Principles of Business Monday, December 2, 2013 Journal: What idea do you have that you could use to start a business? Is it a new idea, or an improvement of a current product/service? Agenda: Chapter 6.1 Notes

Entrepreneurship & Small Business Management Chapter 6 Entrepreneurship & Small Business Management

Becoming an Entrepreneur Chapter 6.1 Becoming an Entrepreneur

Chapter 6.1 Goals Identify characteristics of successful entrepreneurs. Recognize the importance of entrepreneurship in the economy. Describe opportunities and risks of entrepreneurship.

What is an Entrepreneur?? Someone who takes a risk in starting a business to earn a profit. Entrepreneurship The process of starting, organizing, managing, and assuming the responsibility for a business

Characteristics of Entrepreneurs Desire to be your own boss Develop a good business plan Special skills and abilities Coming up with innovative ideas

Entrepreneurs in Action Number off from 1-4 Read about your entrepreneur. Be prepared to tell the class about them.

Joshua Moore Joshua Moore was a high school student and brother to 4-year old Sophie when he developed an idea for a baby stroller breaking system. To fund work on his invention, Josh started Personal Affections, selling key chains, picture frames, mirrors, and personalized stickers at his Walhalla, SC high school. He received an Entrepreneur of the Year award for an operational business from the National Foundation for Teaching Entrepreneurship. At age 15, he was on his way to becoming an inventor and business owner.

Ben Cathers Ben Cathers was not a typical student. At age 12, he started a web marketing and advertising business. His business grew to 10 employees and a network of more than 300 million advertisements per month. By age 17, Ben started a syndicated radio show called Teen America. Not content with just his own entrepreneurship, at age 19 Ben wrote Conversations with Teen Entrepreneurs. By 19, he co-founded Search Rate Technologies and Klick-TV. By the age of 25, Ben had turned his talent to working with the next generation of young entrepreneurs.

Rich Stachowski Rich Stachowski or Moraga, CA, is an avid scuba diver. While enjoying his hobby, he recognized that he was unable to talk to others who were snorkeling with him. He put his imagination to work and invented Water TalkiesTM at the age of 11. These walkie-talkies can be used under water. Rich worked with a family friend who developed the manufacturing process. He then opened a business to make and sell his product before he was even a teenager. Rich moved on to invent and patent seven more products including underwater binoculars and an underwater periscope.

Abbey Fleck Sometimes ideas for new products come from problems in daily life. Abbey Fleck was watching her father use a microwave oven to cook bacon one morning in their White Bear Lake, MN, home. The bacon came out soaked in grease. Abbey had an idea to develop a pan that would cook the bacon while letting the grease drain out below. She and her father tested several designs that resulted in the Makin Bacon microwave bacon tray. They were able to convince the producers of Armour brand bacon to sell the tray with an advertisement and order form printed on each package of bacon. The product was an instant hit. Abbey’s company currently sells Makin Bacon trays at Kmart, Wal-Mart, Target, & Le Gourmet Chef.

What Does it Take?? Not all business owners and managers are entrepreneurs. Entrepreneurs have unique skills and personal characteristics.

Entrepreneurs are More… Persistent Inquisitive Energetic Goal-oriented Independent Self-confident Creative Reliable Competitive

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

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

Entrepreneurship & the Economy Entrepreneurship is a key part of the economy. Employment Financing Productivity

Entrepreneurship & the Economy Employment Small businesses are responsible for most new employment

Entrepreneurship & the Economy Financing Most new businesses start on $10,000 or less Personal savings, bank loans, credit cards Friends/Family Venture Capital – Money provided by large investors

Entrepreneurship & the Economy Productivity Small businesses produce a large volume of goods $770 billion in annual sales

Checkpoint  What are the sources of financing that entrepreneurs use for their new businesses? Personal savings Friends and family Venture capital Bank loans

Opportunities & Risks Before deciding to start a business, you need to think about the opportunities and risks.

New Business Opportunities Innovation An invention or creation that is brand new. Improvement A designed change that increases the usefulness of a product, service, or process

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

Checkpoint  Where do entrepreneurship opportunities begin? Opportunities begin with innovations (ideas about new products and services) or improvements (ideas for changes to existing products, services, or processes).

