2 Vocabulary Entrepreneur: a person who organizes and manages a business Entrepreneurship: the organization and management of a businessFranchise: the right to market another company’s product or serviceSmall Business Administration (SBA): the prime source of information for would-be entrepreneurs
3 Vocabulary Fraud: the act of deceiving or tricking Commission: a percentage of sales paid to a salespersonZoning laws: regulate what types of business activities can be performed in certain areasLicense: a certificate showing that you have permission to practice your occupation
4 VocabularyFixed expenses: Bills that must be paid regularly in set amountsFlexible expenses: vary from month to monthAssets: items you ownLiabilities: debts you owe
5 Vocabulary Bookkeeping: Recording of income and expenses Accounting: Analysis of the data you’ve recordedReceipts: record of all money collectedProfit ratio: percentage of receipts that are profitBreak-even point: when income equals expenses
6 Entrepreneurship Advantages You are your own boss Freedom to make your own decisionsYou get to keep all profits your company earnsDisadvantagesAs a business owner, you take on all responsibilitiesMany extra hours of work (at least 60 hrs per week)Emotional strain
7 FranchisePurchasing a franchise has several advantages. It allows the entrepreneur to buy a business with a proven track record of success.As a franchise owner, you would also receive support from the franchiser
8 Franchise Buying a franchise also has some disadvantages. You need a lot of money for the initial investment. You also may have to pay ongoing fees to retain the right to use the company’s nameYou may be required to follow company guidelines instead of your own.
9 Franchise Some popular franchises are: Subway McDonalds Taco Bell KFC Jackson-Hewitt Tax ServiceTCBY treatsWendy’s
10 Buying an existing business Another opportunity open to some entrepreneurs is buying a business that is already existingBuying an established business can eliminate much of the work and expense of starting a business.
11 US Small Business Administration (SBA) Established 1953Provides financial, technical, and management assistance to help start, run, and enlarge a business
12 Planning your own business What does it take to succeed?Optimism – you must believe in yourself & your business.Self-starter – you must have initiative
13 Planning your business Choosing a business – what is the best business for you?Choosing a location – the importance fo location depends on the kind of business you havePricing your product or service – are you charging enough for your products or services?
14 Legal and Financial Issues A number of legal and financial issues will affect you if you become an entrepreneur.Zoning and licensing requirements must be metChoose your business structure
15 Business Structure The three basic business structures- ProprietorshipsPartnershipsCorporations
16 Proprietorship Simplest type & most costly ($$$$) You will be the sole ownerGives you total freedomGives you total responsibility
17 Partnership Share the business responsibility You can borrow more money with two peopleIt can be difficult if you don’t get along with partnerThe business could be jeopardized
18 Corporation Easier time raising money Have less risk to your personal assetsCosts more to set upHigher taxes
19 Obtaining Financing Use saved money (seed $) to finance your business Apply for a loanUse outside investors
20 Applying for a loan Business plan Record of fixed and flexible expensesRecord of assets and liabilities
21 Comparing Annual Profits Year 1Income - $100,000Expense - $80,000Profit $20,000Profit ratio = 20,000/100,000 = 20%Year 2Income - $120,000Expense - $98,000Profit $22,000Profit ratio = 22,000/120,000 = 22%
22 Professional Assistance A lawyer can be one of your most valuable resources when starting a businessAn accountant can help analyze his books and give advice about increasing profitsAn insurance agent is another professional whose advice you should seek, protect your business against theft, fire, etc.
23 Working from home Advantages Disadvantages Don’t have to pay rent Can handle home responsibilities during the dayCertain tax advantagesFamily concerns may disrupt your businessNeighbors may object about a business next to their homeClients may feel its unprofessionalLoneliness & isolation can be a possible hazard