****** McGraw-Hill/Irwin Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Nickels McHugh McHugh ** Entrepreneurship and Starting a Small Business 6 CHAPTER * **

****** 6-2 Guess Which Company? He was selling baking soda & decided to entice customers by putting in two packages of chewing gum with each sale. The excitement over the gum started him thinking. Two Seattle teenagers pooled their money & came up with $100. They started delivering messages & parcels for local merchants. Though he didn’t graduate from college, he found out college students eat a lot of pizza. He started his first pizzeria with $900 near a campus with a promise of 3-minute delivery.

****** 6-3 Entrepreneurship DefinitionDefinition Why take the entrepreneurial challenge?Why take the entrepreneurial challenge? OpportunityOpportunity Profit Profit IndependenceIndependence ChallengeChallenge

****** 6-4 Who Starts New Businesses? % % % % 55+ 2% AGE AT START-UP

****** 6-5 Entrepreneurial Attributes Self-Directed & Self- DisciplinedSelf-Directed & Self- Disciplined Self-NurturingSelf-Nurturing Action-OrientedAction-Oriented Highly EnergeticHighly Energetic Tolerant of UncertaintyTolerant of Uncertainty

****** 6-6 Entrepreneurship Entrepreneurial TeamsEntrepreneurial Teams Micropreneurs and Home-Based BusinessesMicropreneurs and Home-Based Businesses Web-Based BusinessesWeb-Based Businesses IntrapreneursIntrapreneurs

****** 6-7 Reasons for Growth of Home-Based Businesses Technology Technology Downsizing Downsizing Attitudes Attitudes Tax Advantages Tax Advantages

****** 6-8 Home-Based Business Challenges New CustomersNew Customers Time ManagementTime Management Work vs. FamilyWork vs. Family City OrdinancesCity Ordinances RiskRiskFocus Find OpportunityFind Opportunity Results vs. RoutineResults vs. Routine Profit vs. PaycheckProfit vs. Paycheck New IdeasNew Ideas Long Term vs. Short TermLong Term vs. Short Term

****** 6-9 Most Common Types of Home-Based Businesses Source: Independent Insurance Agents of America

****** 6-10 Government & Entrepreneurship Immigration Act of 1990-Immigration Act of Investor Visa Enterprise Zones Enterprise Zones Incubators Incubators

****** Utah 2.Nevada 3.Washington 4.Florida 5.Colorado 6.Washington D.C. 7.Maryland 8.Georgia 9.Tennessee 10.Alaska Source: Investor Business Daily, June 24, 2004 Top Ten States Where Businesses Have Started

****** 6-12 Top Ten States Where Businesses Have Closed 1.Utah 2.Washington 3.New Mexico 4.Nevada 5.Idaho 6.Missouri 7.Arizona 8.Vermont 9.Georgia 10.California Source: Investor Business Daily, June 24, 2004

****** 6-13 What is Small Business? Independently OwnedIndependently Owned Not Dominant in Its FieldNot Dominant in Its Field Meet Certain Standards of Size (Employees, Annual Receipts)Meet Certain Standards of Size (Employees, Annual Receipts)

****** 6-14 U.S. Small Businesses 20 Million Full/Part-time Businesses20 Million Full/Part-time Businesses Account for More Than 50% of Gross Domestic Product (GDP)Account for More Than 50% of Gross Domestic Product (GDP) JobsJobs 80% of Americans 1 st job is in small business80% of Americans 1 st job is in small business 75% of new jobs are created by small businesses75% of new jobs are created by small businesses Minority-owned Businesses Growing RapidlyMinority-owned Businesses Growing Rapidly

****** 6-15 Business Ownership by Gender Source: USA Today

****** 6-16 Female Owners’ Top Industries SOURCE: USA Today

****** 6-17 Small Business – Major Causes of Failure Plunging in without first testingPlunging in without first testing Under/over pricingUnder/over pricing Too little capitalToo little capital Little/no experienceLittle/no experience Borrowing money without planningBorrowing money without planning Trying to do too much with too littleTrying to do too much with too little Buying too much on creditBuying too much on credit Expanding credit too freely and rapidlyExpanding credit too freely and rapidly Incomplete and/or inaccurate recordsIncomplete and/or inaccurate records Not understanding business cyclesNot understanding business cycles Forgetting about taxes, insurances, etc.Forgetting about taxes, insurances, etc. Owner working or not, according to whimOwner working or not, according to whim

