ENTREPRENEURSHIP, NEW VENTURES, AND BUSINESS OWNERSHIP

1. 3 ENTREPRENEURSHIP, NEW VENTURES, AND BUSINESS OWNERSHIP © 2007 Prentice Hall, Inc. All rights reserved.

2. Practice Quiz • Describe ‘small business’ • Describe the importance of small business to the U.S. economy • Describe the difference between entrepreneurship and small business • Describe the start-up decisions faced by small businesses • Describe a sole proprietorship • Describe the differences between partnerships, sole proprietorships and corporations. © 2007 Prentice Hall, Inc. All rights reserved.

3. L E A R N I N G O B J E C T I V E S After reading this chapter, you should be able to: • Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. • Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. • Describe the business plan and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. • Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. © 2007 Prentice Hall, Inc. All rights reserved.

4. L E A R N I N G O B J E C T I V E S (cont’d) After reading this chapter, you should be able to: • Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. • Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations. • Explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. © 2007 Prentice Hall, Inc. All rights reserved.

5. What’s in It for Me? • By understanding the material discussed in this chapter, you’ll be better prepared to: • Understand the challenges and opportunities provided in new venture start-ups • Assess the risks and benefits of working in a new business • Evaluate the investment potential inherent in a new enterprise • Remove some of the blocks to starting your own business © 2007 Prentice Hall, Inc. All rights reserved.

6. Someone give me a definition of a ‘small business’ • How do we see if a business qualifies as a small business? • Then, why do we care? © 2007 Prentice Hall, Inc. All rights reserved.

7. Small Business Defined • A business that is independent (not part of a larger business) and that has relatively little influence in its market. • An independently owned and managed business that does not dominate its market. • Not a real exact definition, eh? © 2007 Prentice Hall, Inc. All rights reserved.

8. Analyzing Small Business • Use number of employees • Use annual sales in dollars • Department of Commerce view: • Small if < 500 employees • Small Business Administration view: • Very specific and varying views © 2007 Prentice Hall, Inc. All rights reserved.

9. Analyzing Small Business • Probably better to look at a business in terms of market dominance when determining whether it falls under the ‘small business’ category • Why do you care about categorizing businesses? • Think about starting your own business • Think about scoping out your ‘small business’ brethren or competitors © 2007 Prentice Hall, Inc. All rights reserved.

10. What is the importance of small business to the U.S. economy? • Three major areas © 2007 Prentice Hall, Inc. All rights reserved.

11. The Importance of Small Business in the U.S. Economy • Job creation • Innovation • Contributions to big business • Suppliers of specialized services and raw materials • Sellers of larger firms’ products © 2007 Prentice Hall, Inc. All rights reserved.

12. The Importance of Small Business in the U.S. Economy – job creation • Source of new jobs for the economy • What if you don’t ‘fit’ big business’ mold? • Small firms hire at a faster rate • You might say they lead us out of recessions • Small firms cut jobs at a faster rate • They can’t weather an economic storm as well as a larger business • Many small business jobs are simply down-sized from their large business counterparts © 2007 Prentice Hall, Inc. All rights reserved.

13. The Importance of Small Business in the U.S. Economy – innovation • About half of today’s innovations came from small businesses • Not all make huge bucks, and not all are deemed worthy by large businesses • Far less red tape in a small business than in a large business • Makes it easier for innovations to be created • Crocs example • Like you or I couldn’t have come up with that one © 2007 Prentice Hall, Inc. All rights reserved.

14. The Importance of Small Business in the U.S. Economy – contribution to big business • Suppliers of specialized services and raw materials • Sellers of larger firms’ products • Cover the ‘spot’ markets for big business © 2007 Prentice Hall, Inc. All rights reserved.

15. So where should you position your business? • In which industry sector? • Kind of forces you to know the industry sectors © 2007 Prentice Hall, Inc. All rights reserved.

16. Popular Areas of Small-Business Enterprise • Major small-business industry groups: • Services • Retailing • Construction • Wholesaling • Finance and insurance • Manufacturing and transportation © 2007 Prentice Hall, Inc. All rights reserved.

17. Practice Quiz Question • So what are the two most popular industry areas for small business? © 2007 Prentice Hall, Inc. All rights reserved.

18. FIGURE 3.2 Small Business by Industry © 2007 Prentice Hall, Inc. All rights reserved.

19. Victor Kiam • “Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage” © 2007 Prentice Hall, Inc. All rights reserved.

20. Practice Quiz Question • What is the difference between an entrepreneur and a small business owner? © 2007 Prentice Hall, Inc. All rights reserved.

21. Entrepreneurship • Entrepreneurship • The process of seeking businesses opportunities under conditions of risk • Entrepreneur • One who accepts the risks and opportunities of creating, operating and growing a new business • Small Business Owner • Accepts risk • Is more content to be a single store, or location • Does not always have growth of the business as a primary entrepreneurial goal © 2007 Prentice Hall, Inc. All rights reserved.

22. Should you be an entrepreneur or a small business owner? © 2007 Prentice Hall, Inc. All rights reserved.

23. Do you have what it takes? • What are the characteristics of an entrepreneur? © 2007 Prentice Hall, Inc. All rights reserved.

24. Entrepreneurial Characteristics • Successful Entrepreneurs: • are resourceful. • are concerned for good customer relations. • desire to be their own boss. • can deal with uncertainty and risk. • are open-minded. • rely on networks, business plans, and consensus. • have different views on how to succeed, to automate a business, and when to rely on experience or business acumen. • Hard-working • Driven, or passionate about their work © 2007 Prentice Hall, Inc. All rights reserved.

