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Entrepreneurship. Chapter 4. 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. Advantages. You are in charge!!!—no boss to answer to

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Chapter 4

What is an entrepreneur

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.



  • You are in charge!!!—no boss to answer to

  • Great job satisfaction

  • Can lead to great income.



  • 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.



  • 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.

4 ways of going into business

4 Ways of going into Business

  • Starting a New Business


    • Don’t have to inherit a previous owners mistakes or bad reputation

    • Personal satisfaction of knowing you built that business.


    • 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.

2 buying an existing business

2. Buying an Existing Business

  • A business may be for sale because:

    • The owner is retiring

    • It is losing $


    • 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

    • The goodwill- loyalty of the customers you will get.

    • A positive reputation

    • Trained Staff



  • The location may be poor

  • Competition

  • Market outlook-potential for future sales may be poor

  • Building or equipment may be expensive to repair.

  • The business may have a poor reputation. “Under new management” signs

3 buying a franchise

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


  • Name recognition

  • Established procedures and management

  • Business reputation

  • Training and staff support

  • Advertising

  • Financing.



  • You must pay a portion of your profits to the parent company

  • You must follow the parent company guidelines

  • There may be less job satisfaction

  • Very expensive to buy.


4 joining a family business

4. Joining a Family Business


  • Your relatives might help you finance the business

  • Family members tend to be loyal and trust each other.

  • 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.


  • Some family do not work well together

  • Difficulties at work can affect your family relationship

3 legal forms of business

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.

  • Partnership- is a legal arrangement when 2 or more people share ownership.

    • All partners are responsible for debts.

  • Corporation- a business where it runs separate from the owners. (they are not responsible for debts)

    • Owners by shares or parts of the company and earn $ based on profit.

  • Sole proprietorship

    Sole Proprietorship

    • Adv

      • Owner makes all the decisions

      • Easiest form of business to set up

      • Least regulated by government

    • Disadv

      • Difficult to finance the business

      • Owners personal assets may be at risk if the business fails

      • Owner may not know everything there is to run a business



    • Adv

      • Easier to raise funds to open a business

      • You can draw on the skills and abilities of the other partners.

      • Share the responsibility & work

    • Disadv

      • Disagreements among partners in decisions

      • Its more complicated than a sole proprietorship

      • All owners are liable for all business losses and personal property may be at risk

    Operating your business

    Operating Your Business

    • Financing

      • Where will you get money from? Mom, a friend, a loan?

      • To apply for a loan you will need a Business & Financial Plan.

      • A business Plan describes:

        • your business & its location

        • How many employees you will hire and their salary

        • your competitors

        • Marketing Plan

        • Timeline for starting your business.

    Financial plan

    Financial Plan

    • This spells out your:

      • Start up costs

      • 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.

        • Income Statement- is a summary of a business income and expenses during a specific time period.

        • Revenue- Income from sales

        • Gross 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.

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