1. Introduction to Business © Thomson South-Western ChapterChapter Entrepreneurship and Small Business Management 6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business Basics 6-3 6-3Starting a Small Business 6

2. Introduction to Business © Thomson South-Western Chapter 6 Slide 2 LESSON 6-1 LESSON 6-1 Becoming an Entrepreneur Goals Identify characteristics of successful entrepreneurs. Recognize the importance of entrepreneurship in the economy. Describe opportunities and risks of entrepreneurship.

3. Introduction to Business © Thomson South-Western Chapter 6 Slide 3 Key Terms entrepreneur entrepreneurship venture capital innovation improvement

4. Introduction to Business © Thomson South-Western Chapter 6 Slide 4 CHARACTERISTICS OF ENTREPRENEURS Entrepreneur: someone who takes a risk in starting a business to earn a profit Entrepreneurship: the process of starting, organizing, managing, and assuming the responsibility for a business Desire to be your own boss Special skills and abilities

5. Introduction to Business © Thomson South-Western Chapter 6 Slide 5 ENTREPRENEURS IN ACTION Pankaj Arora (software and websites) Rich Stachowski (Water talkies) Jeffrey Rodriguez and John Serrano (graffiti art) Abbey Fleck (Makin Bacon®)

6. Introduction to Business © Thomson South-Western Chapter 6 Slide 6 WHAT DOES IT TAKE? Entrepreneurs are more persistent inquisitive energetic goal oriented independent self-confident creative reliable competitive

7. Introduction to Business © Thomson South-Western Chapter 6 Slide 7 WHAT DOES IT TAKE? Entrepreneurs have problem-solving skills tolerance for ambiguity strong integrity personal initiative ability to secure resources capability to learn from failure willingness to work hard (continued)

8. Introduction to Business © Thomson South-Western Chapter 6 Slide 8 >> C H E C K P O I N T What personal characteristic are common to most successful entrepreneurs?

9. Introduction to Business © Thomson South-Western Chapter 6 Slide 9 ENTREPRENEURSHIP AND THE ECONOMY Employment (see next slide) Financing Venture capital: money provided by large investors to finance new products and new businesses that have a good chance to be very profitable Productivity (see notes)

10. Introduction to Business © Thomson South-Western Chapter 6 Slide 10 NUMBER OF EMPLOYEES IN NEW BUSINESSES

11. Introduction to Business © Thomson South-Western Chapter 6 Slide 11 >> C H E C K P O I N T What are the sources of financing that entrepreneurs use for their new businesses?

12. Introduction to Business © Thomson South-Western Chapter 6 Slide 12 OPPORTUNITIES Innovation: an invention or creation that is brand new Improvement: a designed change that increases the usefulness of a product, service, or process

13. Introduction to Business © Thomson South-Western Chapter 6 Slide 13 RISKS Recognizing risks Lack of adequate capital Low sales Higher than expected expenses Competitive pressure An owner unprepared to manage a growing business Operations requiring more time than the owner is willing to commit

14. Introduction to Business © Thomson South-Western Chapter 6 Slide 14 >> C H E C K P O I N T Where do entrepreneurship opportunities begin?

15. Introduction to Business © Thomson South-Western Chapter 6 Slide 15 LESSON 6-2 LESSON 6-2 Small Business Basics Goals Identify important characteristics of small businesses. Recognize the competitive advantages of small businesses. Identify problems faced by many small businesses.

16. Introduction to Business © Thomson South-Western Chapter 6 Slide 16 Key Terms small business Small Business Administration (SBA)

17. Introduction to Business © Thomson South-Western Chapter 6 Slide 17 SMALL BUSINESS OWNERSHIP Small business: an independent business with fewer than ??? Employees Small business: an independent business with fewer than 500 employees

18. Introduction to Business © Thomson South-Western Chapter 6 Slide 18 SMALL BUSINESS OWNERSHIP Description of a small business Owner is usually the manager Operates in one or very few locations Typically serves a small market Not dominant in its field Small business employment Small businesses employ nearly 50% of all U.S. workers Ownership diversity (see notes)

19. Introduction to Business © Thomson South-Western Chapter 6 Slide 19 COMMON TYPES OF SMALL BUSINESSES

20. Introduction to Business © Thomson South-Western Chapter 6 Slide 20 >> C H E C K P O I N T What percentage of employees in the United States work for small businesses?

