Entrepreneurship: A business of your own

Vocabulary Entrepreneur: a person who organizes and manages a business Entrepreneurship: the organization and management of a business Franchise: the right to market another company’s product or service Small Business Administration (SBA): the prime source of information for would-be entrepreneurs

Vocabulary Fraud: the act of deceiving or tricking Commission: a percentage of sales paid to a salesperson Zoning laws: regulate what types of business activities can be performed in certain areas License: a certificate showing that you have permission to practice your occupation

Vocabulary Fixed expenses: Bills that must be paid regularly in set amounts Flexible expenses: vary from month to month Assets: items you own Liabilities: debts you owe

Vocabulary Bookkeeping: Recording of income and expenses Accounting: Analysis of the data you’ve recorded Receipts: record of all money collected Profit ratio: percentage of receipts that are profit Break-even point: when income equals expenses

Entrepreneurship Advantages You are your own boss Freedom to make your own decisions You get to keep all profits your company earns Disadvantages As a business owner, you take on all responsibilities Many extra hours of work (at least 60 hrs per week) Emotional strain

Franchise Purchasing a franchise has several advantages. It allows the entrepreneur to buy a business with a proven track record of success. As a franchise owner, you would also receive support from the franchiser

Franchise Buying a franchise also has some disadvantages. You need a lot of money for the initial investment. You also may have to pay ongoing fees to retain the right to use the company’s name You may be required to follow company guidelines instead of your own.

Franchise Some popular franchises are: Subway McDonalds Taco Bell KFC Jackson-Hewitt Tax Service TCBY treats Wendy’s

Buying an existing business Another opportunity open to some entrepreneurs is buying a business that is already existing Buying an established business can eliminate much of the work and expense of starting a business.

US Small Business Administration (SBA) Established 1953 Provides financial, technical, and management assistance to help start, run, and enlarge a business

Planning your own business What does it take to succeed? Optimism – you must believe in yourself & your business. Self-starter – you must have initiative

Planning your business Choosing a business – what is the best business for you? Choosing a location – the importance fo location depends on the kind of business you have Pricing your product or service – are you charging enough for your products or services?

Legal and Financial Issues A number of legal and financial issues will affect you if you become an entrepreneur. Zoning and licensing requirements must be met Choose your business structure

Business Structure The three basic business structures- 1. Proprietorships 2. Partnerships 3. Corporations

Proprietorship Simplest type & most costly ($$$$) You will be the sole owner Gives you total freedom Gives you total responsibility

Partnership Share the business responsibility You can borrow more money with two people It can be difficult if you don’t get along with partner The business could be jeopardized

Corporation Easier time raising money Have less risk to your personal assets Costs more to set up Higher taxes

Obtaining Financing Use saved money (seed $) to finance your business Apply for a loan Use outside investors

Applying for a loan Business plan Record of fixed and flexible expenses Record of assets and liabilities

Comparing Annual Profits Year 1 Income - $100,000 Expense - $80,000 Profit $20,000 Profit ratio = 20,000/100,000 = 20% Year 2 Income - $120,000 Expense - $98,000 Profit $22,000 Profit ratio = 22,000/120,000 = 22%

Professional Assistance A lawyer can be one of your most valuable resources when starting a business An accountant can help analyze his books and give advice about increasing profits An insurance agent is another professional whose advice you should seek, protect your business against theft, fire, etc.

Working from home Advantages Don’t have to pay rent Can handle home responsibilities during the day Certain tax advantages Disadvantages Family concerns may disrupt your business Neighbors may object about a business next to their home Clients may feel its unprofessional Loneliness & isolation can be a possible hazard

FACTS IN REVIEW Name 3 sources of information about entrepreneurship. What advantages does purchasing a franchise offer an entrepreneur? List 4 personal factors an entrepreneur should possess to succeed.

FACTS IN REVIEW What services are provided by the Small Business Administration (SBA)? Name 2 advantages and disadvantages of working from home. Which business structure is most costly for an entrepreneur to establish?

FACTS IN REVIEW What is the purpose of a business license? Name 3 sources from which an entrepreneur might obtain financing to start a business How is profit ratio figured? Name 3 professionals that can assist an entrepreneur with the details fo starting and operating a business.