1. Entrepreneurship Chapter 4

2. What is an entrepreneur?  A person who runs and organizes their own business.  Must make good decisions  Find inventive solutions  Lives a challenging life.  Risks are high but the reward can be great.

3. Advantages  You are in charge!!!—no boss to answer to  Great job satisfaction  Can lead to great income.

4. Disadvantages  Financial Risk- you may loose your investment and more.  Work long hours  May have high competition  No guarantee of success. ½ of all business fail in the first 4 years.

5. Traits  Highly Motivated- they know what they want and believe in their ability. They plan how to achieve their goals.  Foresight- they are very perceptive. They see opportunities where others may not.  Decisive- they make many decisions every day which must be good for their business to success.

6. 4 Ways of going into Business 1. Starting a New Business Advantages  Don’t have to inherit a previous owners mistakes or bad reputation  Personal satisfaction of knowing you built that business. Disadvantages  Requires more time and effort  Start up costs (the expenses involved with going into business) are high  Have to convince a lender that your business is a good idea for them to lend you the $  It is risky. There are no guarantees your business will be a success.

7. 2. Buying an Existing Business  A business may be for sale because: The owner is retiring The owner is retiring It is losing $ It is losing $Advantages No start up costs No start up costs You take on the previous owners agreements ex: a lease- is a contract to use something for a specified period of time You take on the previous owners agreements ex: a lease- is a contract to use something for a specified period of time The goodwill- loyalty of the customers you will get. The goodwill- loyalty of the customers you will get. A positive reputation A positive reputation Trained Staff Trained Staff

8. Disadvantage The location may be poor The location may be poor Competition Competition Market outlook-potential for future sales may be poor Market outlook-potential for future sales may be poor Building or equipment may be expensive to repair. Building or equipment may be expensive to repair. The business may have a poor reputation. “Under new management” signs The business may have a poor reputation. “Under new management” signs

9. 3. Buying a Franchise A franchise is a legal right to sell a company’s goods and services in a particular area. Ex: Panera, Mc Donalds, 7-11 Advantages Name recognition Name recognition Established procedures and management Established procedures and management Business reputation Business reputation Training and staff support Training and staff support Advertising Advertising Financing. Financing.

10. Disadvantages You must pay a portion of your profits to the parent company You must pay a portion of your profits to the parent company You must follow the parent company guidelines You must follow the parent company guidelines There may be less job satisfaction There may be less job satisfaction Very expensive to buy. Very expensive to buy. http://www.panerabread.com/about/franchise/

11. 4. Joining a Family Business Advantages Your relatives might help you finance the business Your relatives might help you finance the business Family members tend to be loyal and trust each other. Family members tend to be loyal and trust each other. Relatives can teach you the business Relatives can teach you the business Customer are likely to give the same trust and goodwill to a new owner who is part of the same family. Customer are likely to give the same trust and goodwill to a new owner who is part of the same family.Disadvantages Some family do not work well together Some family do not work well together Difficulties at work can affect your family relationship Difficulties at work can affect your family relationship

12. 3 Legal Forms of Business 1. Sole Proprietorship-a business owned by only 1 person. The proprietor (owner)- own all the companies assets and is responsible for all the debts. The proprietor (owner)- own all the companies assets and is responsible for all the debts. 2. Partnership- is a legal arrangement when 2 or more people share ownership.  All partners are responsible for debts. 3. Corporation- a business where it runs separate from the owners. (they are not responsible for debts) 1. Owners by shares or parts of the company and earn $ based on profit.

13. Sole Proprietorship  Adv Owner makes all the decisions Owner makes all the decisions Easiest form of business to set up Easiest form of business to set up Least regulated by government Least regulated by government  Disadv Difficult to finance the business Difficult to finance the business Owners personal assets may be at risk if the business fails Owners personal assets may be at risk if the business fails Owner may not know everything there is to run a business Owner may not know everything there is to run a business

14. Partnership  Adv Easier to raise funds to open a business Easier to raise funds to open a business You can draw on the skills and abilities of the other partners. You can draw on the skills and abilities of the other partners. Share the responsibility & work Share the responsibility & work  Disadv Disagreements among partners in decisions Disagreements among partners in decisions Its more complicated than a sole proprietorship Its more complicated than a sole proprietorship All owners are liable for all business losses and personal property may be at risk All owners are liable for all business losses and personal property may be at risk

15. Operating Your Business  Financing Where will you get money from? Mom, a friend, a loan? Where will you get money from? Mom, a friend, a loan? To apply for a loan you will need a Business & Financial Plan. To apply for a loan you will need a Business & Financial Plan. A business Plan describes: A business Plan describes: your business & its locationyour business & its location How many employees you will hire and their salaryHow many employees you will hire and their salary your competitorsyour competitors Marketing PlanMarketing Plan Timeline for starting your business.Timeline for starting your business.

16. Financial Plan  This spells out your: Start up costs Start up costs Operating expenses- the costs of doing business Operating expenses- the costs of doing business  Financial Records You must keep track of your money so you can tell how well your business is doing. You must keep track of your money so you can tell how well your business is doing. Income Statement- is a summary of a business income and expenses during a specific time period.Income Statement- is a summary of a business income and expenses during a specific time period. Revenue- Income from salesRevenue- Income from sales Gross profit- the difference between the cost of goods and their selling priceGross profit- the difference between the cost of goods and their selling price Net profit- the amount left after all operating expenses are subtracted from the gross profit.Net profit- the amount left after all operating expenses are subtracted from the gross profit.