21. Introduction to Business © Thomson South-Western Chapter 6 Slide 21 SMALL BUSINESS ADVANTAGES Meeting customer needs (see notes) Providing unique services Examples  plan a wedding, design custom sound systems

22. Introduction to Business © Thomson South-Western Chapter 6 Slide 22 >> C H E C K P O I N T How can small businesses compete successfully with larger businesses?

23. Introduction to Business © Thomson South-Western Chapter 6 Slide 23 COMMON REASONS FOR SMALL BUSINESS FAILURE Not keeping adequate records Not having enough start-up money Lack of management experience Lack of experience with the type of business Not controlling operating expenses Poor location for the business Failure to manage credit offered to customers

24. Introduction to Business © Thomson South-Western Chapter 6 Slide 24 SMALL BUSINESS ASSISTANCE Faculties of universities and colleges Small Business Administration (SBA) A government agency that helps small business owners develop business plans and obtain financing Local groups of business people

25. Introduction to Business © Thomson South-Western Chapter 6 Slide 25 >> C H E C K P O I N T List common reasons for small business failure.

26. Introduction to Business © Thomson South-Western Chapter 6 Slide 26 LESSON 6-3 LESSON 6-3 Starting a Small Business Goals Recognize important factors to be considered when starting a business. Describe the elements of a business plan. Identify types and sources of financing for a small business.

27. Introduction to Business © Thomson South-Western Chapter 6 Slide 27 Key Terms business plan start-up financing short-term financing long-term financing

28. Introduction to Business © Thomson South-Western Chapter 6 Slide 28 THE BUSINESS DECISION Where do business ideas come from? Hobbies, interests, business experience A good idea needs to be accompanied by experience What are two key factors in making the decision to start a business? Finding the right place Timing

29. Introduction to Business © Thomson South-Western Chapter 6 Slide 29 THE BUSINESS DECISION Whose help do you need to start a business? Employees that are chosen carefully People with specialized business knowledge Who are people with specialized business knowledge? Bankers, lawyers, accountants

30. Introduction to Business © Thomson South-Western Chapter 6 Slide 30 THE BUSINESS DECISION Preparation is the most important step in starting a business What information needs to be gathered? Customers, competitors, important operations, government regulations Where can we find this information? Libraries, colleges, small business assistance centers

31. Introduction to Business © Thomson South-Western Chapter 6 Slide 31 >> C H E C K P O I N T Why is it important to use a team approach when starting a new business?

32. Introduction to Business © Thomson South-Western Chapter 6 Slide 32 WHAT IS A BUSINESS PLAN? A business plan is a written description of the business idea and how it will be carried out, including all major business activities.

33. Introduction to Business © Thomson South-Western Chapter 6 Slide 33 ELEMENTS OF A BUSINESS PLAN Description of the Business The business idea Major products and services Ownership structure Strengths/weaknesses Long- and short-term goals

34. Introduction to Business © Thomson South-Western Chapter 6 Slide 34 ELEMENTS OF A BUSINESS PLAN Description of Competition Characteristics of the industry Condition of the economy Strengths and weaknesses of major competitors (continued)

35. Introduction to Business © Thomson South-Western Chapter 6 Slide 35 ELEMENTS OF A BUSINESS PLAN Customer Analysis Description of customers Location, number, and resources of customers Sales forecasts (continued)

36. Introduction to Business © Thomson South-Western Chapter 6 Slide 36 ELEMENTS OF A BUSINESS PLAN Operations Plan Organization of the company Description of major operations Analysis of resources needed Human resource plans (continued)

