Entrepreneurship and Small Business Management

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

2. 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. Chapter 6 Key Terms • entrepreneur • entrepreneurship • venture capital • innovation • improvement

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

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

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

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

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

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

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

12. Chapter 6 OPPORTUNITIES • Innovation • Improvement

13. 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. Where do entrepreneurship opportunities begin? Chapter 6 Checkpoint >> 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. 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. Chapter 6 COMMON TYPES OF SMALL BUSINESSES Common Types of Small Businesses Source: Small Business Administration and U.S. Census Bureau

19. What percentage of employees in the United States work for small businesses? Chapter 6 Checkpoint >> 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. Chapter 6 SMALL BUSINESS ADVANTAGES • Meeting customer needs • Providing unique services

21. How can small businesses compete successfully with larger businesses? Chapter 6 Checkpoint >> 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. 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. Chapter 6 SMALL BUSINESS ASSISTANCE • Faculties of universities and colleges • Local groups of business people • Small Business Administration (SBA)

24. List common reasons for small business failure. Chapter 6 Checkpoint >> 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. 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. Chapter 6 Key Terms • business plan • start-up financing • short-term financing • long-term financing

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

28. Why is it important to use a team approach when starting a new business? Chapter 6 Checkpoint >> 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. 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. 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. Chapter 6 ELEMENTS OF A BUSINESS PLAN (continued) • Customer Analysis • Description of customers • Location, number, and resources of customers • Sales forecasts

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

35. 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. 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. What is the “strategic alternatives” in a business plan? Chapter 6 Checkpoint >> 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. 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. Checkpoint >> In addition to owner-supplied capital, what are several other sources of financing for a small business? Chapter 6 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.