CHAPTER 7: SMALL BUSINESS AND ENTREPRENEURSHIP Economic Rocket Fuel

LAUNCHING NEW VENTURES: WHAT’S IN IT FOR ME?  Greater Financial Success  Independence  Flexibility  Challenge  Survival On any given day in the United States, more people are trying to start a new business than are getting married or having children.

THE ENTREPRENEUR: A DISTINCTIVE PROFILE Vision Energy Tolerance of Uncertainty Self-Reliance Confidence Tolerance of Failure Entrepreneurs – People who risk their time, money, and other resources to start and manage a business.

OPPORTUNITIES FOR SMALL BUSINESS  Opportunities:  Market Niches  Personal Customer Service  Lower Overhead Cost  Technology

THREATS FOR SMALL BUSINESS Threats: –Higher Risk of Failure –Lack of Knowledge and Experience –Too Little Money –Bigger Regulatory Burden –Higher Health Insurance Costs

SMALL BUSINESS FAILURE Year in Business Survival Rate Change vs. Prior Year (%) Year 181%19% Year 266%15% Year 354%12% Year 444%10% Year 538%6% Year 634%4% Year 731%3%

Petstore.com offered a fish delivery service. They were bought out by Pets.com for $13 million in stock DOT-COM DEBACLES Webvan: the value of this early online grocer peaked at $1.2 billion, but Webvan left 2,000 people out of work when it closed its doors in the middle of Pets.com: Shutting down only nine months after its $82.5 million IPO, Pets.com hawked pet care products from doggie treats to kitty litter, but lacked a workable plan for high shipping costs. Arrangeonline.comArrangeonline.com, Funeral.com, Heavenly-Door.com and Plan4ever.com marketed funeral arrangements and related services

FAILING WITH STYLE  Walt Disney was fired from an ad agency for a “singular lack of drawing ability.”  Ray Kroc, McDonald’s founder, failed at real estate, he didn’t discover the McDonald brothers’ hamburger stand until he was 52 years old.  Steve Jobs, founder of Apple computer, was dumped by his board of directors, but returned a decade later to launch the iMac, the iPod and the iPad. Your failure may be the first step of the next big thing.

LAUNCH OPTIONS Starting from scratch Buying an established business Buying a franchise

STARTING A BUSINESS FROM SCRATCH Key Pros:Key Cons: It’s all you : Your concept, your decisions, your structure. You don’t have to deal with the prior owner’s bad decisions. It’s all you. That’s a lot of pressure. It can be hard to get credit. Logistics can be challenging It takes time, money, and sheer sweat to build a customer base.

BUYING AN ESTABLISHED BUSINESS Key Pros:Key Cons: The concept, organizational structure, and operating practices are in place. Relationships are established. Obtaining financing is less challenging. Working with someone else’s idea may not be fun. You may inherit old mistakes.

BUYING A FRANCHISE Key Pros:Key Cons: Partnering with established brand Possibility of assistance with management and financing Low failure rate Less opportunity for creativity Tied to national brand’s mistakes Purchase price and on- going royalties can be steep

TOOLS FOR BUSINESS SUCCESS  Small Business Administration Small Business Administration  Gain Experience  Learn from Others  Educate Yourself  Business Plan

The Business Plan Executive Summary Description of Business Competitive and Industry Research Marketing Strategies Operating Procedures Personnel Financial Projections

FINDING THE MONEY: FUNDING OPTIONS  Personal Resources  Loans  Angel Investors Angel Investors  Venture Capital Venture Capital

SMALL BUSINESS AND THE ECONOMY: AN OUTSIZED IMPACT  Creating New Jobs  Fueling Innovation  Vitalizing Inner Cities

ECONOMIC IMPACT  Just 9.8% of the world’s entrepreneurs expect to create almost 75% of the jobs generated by new business ventures in the next five years.  1 out of 10 adults worldwide start businesses every year  Three key factors drive entrepreneurship globally: □ Per Capita Income □ Opportunity Cost □ Cultural/Political Environment