3. Entrepreneurship and Small Business
The process of creating and managing a business to achieve a desired objective
Small Business
Any independently owned and operated business that is not dominant in its competitive area and employs fewer than 500 people

4. 10 Reasons to Start a Business
You are your own boss.
You get to do what you are interested in.
Your firm = Your deadlines.
You can be creative.
Its not that hard to do.
It can be very profitable.
Its varied.
You can cut the commute.
You can have a second career.
The big dream really can be a reality.
Source: “10 Reasons To start a Business in 2006” Startups.co.uk,
(accessed October 31, 2006)

5. What Is a Small Business?
Any independently owned and operated business
Not dominant in its competitive area
Does not employ more than 500 people

6. Facts About Small Businesses

7. The Role of Small Business in the American Economy
Job creation
Innovation
Exporting
Did You Know?
9.1 million women-owned businesses employ million and contribute 3.6 trillion to the economy.
3.25 million minority-owned firms employ
4 million and account for $495 billion in revenues

8. Number of Firms by Employment Size

9. Industries That Attract Small Business
Retailing and Wholesaling
Services
Manufacturing
High Technology
Did You Know?
39 percent of high-tech jobs are in small businesses

10. What are the Advantages of Owning a Small Business?
Personal
Independence
Freedom of choice
The option of working at home
Business
Often requires less money to start and maintain
Flexibility
The ability to focus on a few key customers
The chance to develop a reputation for quality and service
Did You Know?
12% of Internet start-ups were launched in a garage.

11. Traits Needed to Succeed in Entrepreneurship
Neuroticism
Helps entrepreneurs focus on details
Extroversion
Facilitates network building
Conscientiousness
Facilitates planning
Agreeableness
Facilitates networking
Openness to new ideas
Source: Alex de Noble in Joshua Kurlantzick, “About Face,” Entrepreneur, January 2004,

12. Disadvantages of Small Business Ownership
High stress level
High failure rate
Undercapitalization
Managerial inexperience or incompetence
Inability to cope with growth

13. How Hard Do They Work? Hours worked by small business owners
Source: “21st Annual Small Business Survey Summary Report,” Dun & Bradstreet (n.d.), (accessed October 30, 2006).

14. Most Common Mistakes Made by Start-up Businesses
Failing to spend enough time researching the business idea to see if it’s viable
Miscalculating market size, timing, ease of entry, and potential market share
Underestimating financial requirements and timing
Overprotecting sales volume and timing
Making cost projections that are too low
Hiring too many people and spending too much on offices and facilities
Lacking a contingency plan for a shortfall in expectations
Bringing in unnecessary partners

15. Most Common Mistakes Made by Start-up Businesses
Focusing too much on sales volume and company size rather than profit
Hiring for convenience rather than skill requirements.
Neglecting to manage the entire company as a whole.
Accepting that it’s “not possible” too easily rather than finding a way.
Seeking confirmation of your actions rather than seeking the truth.
Lacking simplicity in your vision.
Lacking clarity of your long-term aim and business purpose.
Lacking focus and identity.
Lacking an exit strategy.

16. The Keys to Starting a Small Business Success
A comprehensive business plan
The right form of ownership
Adequate financing

17. Financial Resources Equity Financing Debt Financing Owner’s funds
Venture capitalists
Debt Financing
Loans & collateral
Lines of credit
Trade credits
Barter
Did You Know?
The online lending agency is the latest trend in debt financing. Live Capital connects borrowers to American Express, GC Capital and other lenders.

18. Franchising Franchise: Franchiser: Franchisee:
A license to sell another’s products or to use another’s name in business or both
Franchiser:
The company that sells a franchise
Franchisee:
The purchaser of a franchise

19. Top Ten Franchises for 2006
Source: “Franchise 500® 2006 Rankings,” Entrepreneur,
(accessed February 22, 2006)

20. Fastest Growing and Hottest New Franchises

21. Advantages of Franchises
Management training and support
Brand-name appeal
Standardized quality of goods and services
National advertising programs
Financial assistance
Proven products and business formats
Centralized buying power
Site selection and territorial protection
Greater chance for success

22. Disadvantages of Franchises
Franchise fees and profit sharing with the franchiser
Strict adherence to standardized operations
Restrictions on purchasing
Limited product line
Possible market saturation
Less freedom in business decisions

23. The Marketing and Communication Tools for Small Business Success
Online features that small and midsize businesses use or are interested
in using to have a competitive advantage:
Source: “Online tools for small and midsize businesses,” USA Today Snapshots, December 6, 2006, p. 1b.

24. Developing Trends Impacting Small Business
Demographic Trends
Baby boomers & Echo boomers
Technological Trends
Increase in Internet usage
Major breakthroughs in technology
Economic Trends
Economic turbulence creates economic threats and new opportunities

25. Making Big Businesses Act “Small”
More and more firms are emulating small businesses in an effort to improve their own bottom line by
Downsizing
Making their operating units function more like independent small businesses
Intrapreneurs

26. Solve the Dilemma
Evaluate the idea of a low-fat cookie and muffin retail store.
Are there any concerns in connection with starting a small business that Jack and Bruce have not considered?
What advice would you give Jack and Bruce as they start up their business?

27. Explore Your Career Options
What are some of the key qualities required of an individual starting a new small business?

28. Additional Discussion Questions and Exercises
Assume you wanted to go into business for yourself.
What kind of business would you prefer?
What would be the financial requirements for entering the business?
What type of work or managerial experience would you need?
What should be included in a business plan?
What is the importance of a business plan to the small-business entrepreneur?

29. Additional Discussion Questions and Exercises
What are the goals of venture capitalists when they invest in new businesses?
Think of your local community. Can you name five new businesses that have started up recently?
Would you consider these new businesses to be small businesses?
Are these new businesses franchises?

30. Chapter 6 Quiz
A license to sell another’s products or to use another’s name in business, or both, is called
a franchise
a joint venture.
a licensing agreement.
a small business license.
Which of the following industries is least likely to be entered into by small-business entrepreneurs?
Services
high technology
mining and manufacturing
retailing

31. Chapter 6 Quiz The shortest path to business failure is
undercapitalization.
lack of a business plan.
stress.
employee turnover
The money needed to finance regular business operations is called
a line of credit.
collateral.
working capital.

32. Multiple Choice Questions about the Video
America’s women owned businesses employ:
275,000 employees
27.5 million employees
10,000 employees
15 million employees
JustDogs is:
A gourmet dog treats franchise
A canine salon
A brand of dog food
A veterinary clinic just for dogs