25. So how do we get started? • What are the first few steps? © 2007 Prentice Hall, Inc. All rights reserved.

26. Getting started… • Come up with the idea! • Think, think, think it through • Write a business plan © 2007 Prentice Hall, Inc. All rights reserved.

27. Starting and Operating a New Business • Crafting a Business Plan • Conveys a description of the business strategy for the new venture and how it will be implemented • A business plan should address: • The entrepreneur’s goals and objectives • The strategies that will be used to obtain them • The implementation of the chosen strategies • Preparing a Business Plan • Setting goals and objectives • Sales forecasting • Financial planning © 2007 Prentice Hall, Inc. All rights reserved.

28. The Business Plan • This is how you will make things happen • On a simple scale, it is just a document • Potential investors will look at this to determine whether or not to invest in you • You have to cover all their questions in detail • Yet you have to then summarize things without leaving out too many details © 2007 Prentice Hall, Inc. All rights reserved.

29. Two major options • Purchase an existing business • Start your own from scratch • Quick video…. © 2007 Prentice Hall, Inc. All rights reserved.

30. WEAR LONG

31. Video • What (general) types of decisions did they make? © 2007 Prentice Hall, Inc. All rights reserved.

32. Practice Quiz Question • What are the pros/cons of purchasing an existing business/franchise? © 2007 Prentice Hall, Inc. All rights reserved.

33. Starting the Small Business • Buying an Existing Business • Less risk when you purchase an ongoing, viable business • Franchising • Advantages • Proven business opportunity for franchisee • Access to management expertise of franchisor • Disadvantages • Start-up costs for franchise purchase • Ongoing payments to the franchisor • Management rules and restrictions on the franchisee © 2007 Prentice Hall, Inc. All rights reserved.

34. Starting the Small Business (cont’d) • Starting from Scratch • Disadvantage: Higher risk of business failure • Advantage: Avoids problems of an existing business • This is what Amy decided to do • Could a local McDonald’s hold a theme night? © 2007 Prentice Hall, Inc. All rights reserved.

35. Think back to chapter 1 • Who has a better idea of the equilibrium point: • An existing business? • A business you would start from scratch? • Who has a better idea of the customer base: • An existing business? • A business you would start from scratch? © 2007 Prentice Hall, Inc. All rights reserved.

36. Questions to Be Answered: • Who and where are my customers? • Both current and potential • Are they local or global? • How do you best reach them? • How much will those customers pay for my product? • How much of my product can I expect to sell? • Who are my competitors? • Why will customers buy my product rather than the product of my competitors? © 2007 Prentice Hall, Inc. All rights reserved.

37. Financing the Small Business • Personal Resources • Loans from Family and Friends • Bank Loans • Venture Capital Companies • Small-Business Investment Companies (SBICs) • Minority Enterprise Small-Business Investment Companies (MESBICs) • SBA Financial Programs • Guaranteed loans and immediate loans programs • Management advice (SCORE and SBDCs) © 2007 Prentice Hall, Inc. All rights reserved.

38. Practice Quiz Question • Describe the five trends in small business start-ups © 2007 Prentice Hall, Inc. All rights reserved.

39. Trends in small business start-ups • Think about: • What should you be aware of? • How will knowing this help you? © 2007 Prentice Hall, Inc. All rights reserved.

40. Trends in Small-Business Startups Emergence of E-commerce Crossovers from Big Business Opportunities for Minorities & Women Global Opportunities Better Survival Rates © 2007 Prentice Hall, Inc. All rights reserved.

41. The emergence of E-commerce • What the heck does this mean to you? • It will probably help you to have a web presence as part of your business • More people are getting comfortable shopping online, so the online customer base is building © 2007 Prentice Hall, Inc. All rights reserved.

42. Crossovers from big business • You work for a big business for awhile, then quit to form your own company • Nothing wrong or unethical about this • Sometimes happens when a big business lays off a division of workers • Those workers buy the business, or start their own firm that does the same thing • Constance vigilance! Keep your eyes open at work for these opportunities • And put some money aside to help you through the lean times when you first get started © 2007 Prentice Hall, Inc. All rights reserved.

43. Crossovers – WATCH OUT! • Don’t go into debt • Live like a student for two years • Concentrate on improving your credit rating • Don’t get too comfortable • Keep focused on your goal of starting your own business © 2007 Prentice Hall, Inc. All rights reserved.

44. On the Internet, nobody knows you’re a dog © 2007 Prentice Hall, Inc. All rights reserved.

45. Opportunities for minorities / women • “On the internet, no one knows you’re a dog” • Famous cartoon from the New Yorker emphasizes the ability of the internet to reduce the effects of stereotypes © 2007 Prentice Hall, Inc. All rights reserved.

46. Global opportunities • Someone explain how this trend helps • Easier access to customers • Easier access to employees • Easier access to suppliers • Of course, it does the same for your competition © 2007 Prentice Hall, Inc. All rights reserved.

47. Better survival rates • Good news indeed • However, it doesn’t mean you can ignore all the hard work that must be done © 2007 Prentice Hall, Inc. All rights reserved.

48. Practice Quiz Question • Describe the reasons why small businesses become successful © 2007 Prentice Hall, Inc. All rights reserved.

49. Reasons for Success • Hard work, drive, and dedication • Market demand • Managerial competence • Luck!!! • Someone give me an example of this © 2007 Prentice Hall, Inc. All rights reserved.

50. CAST CAST CAST CAST