37. Introduction to Business © Thomson South-Western Chapter 6 Slide 37 ELEMENTS OF A BUSINESS PLAN Marketing Plan Description of major marketing activities Description of resources needed Schedule of marketing activities (continued)

38. Introduction to Business © Thomson South-Western Chapter 6 Slide 38 ELEMENTS OF A BUSINESS PLAN Financial Plans Start-up costs Short- and long-term financial needs Sources of financing Budgets and financial statements (continued)

39. Introduction to Business © Thomson South-Western Chapter 6 Slide 39 STEPS IN DEVELOPING THE BUSINESS PLAN Gather and review information Develop the “game plan” Write the plan Ask an expert to review the plan

40. Introduction to Business © Thomson South-Western Chapter 6 Slide 40 >> C H E C K P O I N T What is the “game plan” in a business plan?

41. Introduction to Business © Thomson South-Western Chapter 6 Slide 41 FINANCING THE SMALL BUSINESS Types of financing Start-up financing: amount of money needed to open the business Short-term financing: the money needed to pay for the current operating activities of a business Long-term financing: money needed for the main resources of a business that will last many years

42. Introduction to Business © Thomson South-Western Chapter 6 Slide 42 FINANCING THE SMALL BUSINESS Sources of financing Owner-supplied funds Borrowed funds

43. Introduction to Business © Thomson South-Western Chapter 6 Slide 43 >> C H E C K P O I N T In addition to owner-supplied capital, what are several other sources of financing for a small business?

44. Introduction to Business © Thomson South-Western Chapter 6 Slide 44 Chapter 6 Review

45. Introduction to Business © Thomson South-Western Chapter 6 Slide 45 # 1- True or False Everyone who owns or manages business is an entrepreneur

46. Introduction to Business © Thomson South-Western Chapter 6 Slide 46 #2 Which of the following is not a characteristic of entrepreneurship in the U.S.? 1.About 3% of people aged 18-64 are involved in entrepreneurship 2.About 500,000 new business are created each year 3.40% of new businesses have no employees 4.1 in 5 Americans has invested in business of someone who they know well

47. Introduction to Business © Thomson South-Western Chapter 6 Slide 47 #3 Money provided by large investors to finance new products and new businesses that have a good chance to be very profitable is known as: 1.A loan 2.Credit 3.Venture capital 4.Start-up funding

48. Introduction to Business © Thomson South-Western Chapter 6 Slide 48 #4- True or False The primary reason that businesses started by entrepreneurs close is disagreements with business partners

49. Introduction to Business © Thomson South-Western Chapter 6 Slide 49 #1 The Small Business Administration considers a business small if it employs fewer than how many employees?

50. Introduction to Business © Thomson South-Western Chapter 6 Slide 50 #2 A competitive advantage that small businesses have over larger businesses is 1.Lower costs 2.More consumer research 3.Lower prices 4.Attention to unique customer needs

51. Introduction to Business © Thomson South-Western Chapter 6 Slide 51 #3 Which of the following is not one of the reasons small business fail? 1.Poor customer credit practices 2.The owner does not have adequate experience 3.A poor business location 4.Not enough employees to do the work

52. Introduction to Business © Thomson South-Western Chapter 6 Slide 52 #1 Every business begins with an: 1.Customer 2.Profit 3.Idea 4.invention

53. Introduction to Business © Thomson South-Western Chapter 6 Slide 53 #2- TRUE OR FALSE Most small business owners enjoy being part of a team

54. Introduction to Business © Thomson South-Western Chapter 6 Slide 54 #3- TRUE OR FALSE A business plan does not have to be written since the business owner is well aware of the information in the plan

55. Introduction to Business © Thomson South-Western Chapter 6 Slide 55 #4 Money needed for the important resources of a business (such as land, buildings, and equipment) that will last for many years is called 1.Start-up financing 2.Short-term financing 3.Long-term financing 4.Credit