs
Future Growth
Ability to Repay Loan

37. Expenses Capital expenses – one-time costs needed to get started
Example: Machine
Fixed Expenses – those that must be paid regularly in set amounts
Example: Rent payments, Insurance
Flexible Expenses – those that vary from month to month.
Example: Utility bills, repairs, advertising costs

38. Statement of Assets & Liabilities
Assets – items you own.
Examples – cash, stocks, bonds, property
Liabilities – all the debts you owe.
Examples – car payments, home loan

39. Did you get the loan? Good Credit Rating
Experience and Knowledge to run business
A complete, organized proposal will affect the loan officer’s decision!

40. Small Business Failure
50 % fail within 5 years
Lack of Financial Planning – often
Record Keeping – it’s the law!

41. Recordkeeping
Bookkeeping – involves the recording of income and expenses.
Accounting – involves an analysis of the data you’ve recorded.
Type of recordkeeping depends on the business
Store – tracks products
Employees – track hours (taxes and expenses)
Service – tracks time performing tasks
Receipts – (aka: revenues) include all money you receive from customers for cash and credit sales

42. Sales Slip Way to track receipts
Include date, customer’s name, address, items sold, quantity, price per item, sales tax, and sales total
Subtract expenses from receipts to determine profit
To determine success compare years
Profit Ratio – the percentage of receipts that are profit (by dividing total profit from total receipts)
Main Goal is to PROFIT!
Break-Even Point – when income = expenses
Ex. 1st yr with 20% profit ratio, break-even = September

43. Professional Assistance
Lawyer – can set up your business structure, verify zoning laws and licensing requirements; legal issues
Discuss fees up front
Accountant – helps you choose a record keeping system to meet your needs; help with loan applications; handle taxes; analyze books; advise on how to increase profits
Other business owners
Local Chamber of Commerce – give references
Insurance Agent – protect in event of fire or theft; liability; disability coverage
Look for Small Business Experience

44. Turn to pg. 462 Answer “Facts in Review” on pg. 420 #1-14 (all)
When finished, turn in your answers!
Raise your hand if you have a question.
Good Luck!