1. Entrepreneurship and Small-Business Ownership
Chapter 6

2. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Learning Objectives
Highlight the contributions small businesses make to the U.S. economy
List the most common reasons people start their own companies and identify the common traits of successful entrepreneurs
Explain the importance of planning a new business and outline the key elements in a business plan
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3. Learning Objectives (cont.)
Identify the major causes of business failures and identify sources of advice and support for struggling business owners
Discuss the principal sources of small-business private financing
Explain the advantages and disadvantages of franchising
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4. The Big World of Small Business
A company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry)
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5. Economic Roles of Small Business
They provide jobs
They introduce new products
They meet the needs of larger organizations
They inject a considerable amount of money into the economy.
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6. Economic Roles of Small Business
They take risks that larger companies sometimes avoid
They provide specialized goods and services
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7. The Big Economic Impact of Small Business
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8. Characteristics of Small Businesses
Most small firms have a narrow focus
Small businesses have to get by with limited resources
Small businesses often have more freedom to innovate
Entrepreneurial firms find it easier to make decisions quickly and react to changes in the marketplace
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9. Factors Contributing to the Increase in the Number of Small Businesses
E-commerce
Social media
Technological advances
Growing diversity in entrepreneurship
Corporate downsizing and outsourcing
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10. The Entrepreneurial Spirit
The positive, forward-thinking desire to create profitable, sustainable business enterprises
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11. Why People Start their Own Companies
More control over their future
Tired of working for someone else
Passion for new product ideas
Pursue business goals that are important to them on a personal level
Inability to find attractive employment anywhere else.
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12. Qualities Shared by Successful Entrepreneurs
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13. Business Start-Up Options
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14. Blueprint for an Effective Business Plan
A document that summarizes a proposed business venture, goals, and plans for achieving those goals
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15. Blueprint for an Effective Business Plan (cont.)
Summary
Mission and objectives
Company overview
Products and services
Management and key personnel
Target market
Marketing strategy
• Summary. In one or two paragraphs, summarize your business concept, particularly
the business model , which defines how the company will generate revenue and produce
a profit.
• Mission and objectives. Explain the purpose of your business and what you hope to
accomplish.
• Company overview. Give full background information on the origins and structure of
your venture.
• Products or services. Concisely describe your products or services, focusing on their
unique attributes and their appeal to customers.
• Management and key personnel. Summarize the background and qualifications of the
people most responsible for the company’s success.
• Target market. Provide data that will persuade an investor that you understand your
target market. Be sure to identify the strengths and weaknesses of your competitors.
• Marketing strategy. Provide projections of sales volume and market share; outline
a strategy for identifying and reaching potential customers, setting prices, providing
customer support, and physically delivering your products
or services.
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16. Blueprint for an Effective Business Plan
Design and development plans
Operations plan
Start-up schedule
Major risk factors
Financial projections
Exit strategy
• Design and development plans. If your products require
design or development, describe the nature and extent
of what needs to be done, including costs and possible
problems.
• Operations plan. Provide information on facilities,
equipment, and personnel requirements.
• Start-up schedule. Forecast development of the company
in terms of completion dates for major aspects of
the business plan.
• Major risk factors. Identify all potentially negative
factors and discuss them honestly.
• Financial projections and requirements. Include a
detailed budget of start-up and operating costs, as well
as projections for income, expenses, and cash flow for
the first three years of business. Identify the company’s
financing needs and potential sources.
• Exit strategy. Explain how investors will be able to cash
out or sell their investment, i.e. through a public
stock offering, sale of the company, or a buyback of the
investors’ interest.
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17. Why New Businesses Fail
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18. Government Agencies and Not-for-Profit Organizations
Small Business Administration
Minority Business Development Agency
SCORE
U.S. Chamber of Commerce
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19. Mentors and Advisory Boards
A team of people with subject-area expertise or vital contacts who help a business owner review plans and decisions
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20. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Print and Online Media
Inc .
Business 2.0
Bloomberg BusinessWeek
Fortune and Money
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21. Social Networking for Entrepreneurs
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22. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Business Incubators
Business Incubators
Facilities that house small businesses and provide support services during the company’s early growth phases
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23. Financing Options for Small Businesses
Seed Money
The first infusion of capital used to get a business started
Micro Lenders
Organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans
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24. Financing Options for Small Businesses
Venture Capitalists (VCs)
Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit
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25. Financing Options for Small Businesses (cont.)
Angel investors
Private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest or banks are willing to lend
Initial public offering (IPO)
A corporation’s first offering of shares to the public
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26. The Franchise Alternative
A business arrangement in which one company (the franchisee) obtains the rights to sell the products and use various elements of a business system of another company (the franchisor)
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27. The Franchise Alternative (cont.)
Franchisee
A business owner who pays for the rights to sell the products and use the business system of a franchisor
Franchisor
A company that licenses elements of its business system to other companies (franchisees)
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28. Twelve Questions to Ask Before Signing a Franchise Agreement
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29. Applying What You’ve Learned
Highlight the contributions small businesses make to the U.S. economy
List the most common reasons people start their own companies and identify the common traits of successful entrepreneurs
Explain the importance of planning a new business and outline the key elements in a business plan
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

30. Applying What You’ve Learned (cont.)
Identify the major causes of business failures and identify sources of advice and support for struggling business owners
Discuss the principal sources of small-business private financing
Explain the advantages and disadvantages of franchising
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