1. Entrepreneurship and Small-Business Ownership
Chapter 6

2. Chapter 6 Objectives After studying this chapter, you will be able to:
Highlight the major contributions small businesses make to the national economy.
List the most common reasons people start their own companies and identify the common traits of successful entrepreneurs
Explain the importance of planning a new business and outline the key elements in a business plan.

3. Chapter 6 Objectives Cont.
Identify the major causes of business failures, and identify sources of advice and support for struggling business owners.
Discuss the principle sources of small-business private financing.
Explain the advantages and disadvantages of franchising.

4. The Big World of Small Business
An entrepreneur
An idea
A drive to succeed
Small Business :
A company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry)

5. Economic Roles of Small Business
Provide new jobs
Introduce new products
They meet the needs of larger organizations

6. Roles of Small Business Cont.
They inject a considerable
amount of money into the
economy
They take risks that larger
companies sometimes avoid
Provide specialty goods and services

7. Characteristics of Small Businesses
Lifestyle
High-Growth
Run by Individuals
Limited Products/Services
Limited Resources
Limited Marketplace
Run by Teams
Multiple Products/Services
Investment Capital
Large Marketplace

8. Factors Contributing to an Increase in Small Business
E-Commerce and other technological advances
Growing diversity in entrepreneurship
Corporate downsizing and outsourcing

9. E-Commerce and Technology
New business
E-tailing opportunities
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10. Diversity Growing women/minority ownership Immigrant start-ups
Young professionals
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11. Downsizing and Outsourcing
Recession start-ups
Opportunity generation
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12. The Entrepreneurial Spirit
The positive, forward-thinking desire to create profitable, sustainable business enterprises
Vital to the health of the economy and to everyone’s standard of living

13. Why People Start Businesses
More control over their future
Tired of working for someone else
Passion for new product ideas
Pursue business goals that are important to them on a personal level
Inability to find attractive employment anywhere else

14. Qualities of Successful Entrepreneurs
Love what they do, passion to succeed
Highly disciplined
Self-confident and optimistic
Like to control their own destiny
Relate well with others

15. Qualities of Successful Entrepreneurs Cont.
Curious and eager to learn
Learn from their mistakes
Highly adaptable
Embrace moderate risks

16. Qualities Shared by Successful Entrepreneurs

17. Innovation Without Leaving: Intrapreneurship
Designate entrepreneurial efforts within a larger organization
Freedom to define and initiate new projects, much as they were independent entrepreneurs

18. Small Business Ownership Options
Start-up
Buy an existing business
Franchise

19. Business Start-Up Options

20. Starting a New Business
Advantages
Disadvantages
Control your destiny
Reach your potential
Unlimited profits
Recognition
Doing what you enjoy
Opportunity to make a difference
Uncertainty of income
Risk of loss
Long hours & hard work
Complete responsibility
High stress levels
Lifestyle sacrifices during start-up
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21. Buying an Existing Business
This approach tends to reduce the risks--provided, of course, that you check out the company carefully.
Advantages
Disadvantages
Customer base
Business systems
Product or service
Location
Financing
Alienated customers
Obsolescence
Location
Personality clashes
Outstanding receivables
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22. The Franchising Alternative
Buying a franchise, combines many of the benefits of independent business ownership with the support that comes with being part of a larger organization.
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23. Blueprint for an Effective Business Plan
A document that summarizes a proposed business venture, goals, and plans for achieving those goals
Guide operations
Attract lenders
and investors
Provide a
reality check

24. Mission and objectives Management and key personnel
The Business Plan
Summary
Mission and objectives
Company overview
Products and services
Management and key personnel
Target market
Marketing strategy

25. The Business Plan (Cont.)
Design and development plans
Operations plan
Start-up schedule
Major risk factors
Financial projections
Exit strategy

26. Why New Businesses Fail
Management incompetence
Lack of relevant experience
Inadequate financing
Poor cash management
Lack of strategic planning
Ineffective marketing
Uncontrolled growth
Inappropriate location
Poor inventory control
Poor entrepreneurial Skills

27. Why New Businesses Fail

28. Sources of Small Business Assistance
Government agencies
Nonprofit organizations
Business partners
Mentors
Advisory boards
Media
Networks
Business incubators and accelerators

29. Mentors and Advisory Boards
A team of people with subject-area expertise or vital contacts who help a business owner review plans and decisions

30. Print and Online Media www.entrepreneurship.org Inc . www.inc.com
Business 2.0
Bloomberg BusinessWeek
Fortune and Money

31. Social Networking for Entrepreneurs

32. Business Incubators Business Incubators:
Facilities that house small businesses and provide support services during the company’s early growth phases

33. Private Financing Options For Small Business
Banks and Micro-lenders
Venture Capitalists
Angel Investors
Personal Credit Cards
Small Business Administration

34. Financing Options for Small Businesses
Seed Money:
The first infusion of capital used to get a business started
Micro Lenders:
Organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans

35. Financing Options for Small Businesses
Venture Capitalists (VCs):
Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit.
Angel investors:
Private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest or banks are willing to lend

36. Going Public
Initial Public Offering: A corporation’s first offering of shares to the public

37. The Franchise Alternative
A business arrangement in which one company (the franchisee) obtains the rights to sell the products and use various elements of a business system of another company (the franchisor).
Franchisee:
A business owner who pays for the rights to sell the products and use the business system of a franchisor.
Franchisor:
A company that licenses elements of its business system to other companies (franchisees).

38. The Franchising Alternative
Product franchise
Manufacturing franchise
Business-format franchise

39. Types of Franchise
A product franchise gives you the right to sell trademarked goods, which are purchased from the franchisor and resold. Car dealers and gasoline stations fall into this category.
A manufacturing franchise, such as a soft-drink bottling plant, gives you the right to produce and distribute the manufacturer’s products, using supplies purchased from the franchisor.
A business-format franchise gives you the right to open a business using a franchisor’s name and format for doing business.

40. Pros and Cons of Franchising
Advantages
Disadvantages
Viable business
Must follow format
Name recognition
Little decision making
Network of support
Few options for changes

41. Evaluating a Franchise
Initial franchise
Periodic royalties
Trademarks and names
Advertising and promotion
Business location
Exclusive territory
Right of first refusal
Equipment and supplies
Agreement termination
Franchise agreement

42. Twelve Questions to Ask Before Signing a Franchise Agreement

43. Applying What You’ve Learned
Highlight the contributions small businesses make to the national economy
List the most common reasons people start their own companies and identify the common traits of successful entrepreneurs
Explain the importance of planning a new business and outline the key elements in a business plan

44. Applying What You’ve Learned
Identify the major causes of business failures and identify sources of advice and support for struggling business owners
Discuss the principal sources of small-business private financing
Explain the advantages and disadvantages of franchising