Entrepreneurship: Starting and Growing a Business Chapter 5

I. Entrepreneurship Today Entrepreneur: Entrepreneur: person with vision, drive, and creativity willing to take the risk of starting a new business or of greatly changing the scope and direction of an existing firm

A. Types of Entrepreneurs 1. Classic entrepreneurs people who start their own companies based on innovative ideas 2. Multipreneurs people who start a series of companies 3. Intrapreneurs people who apply vision and risk taking within a large organization (an entrepreneur working for someone else)

B. Why Become an Entrepreneur? 1.Desire to control own destiny 2. Make money 3. Build a new company 4. Personal satisfaction with your work 5. Creating the lifestyle you prefer

II. Characteristics of Successful Entrepreneurs A. Personality traits –ambitious, independent, self-confident, risk-taking, visionary, creative, energetic, passionate, committed B. Good managerial skills C. High achieving and moderate risk taking D. Technical Knowledge E. Good interpersonal and communication skills

III. How Entrepreneurs Fail? A. Begin operations prematurely, not enough analysis was performed B. Not enough money, run out of funds C. Lack of a detailed business plan – lack of operational details or adequate projections

IV. Small Business: - business that is independently owned by an individual or small group of investors, locally based, and not dominant in its industry (does not control a large market share)

A. Advantages of Small Business 1. Greater flexibility 2. More efficient operation 3. Greater ability to serve specialized markets 4. More personal service

B. Disadvantages of Small Business 1. Limited managerial skill 2. Fund-raising difficulty 3. Burdensome government regulations 4. Extreme personal commitment from owner

C. Help for Small Businesses Small Business Administration: Small Business Administration: Government agency that helps people start and manage small businesses 1. Financial Assistance –Small Business Investment Companies 2. Management Advice –Business Development Library –Volunteer consulting groups 3. Assistance for women and minorities

FYI -- Local Resources Center for Economic Development –Small Business Development Center (seminars, workshops, consulting) –Natural Resources Research Institute

V. Starting Your Own Business 1. Self-assessment – do you have the personal traits to succeed? 2. Find a business idea 3. Choose to buy a small business or start from scratch 4. Choose a form of business ownership 5. Develop a Business Plan a. Describes the idea for the new business and how it will be carried out b. Components: description of company, qualifications of owner(s), description of product/service, market analysis, financial plan..….includes performance projections (projected sales/profits)

6. Financing the business (debt vs. equity) 7. Risks of Small Business Ownership (¼ of new businesses fail after 2 yrs, half after 3 yrs, 2 out of 3 fail by the 6 th yr)

VI. Managing a Small Business A. Using outside consultants (outsourcing) B. Hiring and Retaining Employees Jim Day, Chief Executive of Noble Drilling, recognizes the importance of hiring people good for the job, rather than people similar to oneself (Source: Fortune, Sept. 28, 1998, p. 254.)