Entrepreneurship and Small Business Chapter 5

Entrepreneurship A business started by someone who satisfies a need for a good/service. 1990’s online businesses soared Virtual business or dot-com company operates online – 1995 Amazon.com started as online book store…now a leader as an online e-tailer

Entrepreneur A person who recognizes a business opportunity and organizes, manages, and assumes the risks of a business enterprise with the intent of increasing the market value of the business. Take-charge, self-directed people Risk taker

Entrepreneur Every year thousands of entrepreneurs start businesses Many are successful but remain small Many of these businesses will fail within a few years Others will go on to become large corporations

Advantages of an Entrepreneurship Satisfaction from taking a risk and becoming a success Showing expertise and skills Working from home Gaining Profit

Disadvantages of an Entrepreneurship Risk that they may fail Total responsibility for the business Long hours Financial risk

Small Business Defines Small Business – an independently owned business that usually has the owner as its manager – Serves a limited geographic area – Employees fewer than 500 people – Not dominate in its industry – Most business in USA are small business –25 million – Employee 50% of total workforce – Generates more than half the nation’s income – Principle source of new jobs – Account for 38% of jobs in high technology

Advantages of Small Business Easier to form than large businesses – Require licenses for operation – Buildings meet zoning requirements Being the Boss – Make your own decisions Opportunity to offer services large companies cannot offer – Respond quickly to customer’s needs

Disadvantages of Small Business Your responsible for decisions made Create a feeling of loneliness Long hours About 4 out of 5 fail in their first five years – Don’t work enough hours – Overprice or underprice products – Little or no experience – Trends and styles change – Lack managerial skills needed – Inadequate financial planning

Preparing for your Own Business Analyze what you want to do and find a way to do it…. Ask yourself questions – What will I produce? – Who are my main competitors? – Why is my product needed? – How much will product cost to produce? – How many people will I need to run the business? – What facilities will I need? – What licenses, permits, or other legal documents do I need? – How much money do I need to get started?

Preparing for your Own Business Careful planning from the beginning – Develop a BUSINESS PLAN –a written description of a new business venture that describes all aspects of the business – Essential for potential investors and banks for start-up funds

Business Plan 1.Summary 1-3 pages overview of the BP 2.Company Description Type of business (manufacturing, retail or service and product provided) 3.Product –Service section – describe types 4.Marketing Plan Likely customers and details of competition, marketing strategies, types and location of advertising 5.Legal Plan –how you will organize business 6.Management plan/Operation plan Key personnel and their expertise/experience Specify the company’s daily operations, facilities, overall personnel, materials, and processing requirements 7.Financial plan Company’s needs and projected revenues, costs, and profits