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3. EXPLORING BUSINESS V. 2.1 By Karen Collins

4. CHAPTER 5 THE CHALLENGES OF STARTING A BUSINESS

5. CHAPTER OBJECTIVES Define entrepreneurship and explain why individuals become entrepreneurs Describe the importance of small businesses to the U.S. economy Identify advantages & disadvantages of starting a business Evaluate business ownership options Discuss the business plan Discuss why businesses succeed or fail

6. ENTREPRENEUR Entrepreneurs are their own boss, they are financially independent, have a high degree of creative freedom and rely on their own skills. SOMEONE WHO IDENTIFIES A BUSINESS OPPORTUNITY AND ASSUMES THE RISK OF CREATING AND RUNNING A BUSINESS TO TAKE ADVANTAGE OF IT

7. ENTREPRENEURS VS. LIFESTYLE BUSINESS OWNERS ENTREPRENEURSLIFESTYLE BUSINESS OWNERS Innovators Offer New/Improved Products Risk Takers Plan to Grow & Expand Company Start Business to Provide Income Not Innovative No Plan For Expansion

8. SMALL BUSINESSES SBA classification: –Independent Ownership. –Little Influence In Industry. –Organized for profit. Economic impact: –25 million+ Businesses. –50% of GDP.

9. SMALL BUSINESS FOUNDERS Henry Ford: Ford Motor Co. Thomas Edison: General Electric Bill Gates: Microsoft Sam Walton: Wal-Mart Steve Jobs: Apple Howard Schultz: Starbucks Mark Zuckerberg: Facebook

10. SMALL BUSINESS Creates Jobs Sparks Innovation Provides Opportunities –Women & Minorities –Financial Success & Independence Supports Big Business

11. NET NEW JOBS

12. INNOVATIONS FROM SMALL BUSINESS Airplane Personal Computer Tape Recorder Pacemaker Soft Contract Lenses

13. SMALL BUSINESS ADVANTAGES IN INNOVATION Attract Talent Faster Decision Making Focused Research Compensation Incentives

14. WOMEN/MINORITY OWNED BUSINESS

15. SMALL BUSINESS SUPPORTS BIG BUSINESS Suppliers Of Goods Suppliers Of Services –Accounting –Legal Work –Insurance Outsourcing Sales Agents

16. INDUSTRIES OF SMALL BUSINESS 80% = Services –Retailing = 25% –Wholesaling = 10% –Professional/Business Services = 35% 20% = Goods-Producing

17. SMALL BUSINESS BY INDUSTRY

18. SMALL BUSINESS OWNERSHIP ADVANTAGESDISADVANTAGES Independence Financial Rewards Lifestyle Learning Opportunities Creative Freedom Personal Satisfaction Financial Risk Stress Time Commitment Undesirable Duties

19. ENTREPRENEUR’S WORK WEEK

20. DECISIONS FOR STARTING A BUSINESS Type of business? –Manufacturer, retailer, wholesaler –Professional/Personal services –Home? Business like others or innovate (new product/concept)? Business Idea? Feasible? New or existing business, franchise? By myself or with others?

21. BUSINESS PLAN How you will build your business? How do you intend to make it sturdy? Where will you get financing? A DOCUMENT THAT IDENTIFIES THE GOALS OF YOUR PROPOSED COMPANY AND EXPLAINS HOW THEY WILL BE ACHIEVED

22. SOURCES FOR BUSINESS IDEA PREVIOUS EXPERIENCE HOBBIES INDUSTRY EXPERIENCE

23. OWNERSHIP OPTIONS START FROM SCRATCH BUY EXISTING BUSINESS GET A FRANCHISE

24. THE GROWTH OF FRANCHISING

25. FRANCHISE OWNERSHIP ADVANTAGESDISADVANTAGES Recognized Name Product Help In Start-up Advertising Ongoing Support Expensive (Franchise Fees, Royalty Fees) Franchiser’s Rules Franchiser May Not Follow Through

26. BUSINESS PLAN Executive summary Overview of proposed business Industry analysis Mission and core Values Management plan (form of organization, organization structure and management qualifications) Goods, services, production Marketing, global issues Financial plan

27. BENEFITS OF BUSINESS PLAN Forces You To Think Critically About your business Encourages you to make strategic decisions Reduces Risk of failure Forces you to analyze your business concept and industry

28. EXTERNAL USES OF BUSINESS PLAN Persuade investors to invest in your company. –Interested in quality of your business concept and ability of management to make venture successful Obtain financing from bankers. –Determine if loans can get repaid

29. PLANNING STRATEGIC DECISIONS MANAGEMENTOPERATIONSMARKETINGACCOUNTINGFINANCE

30. EXECUTIVE SUMMARY 1-3 Page Overview Most Important Part Written After Rest Of Plan Completed

31. DESCRIPTION OF BUSINESS What will the business do? What goods/services are provided? Why is business unique? Who are the customers? How will products be sold? Where will company be located?

32. INDUSTRY ANALYSIS Size of industry and future expansion/contraction? Opportunities/threats? Overall Industry Outlook? Competitors? How does you product differ from those of competitors?

33. MISSION STATEMENT & CORE VALUES Mission Statement: Purpose or mission of company (reason it exists) Core Values: Fundamental beliefs about what is/is not appropriate in conducting business activities

34. MANAGEMENT PLAN Qualifications of Management –Education –Experience –Expertise Organization Structure Legal Form of Organization –Sole Proprietorship –Partnership –Corporation

35. GOODS AND SERVICES Description Why Better Than Competitors Market Needs Competitive Advantage

36. DEVELOPMENT & PRODUCTION Obtain or make Products? Product Design Technology used to make products Where will facilities be? Type of equipment used Design/Layout Of facilities Number of employees Number of units produced How will you ensure high quality?

37. MARKETING Target Market Pricing Distribution Promotion

38. GLOBAL ISSUES Will you buy, manufacture and/or sell in other countries? Challenges you will face and how you will overcome them Strategies for future entrance into global markets

39. FINANCIAL PLAN Cash Needs –Start-up –Operations –Repay debt Financial Projections –Expected Sales –Expected Costs –Projected Profit or Loss

40. APPENDICES Resumes Financial Statements

41. SUCCEEDING IN BUSINESS Know Your Business Know Basics Of Business Management Have Proper Attitude Get Adequate Funding Manage Money Effectively Manage Time Efficiently Know How to Manage People Satisfy Your Customers Know How To Compete

42. SMALL BUSINESS ADMINISTRATION (SBA) ASSISTANCE Assistance In: –Writing a Business Plan –Starting a Business –Obtaining Financing –Managing a business

43. SBA LOAN GUARANTEES

44. SBA PROVIDERS Small Business Development Centers (SBDC): Assist with –Business Problems –Free Training/Technical Info. Service Corps of Retired Executives (provides individualized advice)

45. WHY BUSINESSES FAIL Bad Business Idea Cash Problems Managerial Inexperience or Incompetence Lack Of Customer Focus Inability To Handle Growth