McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved CHAPTERSIX Entrepreneurship & Starting a Small Business

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved How Did They Begin?  He was selling baking soda & decided to entice customers by putting in two packages of chewing gum with each sale. The excitement over the gum started him thinking.  Two Seattle teenagers pooled their money & came up with $100. They started delivering messages & parcels for local merchants.  Though he didn’t graduate from college, he found out college students eat a lot of pizza. He started his first pizzeria with $900 near a campus with a promise of 3-minute delivery.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Who Starts New Businesses? % % % % 55+ 2% AGE AT START-UP

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Why People Start Their Own Businesses Source: BFIB/VISA Card Primer

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Small Business Revival Shift to Services Shift to Services CAD/CAM Lessening Advantages of Big Manufacturing CAD/CAM Lessening Advantages of Big Manufacturing Maturation of Baby Boomers Maturation of Baby Boomers More Women in Workforce More Women in Workforce

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved What is a Small Business?  Independent  Not Dominant  < 500 Employees

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Entrepreneurship n Definition n Characteristics of Successful Entrepreneurs n Intrapreneur Corporation Intrapreneur

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Entrepreneurial Attributes A. Self-Directed & Self-Disciplined B. Self-Nurturing C. Action-Oriented D. Highly Energetic E. Tolerant of Uncertainty

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Small Business- Advantages  Personalized Service/ Personal Contact  Flexibility  Lower Costs  Innovation Opportunities

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Small Business- Disadvantages - Limited Experience - Long Hours - Insufficient Capital - High Failure Rate

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Hours Worked per Week 1st Year hours 8% hours15% hours23% hours28% hours13% 80 + hours12%

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Most Common Types of Home-Based Businesses Source: Independent Insurance Agents of America

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Small Businesses That… Source: USA Today

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Road to Small Business Success  Business Plan  Sufficient Funding  Seek Advice & Assistance  Know Customer  Manage Resources & Employees  Maintain Records & Controls

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Collaborators Who Help Small Business  Small Business Administration (SBA)  Microloan program  SBICs  SBDCs  Service Corps of Retired Executives (SCORE)  Active Corps of Executives (ACE)

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Capital Sources of Successful Entrepreneurs SOURCE: INC. Magazine Personal Savings Family & Friends Partners Charge Cards Bank Loans Angels & Venture Capital

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Reasons for a Banker To Say “No” $I don’t know enough about you or your business. $You haven’t clearly stated why you need the money. $Your numbers don’t support the loan request. $Your collateral is lacking. $Your business does not support the loan on its own merits.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Government Efforts  Immigration Act of 1990  Enterprise Zones  Incubators

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Small Business & International Prospects Positives 1. World Market 2. Absorb Excess Inventory 3. Soften U.S. Downturns 4. Extend Product Life Negatives 1. Financing Difficult 2. How to Get Started? 3. Lack of Cultural Understanding 4. Paperwork