Entrepreneurship and Small Business Management Introduction to Business Chapter 6

ENTREPRENEURS What qualities make an Entrepreneur different than a “normal” worker?

ENTREPRENEURS Are More: persistent inquisitive energetic goal oriented independent self-confident creative reliable competitive They Have: problem-solving skills tolerance for ambiguity strong integrity personal initiative ability to secure resources capability to learn from failure willingness to work hard

KEY STATS: About 40% of new businesses have zero employees Financing can come from family (50%), friends(29%), banks Venture Capital – money provided by large investors to finance new ideas Productivity – individually-owned businesses account for $600 billion in sales

Why New Businesses Fail Lack of adequate capital Low sales Higher than expected expenses Competitive pressure Owner is unprepared to manage a growing business Operation require more time than expected

Small Business in America Small businesses have <500 employees 99.7% of U.S. businesses (24 million)

SMALL BUSINESSES IN OUR ECONOMY ADVANTAGES Meeting Customer Needs - Why is this easier for small businesses? Providing Unique Services - How are they able to do this? DISADVANTAGES Not keeping adequate records Not having enough start up money Lack of management experience No control of operating expenses Poor location Poor management of credit offered to customers

What is the SBA? Small Business Administration Government agency that helps to develop business plans and obtain financing Created in 1953 United States, Puerto Rico, Virgin Islands, and Guam

Starting a Small Business #1 – An idea plus experience - hobbies, interests, etc… #2 – Right place and right time - customer traffic, wholesalers #3 – Team Approach - specialized knowledge #4 – Preparation and research - competition, customers, regulations, etc…

THE BUSINESS PLAN A written description of the business idea and how it will be carried out, including all major activities Most are developed for one year and then updated for the next

Elements of the Business Plan Description of Business Business idea Major products and services Ownership structure Strengths / weaknesses Long and short-term goals Description of Competition Characteristics of the industry Condition of the economy Strengths and weaknesses of major competitors

Elements (cont’d) Customer Analysis Description of customers Location, number, and resources of customers Sales forecasts Operations Plan Organization of the company Description of major operations Analysis of resources needed Human resource plans

Elements (cont’d) Marketing Plan Description of major marketing activities Description of resources needed Schedule of marketing activities Financial Plans Start-up costs Short and long-term financial needs Sources of financing Budgets and financial statements

FINANCING Start-up Financing Amount of money needed to open the business Buildings, equipment, inventory, supplies Short-term Financing Current operating activities; less than 1 year Long-term Financing Main resources; larger amounts over,any years Land, buildings, equipment used over a long period of time