Chapter 6.1 Goals Identify characteristics of successful entrepreneurs. Recognize the importance of entrepreneurship in the economy. Describe opportunities and risks of entrepreneurship.

Principles of Business Tuesday, December 3, 2013 Journal: What idea do you have that you could use to start a business? Is it a new idea, or an improvement of a current product/service? Agenda: Chapter 6.1 Notes

Principles of Business Wednesday, December 4, 2013 Journal: Do you know anyone who owns a small business? What problems can do you think they deal with? Agenda: Chapter 6.2 Notes

Chapter 6.2 Small Business Basics

Chapter 6.2 Goals Identify important characteristics of small businesses. Recognize the competitive advantages of small businesses. Identify problems faced by many small businesses.

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 Ownership Small business employment Responsible for 60-80% of all new jobs created. Many are service industries

Small Business Ownership Ownership diversity Women own > 25% of all small business Minorities > 17% Majority are over 35 years old 50% are home based

Small Business Ownership Common types of small businesses as % of all small businesses

Checkpoint  Beyond the formal definition of a small business, what four points can be used to describe a small business? Owner is usually the manager Business operates in one or very few locations Business typically serves a small market Business is not dominant in its field

Small Business Advantages Meeting customer needs Fewer customers, but more contact Compete using superior service rather than lower prices

Small Business Advantages Providing unique services More customized for individuals Spend more time determining your needs and discussing alternatives. Customer satisfaction is extremely important Example: Photographers

Checkpoint  How can small businesses compete successfully with larger businesses? 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.

Common Reasons for Failure Not keeping adequate records Not having enough start-up money Lack of management experience Lack of experience with the type of business

Common Reasons for Failure Not controlling operating expenses Poor location for the business Failure to manage credit offered to customers

Small Business Assistance University and college faculty members Local groups of business people Small Business Administration (SBA) Gov’t agency – provides help Business plans Obtaining financing

Checkpoint  List common reasons for small business failure. 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

Chapter 6.2 Goals Identify important characteristics of small businesses. Recognize the competitive advantages of small businesses. Identify problems faced by many small businesses.

Principles of Business Wednesday, December 4, 2013 Journal: Do you know anyone who owns a small business? What problems can do you think they deal with? Agenda: Chapter 6.2 Notes

Principles of Business Thursday, December 5, 2013 Journal: x Agenda: Entrepreneur Research Project

Principles of Business Friday, December 6, 2012 Journal: x Agenda: Entrepreneur Research Project

Principles of Business Monday, December 9, 2013 Journal: x Agenda: Chapter 6.3 Notes

Starting a Small Business Chapter 6.3 Starting a Small Business

Chapter 6.3 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.

The Business Decision An idea plus experience Right place and time Team approach Preparation and research

Checkpoint  Why is it important to use a team approach when starting a new business? 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.

What is a Business Plan?? A written description of the business idea How it will be carried out, including all major business activities.

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

Elements of a Business Plan Description of Competition Characteristics of the industry Condition of the economy Strengths and weaknesses of major competitors

Elements of a Business Plan Customer Analysis Description of customers Location, number, and resources of customers Sales forecasts

Elements of a Business Plan Operations Plan Organization of the company Description of major operations Analysis of resources needed Human resource plans

Elements of a Business Plan Marketing Plan Description of major marketing activities Description of resources needed Schedule of marketing activities

Elements of a Business Plan Financial Plans Start-up costs Short- and long-term financial needs Sources of financing Budgets and financial statements

Steps in Developing the Bus. Plan Gather and review information Develop the strategic alternatives Write the plan Ask an expert to review the plan

Checkpoint  What are the “strategic alternatives” in a business plan? 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.

Financing the Small Business Types of financing Start-up financing Short-term financing Long-term financing Sources of financing Owner-supplied funds Borrowed funds

Checkpoint  In addition to owner-supplied capital, what are several other sources of financing for a small business? 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.

Chapter 6.3 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.

Principles of Business Monday, December 9, 2013 Journal: x Agenda: Chapter 6.3 Notes