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Starting a Small Business in the U.S.

Chapters 5 and 6. Starting a Small Business in the U.S. Who are the Entrepreneurs?. Mark Zuckerburg – Facebook Mitchell and Mollie Murphree – Five Senses Restaurant Mark Davis Insert Therapeutics. Why Start Your Own Business?. Control Reap the Profit Challenge of Something New

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Starting a Small Business in the U.S.

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  1. Chapters 5 and 6 Starting a Small Business in the U.S.

  2. Who are the Entrepreneurs? • Mark Zuckerburg – Facebook • Mitchell and Mollie Murphree – • Five Senses Restaurant • Mark Davis • Insert Therapeutics

  3. Why Start Your Own Business? • Control • Reap the Profit • Challenge of Something New • Opportunity Is There

  4. What Is Entrepreneurship? + Opportunity Resources New Value

  5. The Internet – A Major Aid for New Small Businesses • 20 million businesses are run out of homes in the U.S. • Many are helped through Web services • Online sales account for 8% of all retail sales in the U.S. • 24 hour business • Ease and low expense of mailing customers • Ease of reaching small target markets over large geographic areas

  6. Entrepreneurs Everywhere • In corporations • Intrapreneurs or corporate entrepreneurs • Have to have right culture • Much of the reward – not much of the risk • In incubators • Arte’ Center for the Advancement of Research, Technology, and Entrepreneurship

  7. The Importance of Small Business • Generate 75 percent of new jobs in U.S. each year • Generate over 50% of GDP in U.S. • Generate 11 TIMES the innovations of large businesses.

  8. The Downside to Small Business • You can lose your shirt! • 60% of small businesses go out of business in the first six years • Owning a business is likely to be extremely stressful. • Loving a field does not mean you’ll be successful as a business owner in that field!

  9. Setting Up Your Small Business • Choose an ownership form and register with government. • Make a business plan • Especially if you plan to go for a loan or for an angel investor. • Visit your local TSBDC and SCORE offices.

  10. Forms of Ownership • Sole proprietorship • Partnership • LLC • S-Corporations • C-Corporations

  11. How to Set Up Your Business • Sole Proprietorship • Only one owner • Dies with owner • No limited liability • Most common form of business • Tax flows to personal income • Must file for business license in TN

  12. Partnership • 2 or more owners • No limited liability • Exception: General vs. limited partnerships • More likely to survive than sole prop. • Division of profits, liability, conflicts the downside

  13. Corporations • Exist separately from owner • Represent 81% of U.S. revenues • Should tell you something about sole proprietorships! • S and C – different tax treatment and ownership allowances • Perpetual life • More red tape to start up

  14. Limited Liability Companies (LLCs) • Very much like S-corporation • Can be taxed on owner’s return • Other corporations can be owners also • Flexible distribution of profit • Must have approval of other owners to sell out • Must dissolve by deadline; dies with owners • Pay Medicare and Medicaid tax on profits

  15. Careful Consideration Should Be Taken to Pick the Right Form !! • Liability concerns • Tax concerns • Future growth considerations • Cost to start up

  16. Ways that Companies Grow • Mergers • Vertical • Horizontal • Conglomerate • Acquisitions • Leveraged Buyout (?)

  17. Franchises • One firm already has a successful product or service • Offers its trademarks and patented business processes to another for… • Initial franchise fee and ongoing royalties

  18. Entrepreneurs • Franchisees can be entrepreneurs • The ones opening the franchise in their local market • Franchisors can be entrepreneurs • Different role of being a manager of managers

  19. Franchise Agreements • Single unit agreements • Open one store • Area agreements • Open several stores in one area, up to a maximum • Master franchisee: Can also sell franchises to others in that area

  20. Developing a Franchise • Franchise fee ($25,000-$100,000) • Capital Requirements • Land • Building • Inventory • Licenses • Royalty payment on gross income • Advertising fees (on top of your ads) • Other fees as agreed upon

  21. Last Kind of Business:Cooperative • MTEMC is a cooperative • Owned by the users of the electricity • Farm cooperatives • Farmers band together to get better pricing • One member, one vote • Other examples? Ace Hardware, Ocean Spray, True Value Hardware

  22. Managing an Organization • Much different than 20 years ago • Managers • Plan • Organize • Lead • Control

  23. Being a Manager: Planning • Mission, vision, values, goals, and objectives • SWOT analysis • Strategy and tactics • Decision making • Using scientific method

  24. Being a Manager: Organizing • Organizational Chart • Why do people get put into management positions? • Is this right? • Choosing between stakeholders • Staffing the ranks and dealing with turnover

  25. Being a Manager: Leading • Creating something for others to follow • Different styles • Autocratic • Participative • Free-rein • Used to be referred to as directing

  26. Being a Manager: Controlling • Establishing standards • Creating a measurement system • Measuring • Comparing results to plans • Taking corrective action

  27. Importance of Satisfaction • External customers • Getting them to want to refer the business • Getting them to return • Internal customers • Making them feel at home • Putting a smiling face in front of the customer

  28. Chapter 8 Organizing the Business

  29. Figuring Out Organizational Structure • Make strategic plans for the company • Decide what work needs to be done • Divide up the tasks • Job specialization – Adam Smith • Hire more workers as the business grows. What are the problems inherent in this?

  30. Figuring Out Organizational Structure • Departments • Set up to handle similar tasks • What are the functions of the organization? • Assigning responsibility

  31. The Organizational Chart • A blueprint for how things get done in a company • Microsoft’s organizational chart • A standard organizational chart • Shows tasks, responsibilities, and hierarchy.

  32. Why Are Today’s Organizations So Big?? • Mass production • Economies of scale • Organizational Theory • Henri Fayol • One boss, hierarchy, organization is most important, order, pride, clear communication • Max Weber • Manager has the power, job descriptions, everything in writing,

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