© Prentice Hall, 2007Excellence in Business, 3eChapter Putting Yourself in Charge: Entrepreneurs and Small Business Owners

© Prentice Hall, 2007Excellence in Business, 3eChapter The World of Small Business Independently owned and operated Not dominant in its field Relatively small annual sales Fewer than 500 employees

© Prentice Hall, 2007Excellence in Business, 3eChapter Roles of Small Business Provide new jobs Introduce new products Service large corporations Inject money into the economy Take business risks Provide specialty goods and services

© Prentice Hall, 2007Excellence in Business, 3eChapter Types of Small Business LifestyleHigh-Growth Run by Individuals Limited Products/Services Limited Resources Limited Marketplace Run by Teams Multiple Products/Services Investment Capital Large Marketplace

© Prentice Hall, 2007Excellence in Business, 3eChapter The Typical Small Business Few products or services Narrow customer base Close market contact Limited resources Increased innovation

© Prentice Hall, 2007Excellence in Business, 3eChapter How Entrepreneurs Spend Their Time Dealing with employees Keeping records Direct selling Production Maintenance Dealing with suppliers Arranging financial matters Planning growth and change Other services

© Prentice Hall, 2007Excellence in Business, 3eChapter Factors Contributing to Small Business Growth E-commerce and technology Growing diversity Downsizing and outsourcing

© Prentice Hall, 2007Excellence in Business, 3eChapter Characteristics of Entrepreneurs Highly disciplined Self confident Energy and stamina Control their destiny Relate well to others Learn new skills

© Prentice Hall, 2007Excellence in Business, 3eChapter Characteristics of Entrepreneurs Learn from mistakes Monitor market changes Exploit new opportunities Driven to succeed Think positively Take moderate risks

© Prentice Hall, 2007Excellence in Business, 3eChapter Develop a Business Plan Summarize the business Communicate goals Highlight plans Show customer benefits

© Prentice Hall, 2007Excellence in Business, 3eChapter Importance of a Business Plan Guide company operations Outline a strategy Attract lenders and investors

© Prentice Hall, 2007Excellence in Business, 3eChapter Starting a New Business + Control your destiny + Reach your potential + Unlimited profits + Recognition + Doing what you enjoy – Uncertainty of income – Risk of loss – Long hours & hard work – Complete responsibility – High stress levels AdvantagesDisadvantages

© Prentice Hall, 2007Excellence in Business, 3eChapter Buying an Existing Business + Customer base + Business systems + Product or service + Location + Financing – Alienated customers – Obsolescence – Location – Personality clashes – Outstanding receivables AdvantagesDisadvantages

© Prentice Hall, 2007Excellence in Business, 3eChapter The Franchise Alternative Franchisee Franchisor Types of franchises –Product –Manufacturing –Business-format

© Prentice Hall, 2007Excellence in Business, 3eChapter How to Evaluate a Franchise Initial franchise Periodic royalties Trademarks and names Advertising and promotion Business location

© Prentice Hall, 2007Excellence in Business, 3eChapter How to Evaluate a Franchise Exclusive territory Right of first refusal Equipment and supplies Agreement and termination Franchise assignment

© Prentice Hall, 2007Excellence in Business, 3eChapter The Pros and Cons of Franchising Advantages  Get a viable business  Name recognition  Network of support  Blueprint for success Disadvantages  No guarantee of success  High monthly royalties  Limited independence  Limited flexibility

© Prentice Hall, 2007Excellence in Business, 3eChapter Why New Businesses Fail Management IncompetenceManagement Incompetence Lack of ExperienceLack of Experience Insufficient FinancingInsufficient Financing Poor Business PlanningPoor Business Planning Unworkable GoalsUnworkable Goals Diminished Customer BaseDiminished Customer Base Uncontrolled GrowthUncontrolled Growth Inappropriate LocationInappropriate Location Poor System of ControlsPoor System of Controls Poor Entrepreneurial SkillsPoor Entrepreneurial Skills

© Prentice Hall, 2007Excellence in Business, 3eChapter Sources of Small Business Assistance SCORE Incubators The Internet

© Prentice Hall, 2007Excellence in Business, 3eChapter Financing A New Business Avoid common mistakes –Overestimating sales –Overestimating cash flow –Underestimating expenses

© Prentice Hall, 2007Excellence in Business, 3eChapter Sources of Private Financing Banks and microlenders Venture capitalists Angel investors Credit cards

© Prentice Hall, 2007Excellence in Business, 3eChapter Small Business Administration SBA-backed loans SBA-microloans Small business investment companies (SBICs)

© Prentice Hall, 2007Excellence in Business, 3eChapter Going Public Initial public offering (IPO) –Advantages Raising capital –Disadvantages Expensive and time consuming