1. Introduction to Business © Thomson South-Western ChapterChapter Entrepreneurship and Small Business Management 6

2. Introduction to Business © Thomson South-Western Chapter 6 Slide 2 CHARACTERISTICS OF ENTREPRENEURS Entrepreneur One who takes a risk in starting a business to earn a profit Desire to be your own boss Special skills and abilities

3. Introduction to Business © Thomson South-Western Chapter 6 Slide 3 ENTREPRENEURS IN ACTION Barbers – Cabin Coffee Creative Graphics Schroeder Plumbing

4. Introduction to Business © Thomson South-Western Chapter 6 Slide 4 WHAT DOES IT TAKE? Entrepreneurs are more persistent inquisitive energetic goal oriented independent self-confident creative reliable competitive

5. Introduction to Business © Thomson South-Western Chapter 6 Slide 5 WHAT DOES IT TAKE? 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 (continued)

6. Introduction to Business © Thomson South-Western Chapter 6 Slide 6 ENTREPRENEURSHIP AND THE ECONOMY Employment 1/10 involved in some type of entrepreneurship 60% of these have hired employees Financing Comes from entrepreneurship 50% also get help from family May use Venture Capital Money provided by large investors

7. Introduction to Business © Thomson South-Western Chapter 6 Slide 7 ENTREPRENEURSHIP AND THE ECONOMY Productivity Account for over $600 billion in sales Responsible for nearly half of GDP

8. Introduction to Business © Thomson South-Western Chapter 6 Slide 8 NUMBER OF EMPLOYEES IN NEW BUSINESSES

9. Introduction to Business © Thomson South-Western Chapter 6 Slide 9 OPPORTUNITIES Innovation Invention or creation that is brand new (IPOD, IPAD) Improvement Design change that increase the usefulness of a product (Post its – to wall hooks)

10. Introduction to Business © Thomson South-Western Chapter 6 Slide 10 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

11. Introduction to Business © Thomson South-Western Chapter 6 Slide 11 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 Employees nearly 50 of all workers

12. Introduction to Business © Thomson South-Western Chapter 6 Slide 12 SMALL BUSINESS OWNERSHIP Ownership diversity Women own over ¼ of all small business 16% owned by Ethnic backgrounds Most over 40 years old High School diploma, 30% have college degree Half are operated out of their homes.

13. Introduction to Business © Thomson South-Western Chapter 6 Slide 13 COMMON TYPES OF SMALL BUSINESSES

14. Introduction to Business © Thomson South-Western Chapter 6 Slide 14 SMALL BUSINESS ADVANTAGES Meeting customer needs Serve those with specific needs Providing unique services Plan a wedding, design a sound system

15. Introduction to Business © Thomson South-Western Chapter 6 Slide 15 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

16. Introduction to Business © Thomson South-Western Chapter 6 Slide 16 SMALL BUSINESS ASSISTANCE Faculties of universities and colleges Local groups of business people Small Business Administration (SBA)

17. Introduction to Business © Thomson South-Western Chapter 6 Slide 17 THE BUSINESS DECISION An idea plus experience Right place and time Team approach Preparation and research

18. Introduction to Business © Thomson South-Western Chapter 6 Slide 18 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.

19. Introduction to Business © Thomson South-Western Chapter 6 Slide 19 ELEMENTS OF A BUSINESS PLAN 1.Description of the Business a)The business idea b)Major products and services c)Ownership structure d)Strengths/weaknesses e)Long- and short-term goals

20. Introduction to Business © Thomson South-Western Chapter 6 Slide 20 ELEMENTS OF A BUSINESS PLAN 2. Description of Competition a)Characteristics of the industry b)Condition of the economy c)Strengths and weaknesses of major competitors (continued)

21. Introduction to Business © Thomson South-Western Chapter 6 Slide 21 ELEMENTS OF A BUSINESS PLAN 3. Customer Analysis a)Description of customers b)Location, number, and resources of customers c)Sales forecasts (continued)

22. Introduction to Business © Thomson South-Western Chapter 6 Slide 22 ELEMENTS OF A BUSINESS PLAN 4.Operations Plan a)Organization of the company b)Description of major operations c)Analysis of resources needed d)Human resource plans (continued)

23. Introduction to Business © Thomson South-Western Chapter 6 Slide 23 ELEMENTS OF A BUSINESS PLAN 5.Marketing Plan a)Description of major marketing activities b)Description of resources needed c)Schedule of marketing activities (continued)

24. Introduction to Business © Thomson South-Western Chapter 6 Slide 24 ELEMENTS OF A BUSINESS PLAN 6.Financial Plans a)Start-up costs b)Short- and long-term financial needs c)Sources of financing d)Budgets and financial statements (continued)

25. Introduction to Business © Thomson South-Western Chapter 6 Slide 25 STEPS IN DEVELOPING THE BUSINESS PLAN Gather and review information Develop the “game plan” Write the plan Ask an expert to review the plan

26. Introduction to Business © Thomson South-Western Chapter 6 Slide 26 FINANCING THE SMALL BUSINESS 1.Types of financing a)Start-up financing - $ to start b)Short-term financing - $ for current operations c)Long-term financing - $ for capital resources 2.Sources of financing a)Owner-supplied funds b)Borrowed funds Banks – Family – Angel Investors