1. 6-3 Starting a Small Business
THE BUSINESS DECISION
The procedures followed to start a business will often determine whether it will be successful.

2. An Idea Plus Experience
Every business begins with an idea
Business ideas come from many sources
Hobbies, interests, and business experience
Books and magazines suggest new opportunities including franchises

3. You shouldn’t consider starting a business without working for a small business
Several years of training in a range of business operations will prepare you to be an owner
Having responsibility for making decisions and opportunities to be the manager are key.

4. Right Place and Time Most retail businesses need good customer traffic
If the business is not easy to find or requires a great deal of travel time, many people will stay away
A wholesaler needs easy access to manufacturers where products are obtained for sale
Manufacturers must be located in an area with access to the required raw materials
Transportation systems must be easy to reach to distribute finished materials

5. Team Approach Many small business owners are quite independent.
A business is not easy to run without the help of others
Employees must be chosen carefully for their teamwork abilities.
In addition to employees, owners will need assistance from people with specialized knowledge.
Bankers, lawyers, and accountants

6. Preparation and Research
The most important step in starting a business is preparation.
Includes having enough information to make good decisions
Time spent studying information before the business is started will save time and avoid later problems

7. Information is needed about:
Customers
Competitors
Important operations
Government regulations

8. This information is available through:
Libraries
Colleges
Small business assistance centers
Sometimes, the owner will have to do further research to collect current data.

9. Checkpoint>>
Why is it important to use a team approach when starting a new business?

10. DEVELOPING A BUSINESS PLAN
When successful businesses are compared to those who have failed, one factor stands out as the most important difference.
The owners of a successful business develop and follow a business plan.

11. What is a Business Plan?
Business plan- written description of the business idea and how it will be carried out
Key features include:
General description of the company
Description of products / services sold
Market analysis (demand, customers, and competition)
Financial plan

12. Most business plans are developed for one year and updated the next year
By developing a plan, the owner is forced to think about important activities, the amount of time they will take, and their cost.
The plan serves as a guide to keep the business on track.

13. Steps in Developing the Business Plan
The business owner is in charge of developing the business plan.
The most popular use of business plans is to persuade investors and banks to finance the venture.

14. Gather and review information
Step 1
Gather and review information
Review other business plans and study information on the activities and financial performance of similar businesses

15. Develop strategic alternatives
Step 2
Develop strategic alternatives
Alternate plans for marketing, staffing, and financing

16. Each section of the business plan should be written.
Step 3
Each section of the business plan should be written.
Several sections for the description of the business
Before the plan is completed, the owner should have business experts review and offer advice for strengths and weaknesses of the plan.

17. Checkpoint>>
What are “strategic alternatives” in a business plan?

18. FINANCING THE SMALL BUSINESS
A new business with a good product or service may run out of money before becoming profitable.
Several years of operation are required before most new businesses can earn a profit.
Finding adequate financing is a key step in starting and running a business.

19. Types of Financing
Start-up financing- amount of money needed to open the business
Includes the cost of buildings, equipment, inventory, supplies, and licenses
Short-term financing- money needed to pay for current operating activities
Less than one year
Often for one or two months
Long-term financing- money needed for the main resources of a business that will last for many years
Land, buildings, and equipment

20. Sources of Financing
Finding the money needed may be the most difficult part of starting a business.
Comes from a mixture of owner-supplied and borrowed funds.
In a proprietorship, one person will supply the money.
In most partnerships, each partner will contribute.
In a corporation, shareholders own the business and contribute the money.
Borrowed funds are obtained through loans from banks, other financial institutions, or other people.

21. Checkpoint>>
In addition to owner-supplied capital, what are several other sources of financing for small businesses?

22. 6-3 ASSESSMENT