Entrepreneurship and Small Business Chapter 6 Entrepreneurship and Small Business

6-1 Becoming an Entrepreneur CHARACTERISTICS OF ENTREPRENEURS Entrepreneur- someone who takes a risk in starting a business to earn a profit

Some key factors in starting your own business include: Wanting to be your own boss Having special skills and abilities Coming up with innovative ideas

Entrepreneurship- the process of starting, organizing, managing, and assuming the responsibility for a business

Entrepreneurs in Action Sometimes ideas for new products come from problems in every day life Examples: Abby watched her dad make bacon in the microwave and the bacon came out soaked in grease. She created the Makin Bacon ® microwave tray. She and her father convinced Armour brand bacon to sell the tray.

What Does it Take? Not all people who own or manage a business are entrepreneurs A person must be able to turn the idea into a business Entrepreneurs come from: All age categories, racial, and ethnic groups Both genders Varied amounts of educational background Many entrepreneurs own their fist business while in their teens

There are personal traits that are common among entrepreneurs including: Persistent Inquisitive Energetic Goal oriented Independent Self-confident Creative Reliable Competitive

Checkpoint>> Choose 2 of the 9 personal skills of a successful entrepreneur and tell why having each skill would be benefit for starting their own business.

ENTREPRENEURSHIP AND THE ECONOMY Entrepreneurship is a key part of the U.S. Economy Nearly one in ten of all Americans ages 18-64 are involved in some type of entrepreneurship activity

Employment Small businesses are responsible for most new employment Over 60% of new jobs were created by businesses with fewer than 500 employees Nearly as many small businesses close as begin each year

Financing Most of the money needed to start a new business comes from the entrepreneur, their family, or friends One in five Americans has invested in a business of someone they know well More than 50% lend financial support to a family member / relative 29% give to neighbors and friends 8% invest in businesses started by colleagues More than $100 billion in new businesses each year

In the late 1990’s, many venture capital companies were formed Venture capital- money provided by large investors to finance new products and new businesses that have a good chance to be very profitable In the late 1990’s, many venture capital companies were formed They supplied an additional $100 billion per year to start new businesses This amount dropped to $22 billion in 2005 More than 2,900 companies receive venture capital each year This shows that many people think new business provide a good investment opportunity

Other sources for start-up capital includes: loans from financial institutions, credit given by other businesses

Productivity New and small businesses produce a large volume of goods and services for the economy. Businesses with just a single owner and no staff account for more than $600 billion in sales annually. Small businesses are responsible for more than half of the gross domestic product.

Checkpoint>> What are the sources of financing that entrepreneurs use for their new businesses?

OPPORTUNITIES AND RISKS New Business Opportunities Innovation- an invention or creation that is brand new Improvement- a designed change that increase the usefulness of a product, service, or process

Inventors often develop innovations. Those inventions may become the basis for a new business. Examples of well-known innovations include: Apple personal computer and Post-It Notes

In addition to inventions, innovations create new services that become the basis for a new business Example: Frederick Smith envisioned an economical worldwide system for quickly and efficiently shipping packages. This idea led to the start of FedEx.

Recognizing Risks Many successful entrepreneurs and their businesses are well known. Their success encourages others to think about starting a new business. More new businesses fail than succeed.

The primary reasons businesses started by entrepreneurs close are: Lack of adequate capital Low sales Higher than expected expenses Competitive pressure An owner unprepared to manage a growing business Operations requiring more time than the owner is willing to commit

Checkpoint>> Where do entrepreneurship opportunities begin?

6-1 ASSESSMENT