Entrepreneurship and Small Businesses Unit 2, Chapter 5 Page 70-83

Entrepreneurship and Small Businesses The Small Business Administration (SBA) defines a small business as an independently owned business that usually has the owner as its manager The Small Business Administration (SBA) defines a small business as an independently owned business that usually has the owner as its manager AKA “Mom and Pop” stores AKA “Mom and Pop” stores

Entrepreneurship and Small Businesses A small business: A small business: Serves a limited geographic area Serves a limited geographic area Employs fewer than 500 people Employs fewer than 500 people Is not dominant in its industry Is not dominant in its industry What are some examples of local small businesses? What are some examples of local small businesses?

Entrepreneurship and Small Businesses What percentage of the total workforce does small business employ? What percentage of the total workforce does small business employ? Small businesses employ more than 50 percent of the total workforce in the United States Small businesses employ more than 50 percent of the total workforce in the United States

Entrepreneurship and Small Businesses Small businesses generate more than half the nation’s income Small businesses generate more than half the nation’s income They are the principal source of new jobs They are the principal source of new jobs

Entrepreneurship and Small Businesses Some of the advantages of owning a small business are: Some of the advantages of owning a small business are: Being the boss Being the boss Offering services large companies cannot offer Offering services large companies cannot offer Ease of formation Ease of formation

Entrepreneurship and Small Businesses Disadvantages Disadvantages When you’re a small business owner, you’re responsible for decisions When you’re a small business owner, you’re responsible for decisions You often work long hours and have great financial responsibility You often work long hours and have great financial responsibility

Entrepreneurship and Small Businesses Key Stat!!! Key Stat!!! About ______ out of five small businesses fail in their first five years About ______ out of five small businesses fail in their first five years Four Four Small business owners: Small business owners: May mistake the freedom of being in business for oneself for the liberty of working or not May mistake the freedom of being in business for oneself for the liberty of working or not

Entrepreneurship and Small Businesses Small business owners: Small business owners: May underprice or overprice goods or services May underprice or overprice goods or services Going into business with little or no experience may result in the business closing Going into business with little or no experience may result in the business closing

Entrepreneurship and Small Businesses Why a small business might not work: Why a small business might not work: 1. Effect of Change 1. Effect of Change Consumers’ tastes change Consumers’ tastes change If flexibility and change are not part of the business, then it’s likely to fail If flexibility and change are not part of the business, then it’s likely to fail

Entrepreneurship and Small Businesses Why a small business might not work: Why a small business might not work: 2. Managerial Skills Needed 2. Managerial Skills Needed Financing Financing Employee Relations Employee Relations Production Production Customer Relations Customer Relations

Entrepreneurship and Small Businesses 3. Inadequate Financial Planning 3. Inadequate Financial Planning Starting with little money, spending carelessly, borrowing money without planning, and forgetting about taxes and insurance may result in a failure Starting with little money, spending carelessly, borrowing money without planning, and forgetting about taxes and insurance may result in a failure

Entrepreneurship and Small Businesses A business plan is: A business plan is: A written description of a new business venture that describes all aspects of the business A written description of a new business venture that describes all aspects of the business

Entrepreneurship and Small Businesses Some questions to consider before starting your own business are: Some questions to consider before starting your own business are: What will I produce? What will I produce? Who are my main competitors? Who are my main competitors? Why is my product needed? Why is my product needed?

Entrepreneurship and Small Businesses How much will my product cost to produce? How much will my product cost to produce? How many people will I need to run the business? How many people will I need to run the business? What physical facilities will I need? What physical facilities will I need?

Entrepreneurship and Small Businesses What licenses, permits, or other legal documents do I need? What licenses, permits, or other legal documents do I need? How much money will I need to get started? How much money will I need to get started?

Entrepreneurship and Small Businesses The essential parts of the business plan are: The essential parts of the business plan are: 1.) Summary (First in order, last thing to be completed! 1.) Summary (First in order, last thing to be completed! 2.) Company description 2.) Company description 3.) Products and services 3.) Products and services

Entrepreneurship and Small Businesses 4.) Marketing plan 4.) Marketing plan 5.) Legal plan 5.) Legal plan 6.) Management and operating plan 6.) Management and operating plan 7.) Financial plan 7.) Financial plan