6-1 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. NickelsMcHughMcHugh Nickels Cover

6-2 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 66 Entrepreneurship and Starting a Small Business 6-2

6-3 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. How Did They Begin?  He was selling baking soda & decided to entice customers by putting in two packages of chewing gum with each sale. The excitement over the gum started him thinking.  Two Seattle teenagers pooled their money & came up with $100. They started delivering messages & parcels for local merchants.  Though he didn’t graduate from college, he found out college students eat a lot of pizza. He started his first pizzeria with $900 near a campus with a promise of 3-minute delivery.

6-4 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business Revival Shift to Services Shift to Services CAD/CAM Lessening Advantages of Big Manufacturing CAD/CAM Lessening Advantages of Big Manufacturing Maturation of Baby Boomers Maturation of Baby Boomers More Women in Workforce More Women in Workforce

6-5 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Entrepreneurship DefinitionDefinition Characteristics of Successful EntrepreneursCharacteristics of Successful Entrepreneurs IntrapreneurIntrapreneur Micropreneur vs. Home-BasedMicropreneur vs. Home-Based Corporation Entrepreneur

6-6 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business- Advantages  Personalized Service/ Personal Contact  Flexibility  Lower Costs  Innovation Opportunities

6-7 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business- Disadvantages - Limited Experience - Long Hours - Insufficient Capital - High Failure Rate

6-8 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Why People Start Their Own Businesses Source: BFIB/VISA Card Primer

6-9 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Reasons Women Leave Jobs in Big Companies to Start Business Source: FSB, March 2001

6-10 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Self- Perception of Small Business Owners Source: USA Today, 5/20/03

6-11 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Who Starts New Businesses? % % % % 55+ 2% AGE AT START-UP

6-12 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Entrepreneurial Attributes A.Self-Directed & Self- Disciplined B.Self-Nurturing C.Action-Oriented D.Highly Energetic E.Tolerant of Uncertainty

6-13 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Hours per Week Entrepreneurs Worked 1st Year hours 8% hours15% hours23% hours28% hours13% 80 + hours12%

6-14 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Reasons for Growth of Home-Based Businesses Technology Technology Downsizing Downsizing Attitudes Attitudes Tax Advantages Tax Advantages

6-15 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Most Common Types of Home-Based Businesses Source: Independent Insurance Agents of America

6-16 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Home Office Owners Challenges New CustomersNew Customers Time ManagementTime Management Work vs. FamilyWork vs. Family City OrdinancesCity Ordinances RiskRisk Focus Find Opportunity Results vs. Routine Profit vs. Paycheck New Ideas Long Term vs. Short Term

6-17 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Government Efforts  Immigration Act of Investor Visa  Enterprise Zones  Incubators

6-18 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. What is Small Business?  Independent  Not Dominant  < 500 Employees

6-19 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. U.S. Small Businesses  20 Million Full/Part-Time Businesses  75% of New Jobs  45% of Gross Domestic Product  Jobs  80% of Americans = 1 st Job in Small Business  75% of New Jobs = Small Business  Women-Owned Growing Rapidly

6-20 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business Success  Learn from Others  Get Experience  Take Over Successful Firm

6-21 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Successful Business Management Requirements Business Plan Business Plan Adequate Funding Adequate Funding Lenders/Investors Lenders/Investors “Angels” “Angels” Venture Capitalists Venture Capitalists Professional Advice/Help Professional Advice/Help Know Your Customer Know Your Customer Manage Human Resources Manage Human Resources Keep Good Records Keep Good Records

6-22 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business Strategies Examine Marketing & ID Areas for GrowthExamine Marketing & ID Areas for Growth Profile Best Customers & Market to Similar ProspectsProfile Best Customers & Market to Similar Prospects Invest in Sales Training & TechnologyInvest in Sales Training & Technology Refresh Business Perspective With Outside ViewsRefresh Business Perspective With Outside Views Streamline Business & Eliminate WasteStreamline Business & Eliminate Waste

6-23 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Saving A Business In Trouble React/Not Overreact Understand Financial Situation Find Professional Help Develop “Recovery Plan” Be Visible Confident Leader Remind Employees of Stake in Business Don’t Get Stung By Killer “ Bankruptcy”

6-24 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Sources of Successful Entrepreneurs SOURCE: FSB, March 2001

6-25 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Reasons for a Banker To Say “No” $I don’t know enough about you or your business. $You haven’t clearly stated why you need the money. $Your numbers don’t support the loan request. $Your collateral is lacking. $Your business does not support the loan on its own merits.

6-26 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business Collaborators  Small Business Administration (SBA)  Microloan program  SBICs  SBDCs  Service Corps of Retired Executives (SCORE)  Active Corps of Executives (ACE)

6-27 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Ways to Improve Banking Relationships 1)Provide Bank With Business Plan, Brochures, Business Cards, etc. 2)Describe Business, Financial Situation, Plans 3)Ask About Scope of Bank Services 4)Express Interest In Banker’s Background- Family, Hobbies, etc. 5)Follow Up With Phone Calls, Visits Source: St. Louis Business Monthly, August 2002

6-28 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Small Business & International Prospects Positives 1.World Market 2.Absorb Excess Inventory 3.Soften U.S. Downturns 4.Extend Product Life Negatives 1.Financing Difficult 2.How to Get Started? 3.Lack of Cultural Understanding 4.Paperwork

6-29 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. International Small Business Advantages Deal With IndividualsDeal With Individuals Faster ShippingFaster Shipping Variety of SuppliersVariety of Suppliers Professional ServiceProfessional Service Information Dept. of Commerce- SBA- International- /internat.html /internat.html