* * Chapter Six Entrepreneurship and Starting a Small Business McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

* * The Job-Creating Power of Entrepreneurship in the U.S. Entrepreneurship -- Accepting the risk of starting and running a business. WHAT is ENTREPRENEURSHIP? 6-2

* * Why People Take the Entrepreneurial Challenge Opportunity Profit Independence Challenge LG1 WHY TAKE the RISK? 6-3

* * Why People Take the Entrepreneurial Challenge Self-directed Self-nurturing Action-oriented Highly energetic Tolerant of uncertainty LG1 WHAT DOES IT TAKE to be an ENTREPRENEUR? 6-4

* * Turning Your Passion and Problems into Opportunities It fills customers’ needs. You have the skills and resources to start a business. You can sell the product or service at a reasonable price and still profit. LG1 An IDEA is a GOOD OPPORTUNITY IF… You can get your product or service to customers before the window of opportunity closes. You can keep the business going. 6-5

* * Micropreneur s and Home- Based Businesses Micropreneur -- Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the work they want to do, and offers a balanced lifestyle. Many micropreneurs are home-based business owners – writers, consultants, video producers, architects, bookkeepers, etc. Nearly 60% of home-based micropreneurs are men. LG1 MICROPRENEURS 6-6

* * Micropreneurs and Home- Based Businesses Computer technology has leveled the playing field. Corporate downsizing has led many to venture on their own. Social attitudes have changed. New tax laws have loosened restrictions on deducting expenses for home offices. LG1 HOME-BASED BUSINESS GROWTH 6-7

* * Source: St. Louis Small Business Monthly, February, Ability to start your business immediately Minimal startup capital needed No rent or excessive set-up charges Comfortable working conditions Micropreneurs and Home- Based Businesses LG1 BENEFITS of HOME-BASED BUSINESSES Reduced wardrobe expenses No commuting Tax benefits Elimination of office politics Low risk for trial and error 6-8

* * Source: St. Louis Small Business Monthly, February, Difficult to establish work habits Limited support system Isolation Work space may be limited Disruption of personal life Clients may be uncomfortable coming to your home Zoning restrictions Success is based 100% on your efforts Micropreneurs and Home- Based Businesses LG1 DOWNSIDES of HOME-BASED BUSINESSES 6-9

* * Web-Based Businesses Affiliate Marketing -- An Internet-based marketing strategy in which a business rewards individuals or other businesses for each visitor or customer the affiliate sends to its website. LG1 ONLINE BUSINESS Web-based businesses have more unique products than most brick and mortar stores. Online sales reached $165.9 billion in 2007, 8% of all retail sales. 6-10

* * Entrepreneurship Within Firms Intrapreneur -- A creative person who works as an entrepreneur within a corporation. Intrapreneurs use a company’s existing resources to launch new products for the company. LG1 INTRAPRENEURS 6-11

* * Encouraging Entrepreneurship: What Government Can Do Immigration Act passed in 1990 created a category of “investor visas” that encourage entrepreneurs to come to the U.S. Enterprise Zones -- Specific geographic areas to which governments attract private business investment by offering lower taxes and other government support. Incubators -- Offer new businesses low-cost offices with basic services. LG1 GOVERNMENT and ENTREPRENEURSHIP 6-12

* * Small Versus Big Business Small Business -- Independently owned and operated, not dominant in its field of operation and meets certain standards of size. Businesses are “small” in relationship to other businesses in their industries. LG2 SMALL BUSINESSES 6-13

* * Importance of Small Business More personal customer service. The ability to respond quickly to opportunities. LG2 ADVANTAGES of SMALL OVER BIG BUSINESS 6-14

* * Learning About Small Business Operations Learn from Others – Investigate your local colleges for classes on small business and entrepreneurship; talk to and work for successful local entrepreneurs. Get Some Experience – Gain three years experience in the field; then start a part-time small business. Take Over a Successful Firm – Serve as an apprentice and eventually take over once the owner steps down. LG3 LEARNING ABOUT SMALL BUSINESS 6-15

* * Managing a Small Business Planning Financing Knowing customers Managing employees Keeping records LG4 MAJOR BUSINESS FUNCTIONS 6-16

* * Begin with Planning Business Plan -- A detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and owners qualifications. A business plan forces potential owners to be specific about what they will offer. A business plan is mandatory for talking with bankers or investors. LG4 BUSINESS PLANS 6-17

* * Writing a Business Plan A good plan takes a long time to prepare. A good executive summary catches interest and tempts potential investors to read on. LG4 WRITING a BUSINESS PLAN Getting the plan into the right hands is almost as important as getting the right information in it. 6-18

* * Getting Money to Fund a Small Business Personal savings Relatives Former employers Banks & finance companies Government agencies Angel investors Venture capitalists -- Individuals or companies that invest in new businesses in exchange for partial ownership. LG4 SOURCES of CAPITAL 6-19

* * Going International: Small Business Prospects Small and medium-sized businesses accounted for 99% of recent export growth. Advantages of global trade for small businesses:  Overseas buyers enjoy dealing with individuals.  Small companies can usually begin shipping much faster.  They provide a wide variety of suppliers.  They can give more personal service and attention. LG5 SMALL BUSINESS PROSPECTS ABROAD 6-20