1. Entrepreneurship and Small Business Management
CHAPTER 6
Entrepreneurship and Small Business Management
6-1 Becoming an Entrepreneur
6-2 Small Business Basics
6-3 Starting a Small Business

2. Becoming an Entrepreneur
6-1
Becoming an Entrepreneur
Goals
Identify characteristics of successful entrepreneurs.
Recognize the importance of entrepreneurship in the economy.
Describe opportunities and risks of entrepreneurship.

3. Key Terms entrepreneur entrepreneurship venture capital innovation
Chapter 6
Key Terms
entrepreneur
entrepreneurship
venture capital
innovation
improvement

4. CHARACTERISTICS OF ENTREPRENEURS
Chapter 6
CHARACTERISTICS OF ENTREPRENEURS
Desire to be your own boss
Special skills and abilities

5. ENTREPRENEURS IN ACTION
Chapter 6
ENTREPRENEURS IN ACTION
Pankaj Arora
Rich Stachowski
Jeffrey Rodriguez and John Serrano
Abbey Fleck

6. WHAT DOES IT TAKE? Entrepreneurs are more persistent inquisitive
Chapter 6
WHAT DOES IT TAKE?
Entrepreneurs are more
persistent
inquisitive
energetic
goal oriented
independent
self-confident
creative
reliable
competitive

7. WHAT DOES IT TAKE? Entrepreneurs have problem-solving skills
Chapter 6
WHAT DOES IT TAKE?
(continued)
Entrepreneurs have
problem-solving skills
tolerance for ambiguity
strong integrity
personal initiative
ability to secure resources
capability to learn from failure
willingness to work hard

8. Chapter 6
Checkpoint >>
What personal characteristic are common to most successful entrepreneurs?
Answer
Any characteristics listed in Figure 6-1 are acceptable, such as persistence, inquisitiveness, self-confidence, creativity, and so forth.

9. ENTREPRENEURSHIP AND THE ECONOMY
Chapter 6
ENTREPRENEURSHIP AND THE ECONOMY
Employment
Financing
Productivity

10. Employment Growth by Business Size
Chapter 6
Source: U.S. Bureau of Labor Statistics
Employment Growth by Business Size

11. Chapter 6
Checkpoint >>
What are the sources of financing that entrepreneurs use for their new businesses?
Answer
personal savings
friends and family
venture capital
bank loans

12. Chapter 6
OPPORTUNITIES
Innovation
Improvement

13. RISKS Recognizing risks Lack of adequate capital Low sales
Chapter 6
RISKS
Recognizing risks
Lack of adequate capital
Low sales
Higher than expected expenses
Competitive pressure
An owner unprepared to manage a growing business
Operations requiring more time than the owner is willing to commit

14. Checkpoint >> Where do entrepreneurship opportunities begin?
Chapter 6
Checkpoint >>
Where do entrepreneurship opportunities begin?
Answer
Opportunities begin with innovations (ideas about new products and services) or improvements (ideas for changes to existing products, services, or processes).

15. 6-2 Small Business Basics Goals
Identify important characteristics of small businesses.
Recognize the competitive advantages of small businesses.
Identify problems faced by many small businesses.

16. Chapter 6
Key Terms
small business
Small Business Administration (SBA)

17. SMALL BUSINESS OWNERSHIP
Chapter 6
SMALL BUSINESS OWNERSHIP
Description of a small business
Owner is usually the manager
Operates in one or very few locations
Typically serves a small market
Not dominant in its field
Small business employment
Ownership diversity

18. COMMON TYPES OF SMALL BUSINESSES
Chapter 6
COMMON TYPES OF SMALL BUSINESSES
Common Types of Small Businesses
Source: Small Business Administration and U.S. Census Bureau

19. Chapter 6
Checkpoint >>
What percentage of employees in the United States work for small businesses?
Answer
Nearly 50 percent of the American workforce is employed by small businesses.
Small businesses are also responsible for 60–80 percent of all new jobs.

20. SMALL BUSINESS ADVANTAGES
Chapter 6
SMALL BUSINESS ADVANTAGES
Meeting customer needs
Providing unique services

21. Chapter 6
Checkpoint >>
How can small businesses compete successfully with larger businesses?
Answer
Smaller businesses are able to provide more personalized products and services to their customers.
They are able to provide products and services where smaller orders and projects are required and tend to fill unique customer needs, which larger companies do not provide.

22. COMMON REASONS FOR SMALL BUSINESS FAILURE
Chapter 6
COMMON REASONS FOR SMALL BUSINESS FAILURE
Not keeping adequate records
Not having enough start-up money
Lack of management experience
Lack of experience with the type of business
Not controlling operating expenses
Poor location for the business
Failure to manage credit offered to customers

23. SMALL BUSINESS ASSISTANCE
Chapter 6
SMALL BUSINESS ASSISTANCE
Faculties of universities and colleges
Local groups of business people
Small Business Administration (SBA)

24. Checkpoint >> List common reasons for small business failure.
Chapter 6
Checkpoint >>
List common reasons for small business failure.
Answer
not keeping adequate records
insufficient start-up money
lack of management experience
lack of experience with the type of business
not controlling operating expenses
poor location
failure to manage credit

25. Starting a Small Business
6-3
Starting a Small Business
Goals
Recognize important factors to be considered when starting a business.
Describe the elements of a business plan.
Identify types and sources of financing for a small business.

26. Key Terms business plan start-up financing short-term financing
Chapter 6
Key Terms
business plan
start-up financing
short-term financing
long-term financing

27. THE BUSINESS DECISION An idea plus experience Right place and time
Chapter 6
THE BUSINESS DECISION
An idea plus experience
Right place and time
Team approach
Preparation and research

28. Chapter 6
Checkpoint >>
Why is it important to use a team approach when starting a new business?
Answer
A team approach allows employees to feel valued and motivated to take personal responsibility for the benefit of the business.
Owners cannot expect to be able to do everything alone. Building a team will allow the business to increase productivity and, ultimately, profits.

29. Chapter 6
WHAT IS A BUSINESS PLAN?
A business plan is a written description of the business idea and how it will be carried out, including all major business activities.

30. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
Description of the Business
The business idea
Major products and services
Ownership structure
Strengths/weaknesses
Long- and short-term goals

31. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Description of Competition
Characteristics of the industry
Condition of the economy
Strengths and weaknesses of major competitors

32. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Customer Analysis
Description of customers
Location, number, and resources of customers
Sales forecasts

33. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Operations Plan
Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans

34. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Marketing Plan
Description of major marketing activities
Description of resources needed
Schedule of marketing activities

35. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Financial Plans
Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements

36. STEPS IN DEVELOPING THE BUSINESS PLAN
Chapter 6
STEPS IN DEVELOPING THE BUSINESS PLAN
Gather and review information
Develop the strategic alternatives
Write the plan
Ask an expert to review the plan

37. Chapter 6
Checkpoint >>
What is the “strategic alternatives” in a business plan?
Answer
Strategic alternatives are alternative plans for production, staffing, financing, and so on.
Even the best business plan cannot predict every possible circumstance.
An alternate plan allows a business to be prepared for the unforeseeable.

38. FINANCING THE SMALL BUSINESS
Chapter 6
FINANCING THE SMALL BUSINESS
Types of financing
Start-up financing
Short-term financing
Long-term financing
Sources of financing
Owner-supplied funds
Borrowed funds

39. Chapter 6
Checkpoint >>
In addition to owner-supplied capital, what are several other sources of financing for a small business?
Answer
Borrowed money may come from banks, finance companies, or other individuals, such as friends and family.
Some suppliers may also be willing to extend credit.