Copyright © Cengage Learning. All rights reserved.5 | 1 Chapter Five Small Business, Entrepreneurship, and Franchises

Copyright © Cengage Learning. All rights reserved. 5 | 2 Learning Objectives 1.Define what a small business is and recognize the fields in which small businesses are concentrated. 2.Identify the people who start small businesses and the reasons why some succeed and many fail. 3.Assess the contributions of small businesses to our economy. 4.Judge the advantages and disadvantages of operating a small business.

Copyright © Cengage Learning. All rights reserved. 5 | 3 Learning Objectives (cont’d) 5.Explain how the Small Business Administration helps small businesses. 6.Appraise the concept and types of franchising. 7.Analyze the growth of franchising and the advantages and disadvantages of franchising.

Chapter 5 Outline –Small Business: A Profile The Small-Business Sector Industries That Attract Small Businesses The People in Small Businesses: The Entrepreneurs Why Small Businesses Fail –The Importance of Small Businesses in Our Economy Providing Technical Innovation Providing Employment Providing Competition Filling Needs of Society and Other Businesses –The Pros and Cons of Smallness Advantages of Small Business Disadvantages of Small Business

Chapter 5 Outline (cont.) –Developing a Business Plan –The Small Business Administration SBA Management Assistance SBA Financial Assistance –Franchising What Is Franchising? Types of Franchising Arrangements The Growth of Franchising Are Franchises Successful? Advantages of Franchising Disadvantages of Franchising –Global Perspectives in Small Business

Copyright © Cengage Learning. All rights reserved. 5 | 6 Small Business: A Profile A business that is independently owned and operated for profit and is not dominant in its field SBA “smallness” guidelines Small-business sector

Copyright © Cengage Learning. All rights reserved. 5 | 7 Industries that Attract Small Businesses Attractive small-business industry characteristics Industry categories where small businesses tend to cluster

Copyright © Cengage Learning. All rights reserved. 5 | 8 The People in Small Businesses: The Entrepreneurs Why people go into business for themselves –The “entrepreneurial spirit” –The desire for independence –The desire to determine one’s own destiny –The willingness to find and accept a challenge –Personal background –Age –“Had enough” of working for someone else –High-tech opportunities, especially for teens –Losing a job and deciding to start a business –An idea for a new product –An opportunity presents itself

Copyright © Cengage Learning. All rights reserved. 5 | 9 Why Some Entrepreneurs and Small Businesses Fail Lack of capital and cash-flow problems Lack of management skills Overexpansion

Copyright © Cengage Learning. All rights reserved. 5 | 10 The Importance of Small Businesses in Our Economy Providing technological innovation

Copyright © Cengage Learning. All rights reserved.5 | 11 The Importance of Small Business in Our Economy (cont’d) Providing employment Providing competition Filling needs of society and other businesses

Copyright © Cengage Learning. All rights reserved. 5 | 12 The Pro and Cons of Smallness ADVANTAGESDISADVANTAGES

Copyright © Cengage Learning. All rights reserved. 5 | 13 Developing a Business Plan Business plan Three basic purposes Accuracy and realistic expectations are crucial

Copyright © Cengage Learning. All rights reserved. 5 | 14 The Small Business Administration A governmental agency that assists, counsels, and protects the interests of small business in the U.S. SBA management assistance SBA financial assistance –Regular business loans –Small-business investment companies

Copyright © Cengage Learning. All rights reserved. 5 | 15 Franchising Franchise Franchising Franchisor Franchisee

Copyright © Cengage Learning. All rights reserved. 5 | 16 Types of Franchises manufacturer producer franchisor

Copyright © Cengage Learning. All rights reserved. 5 | 17 Franchising (cont’d) The growth of franchising Are franchises successful?

Copyright © Cengage Learning. All rights reserved. 5 | 18 Advantages of Franchising TO THE FRANCHISOR TO THE FRANCHISEE

Copyright © Cengage Learning. All rights reserved. 5 | 19 Disadvantages of Franchising TO THE FRANCHISORTO THE FRANCHISEE

Copyright © Cengage Learning. All rights reserved. 5 | 20 Global Perspectives in Small Business Growing interdependence of national and international economies as trade barriers diminish Instant communications shrinks distances and expands business opportunities The Internet is the favored strategy for growth for small businesses The SBA offers counseling on how and where to market overseas Small businesses must adapt to demographic and economic changes in the world marketplace