****** 6-18 Small Business – Situations for Success Personal attentionPersonal attention Products not easily made by mass productionProducts not easily made by mass production Sales are not large enough for a large firmSales are not large enough for a large firm Unattractive neighborhoodUnattractive neighborhood FranchisingFranchising Paying attention to new competitorsPaying attention to new competitors The business is in a growth industryThe business is in a growth industry

****** 6-19 Learning about Small Business Operations Learn from OthersLearn from Others Get ExperienceGet Experience Take Over a Successful FirmTake Over a Successful Firm

****** 6-20 Where Did They Start? Source: World Features Syndicate Hallmark YMCA room Williams- Sonoma Abandoned Hardware Store Estee Lauder Vacant Former Restaurant Walt Disney Created Mickey in a Garage

****** 6-21 Early Sales of Well-Known Companies Johnson & Johnson $3,000 Worth of Band-Aids 1 st Year Cyrus McCormick Sold No Reapers 1 st 10 Years Subway 312 Sandwiches 1 st Day Burton’s Snowboards Sold One 1 st Year Bose Sold 40 Speakers 1 st Year (today #1 in market) Source: World Features Syndicate

****** 6-22 Managing a Small Business Business PlanBusiness Plan Adequate FundingAdequate Funding Lenders/InvestorsLenders/Investors “Angels”“Angels” Venture CapitalistsVenture Capitalists Professional Advice/HelpProfessional Advice/Help SBA and SBIC ProgramSBA and SBIC Program Lawyers, Loan Officers, Insurance AgentsLawyers, Loan Officers, Insurance Agents SCORESCORE Local College/universitiesLocal College/universities Know Your CustomerKnow Your Customer Manage Human ResourcesManage Human Resources Keep Good RecordsKeep Good Records

****** 6-23 Reasons for a Banker To Say “No” I don’t know enough about you or your business.I don’t know enough about you or your business. You haven’t clearly stated why you need the money.You haven’t clearly stated why you need the money. Your numbers don’t support the loan request.Your numbers don’t support the loan request. Your collateral is lacking.Your collateral is lacking. Your business does not support the loan on its own merits.Your business does not support the loan on its own merits.

****** 6-24 Small Business Collaborators Small Business Administration (SBA)Small Business Administration (SBA) Microloan programMicroloan program SBICsSBICs SBDCsSBDCs Service Corps of Retired Executives (SCORE)Service Corps of Retired Executives (SCORE)

****** 6-25 Small Business Strategies Examine Marketing & ID Areas for GrowthExamine Marketing & ID Areas for Growth Profile Best Customers & Market to Similar ProspectsProfile Best Customers & Market to Similar Prospects Invest in Sales Training & TechnologyInvest in Sales Training & Technology Refresh Business Perspective With Outside ViewsRefresh Business Perspective With Outside Views Streamline Business & Eliminate WasteStreamline Business & Eliminate Waste

****** 6-26 Saving a Business In Trouble React/Not OverreactReact/Not Overreact Understand Financial SituationUnderstand Financial Situation Find Professional HelpFind Professional Help Develop “Recovery Plan”Develop “Recovery Plan” Be a Visible, Confident LeaderBe a Visible, Confident Leader Remind Employees of Stake in BusinessRemind Employees of Stake in Business Don’t Get Stung By Killer “ Bankruptcy”Don’t Get Stung By Killer “ Bankruptcy”

****** 6-27 Small Business & International Prospects Positives 1.World Market 2.Absorb Excess Inventory 3.Soften U.S. Downturns 4.Extend Product Life Negatives 1.Financing Difficult 2.How to Get Started? 3.Lack of Cultural Understanding 4.Paperwork

****** 6-28 International Small Business Advantages Deal With IndividualsDeal With Individuals Begin Shipping Orders FasterBegin Shipping Orders Faster Variety of SuppliersVariety of Suppliers Professional Service with Undivided AttentionProfessional Service with Undivided AttentionInformation Dept. of Commerce- of Commerce- SBA- International- /internat.htmlSBA- International- /internat.html /internat.html /internat.html