CHAPTER 5 ENTREPRENEURSHIP

Rewards and Challenges of Entrepreneurship An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of starting and operating a business. Entrepreneurship is the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business. A venture is a new business undertaking that involves risks.

12 Characteristics of Entrepreneurs Persistent Risk-taking Self-confident Restless Goal-oriented Action-oriented Responsible Self-demanding Creative Independent Inquisitive Enthusiastic

Small Businesses Small business is an independently owned business that usually has the owner as its manager. A small business serves a limited geographic area and employs fewer than 500 people.

Internet Businesses Virtual Business Dot-com company is a business that operates on the internet. According to American City Business Journals, small businesses that use the internet have grown more than 45 percent faster than those that do not.

Rewards of Entrepreneurship Being the Boss Ability to be in charge (Main Reason) Entrepreneurs do not have to consult with others before making a decision. Doing what you Enjoy Having the opportunity to be Creative Entrepreneurs make the procedure that everyone else follows. Daring or creative ideas. Building an Enterprise Many successful entrepreneurs work in a related business before starting their own business. They must research before starting. Other Reasons Make their own schedule.

Sole proprietorship vs. Partnership vs. Corporation Sole proprietorships are owned and operated by one person. Do not share their company’s income and expenses, profits or loses. All responsibilities and profits and benefits. Partnerships are owned and ran by two or more people. Corporations are run by a chief executive officer, who answers to a board.

Challenges of Entrepreneurship Getting Funds to Start the Business Most people must borrow money or finance the money to get started. (Go in debt). Difficult to get loans-fear of business succeeding or not, and ability to repay the loan. Being Fully Responsible for the Business Must make sure that: Floors swept, bills paid, employees hired, make repairs, handle financial records, train employees, etc. Other Challenges Feeling alone Making right decisions Work long hours Uncertain level of income 4 out of 5 small businesses fail in the first five years of existence. Mostly due to poor financial planning and management, and not being able to adapt to change.

Small Businesses Facts More than 99% of the US firms are small businesses. Small businesses employ more than 50% of the workforce in the US. Majority are one person operations. Estimate: 2/3 of all new jobs are generated by small businesses. Virtual businesses continues to increase.

5.2 The Business Plan Business Plan is a written description of a new business venture that describes ALL aspects of the business. It is used by potential investors and financing agencies that new entrepreneurs go to for start-up funds.

Checklist for Starting a Business What will I produce? Who are my main competitors? Why is my product or service needed? How much will my product or service cost to produce? How many people will I need to run the business? What physical facilities will I need? What licenses, permits, or other legal documents do I need? How much money will I need to get started?

16 Essential Parts of a Business Plan Executive Summary Management Team Plan Company Description Product and Service Plan Vision and Mission Statements Industry Overview Market Analysis Competitive Analysis Marketing Plan Operational Plan Organizational Plan Financial Plan Growth Plan Contingency Plan Cover Page, Title Page, Table of Contents, and Supporting Documents

Executive Summary Brief account of key points. Not more than 2 pages. Most important information from each section. Should persuade the reader that the business will succeed. Evidence gathered through market research.

Management Team Plan Your qualifications. Description of team capabilities. How you will fill gaps in expertise. Hire consultants Form partnerships Advisory Boards

Company Description Outline of the business. Size, scope, and type of business. Why the business will succeed??

Product and Service Plan Description of the product or service you want to offer. Nature of the business should be clear. Unique features of the product. Spin-offs are additional products that may be offered when the business gets established.

Vision and Mission Statements Guiding principles by which a business functions. Vision Statement-the scope and purpose of a company, and it beliefs and values. Mission Statement-specific aspirations of a company, the major goals.

Industry Overview Present your research. Discuss trends and growth within the industry. (Industry is the companies that provide similar, complimentary, or different products)

Market Analysis Research about your customer profile. Overall marketing and sales strategies. Analyze your customers and the competition. Target market information-geographics, economics, and demographics.

Competitive Analysis How the business has an advantage over its competitors.

Marketing Plan How a company makes its customers aware of it products or services. Market niche, pricing, company image, marketing tactics, media plan, and marketing budget.

Operational Plan Production and delivery of the product or service.

Organizational Plan People who will run the firm as well as management’s philosophy. Form of business organization-proprietorship or corporation, etc.

Financial Plan Forecast for the business. Data Proof that the business will be financially healthy.

Growth Plan How the business will expand in the future.

Contingency Plan Likely risks to the business. Lower than expected sales. Emergencies. Ways to minimize risks.

Cover Page, Title Page, Table of Contents, and Supporting Documents Company’s Name Address Phone Number Website Email Logo The date the plan was submitted Name of the preparer