1. 6 * * * * * Entrepreneurship and Starting a Small Business
CHAPTER 6
Nickels McHugh McHugh * *
1-1
McGraw-Hill/Irwin
Understanding Business, 8e
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

2. Guess Which Company?
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.
Also available on a Transparency Acetate
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
Guess Which Company?
This slide will help in starting the chapter discussion. Students enjoy stories about how companies began and these short vignettes will supplement additional information about the history of successful entrepreneurs in the chapter.
See if the students can guess the companies in the short descriptions provided on the acetate. The answers are:
Wrigleys’ chewing Gum ( William Wrigley, Jr.)
United Parcel Service
Domino’s Pizza (Tom Monaghan)
Ask the students: Do you know of any interesting stories about how some other businesses got started? (This can also be assigned as a team project to generate a good discussion.)

3. Entrepreneurship Definition Why take the entrepreneurial challenge?
Opportunity
Profit
Independence
Challenge
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
See text pages:

4. Who Starts New Businesses?
AGE AT START-UP % % % % %
Also available on a Transparency Acetate
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
Who Starts New Businesses?
This slide gives the student a good understanding of the age people start new businesses.
1. Between the ages of 18-24, only 8% of people start a new business, why?
(Discuss the lack of resources available to start; the lack of experience and business knowledge; and the individual assessment of career choice.)
2. Between the ages of 25-34, 71% of new businesses are started, why?
(Greater business experience; more accumulated capital; physical and mental maturity; experience in a career where they have not been happy.)
3. Only 2% of new business is started after 55+ years of age. Ask the students to
4. Explain why this is low? (Nearing retirement, too much risk at their age; years of their peak earnings in corporate life.)

5. Entrepreneurial Attributes
Self-Directed & Self-Disciplined
Self-Nurturing
Action-Oriented
Highly Energetic
Tolerant of Uncertainty
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
See text pages:

6. Entrepreneurship Entrepreneurial Teams
Micropreneurs and Home-Based Businesses
Web-Based Businesses
Intrapreneurs
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
See text pages:

7. Reasons for Growth of Home-Based Businesses
Technology
Downsizing
Attitudes
Tax Advantages
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
See text page: 155

8. Home-Based Business Challenges Focus New Customers Find Opportunity
Time Management
Work vs. Family
City Ordinances
Risk
Focus
Find Opportunity
Results vs. Routine
Profit vs. Paycheck
New Ideas
Long Term vs. Short Term
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
See text pages:

9. Most Common Types of Home-Based Businesses
Also available on a Transparency Acetate
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
Most Common Types of Home-Based Business
1. This slide identifies the most common types of home-based businesses.
2. A study conducted by the Economic Quarterly Developer, using 899 respondents in nine states, revealed some interesting facts:
59% of home-based businesses are owned by men.
Average age of home-based workers is 44.
Total income generated represented 3% of total personal income in those nine states.
In Ohio, home-based business contributes more income than farming.
3. Some tips on becoming successful with a home-based business are:
Most people start a business based on their interest or passion for an activity; you need to examine the market potential, competition, and resources required.
Prepare a well-written business plan outlining your strategic goals.
Do not be resistant to outside help when getting started.
Utilize free services such as the Small Business Administration.
Make sure you have adequate funds.
Source: Independent Insurance Agents of America

10. Government & Entrepreneurship
Immigration Act of 1990-
Investor Visa
Enterprise Zones
Incubators
See Learning Goal 1: Explain why people are willing to take the risks of entrepreneurship, list the attributes of successful entrepreneurs, describe the benefits of entrepreneurial teams and intrapreneurs, and explain the growth of home-based and web-based businesses.
See text page: 159

11. Top Ten States Where Businesses Have Started
Utah
Nevada
Washington
Florida
Colorado
Washington D.C.
Maryland
Georgia
Tennessee
Alaska
Also available on a Transparency Acetate
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
Top Ten States/Districts Where Businesses Have Started
This slide presents the top ten states/districts where businesses have started.
If you were to ask a question to the students where would they locate their business, they may give answers such as close to home, or wherever the need is, or a location where they have good memories, etc. SBA’s statistics through 2002 suggests that Utah is the number 1 state to draw startups.
The top factor in the SBA’s Small Business Survival Index is taxes (13 out of 21 measures are tax-related). The states are also assessed on the size of local government to determine the bureaucracy. Nevada tops the list on this measure with only 4.13 bureaucrats per 1,000 people.
Kevin Stolarick, a Carnegie Mellon Lecturer, offers these four factors that make a place attractive: technology, talent, tolerance and diversity, and territory assets.
(Source: IBD, June 24, 2004)
Source: Investor Business Daily, June 24, 2004

12. Top Ten States Where Businesses Have Closed
Utah
Washington
New Mexico
Nevada
Idaho
Missouri
Arizona
Vermont
Georgia
California
Also available on a Transparency Acetate
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
Top Ten States Where Businesses Have Closed
This slide complements the previous slide on top ten states where businesses have started.
Interestingly, Utah tops both of these lists. In addition to drawing most startups, Utah is also the leader in bankruptcies.
Source: Investor Business Daily, June 24, 2004

13. What is Small Business? Independently Owned Not Dominant in Its Field
Meet Certain Standards of Size (Employees, Annual Receipts)
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
See text pages: 160

14. U.S. Small Businesses 20 Million Full/Part-time Businesses
Account for More Than 50% of Gross Domestic Product (GDP)
Jobs
80% of Americans 1st job is in small business
75% of new jobs are created by small businesses
Minority-owned Businesses Growing Rapidly
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
See text pages: 160

15. Business Ownership by Gender
Also available on a Transparency Acetate
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
Percentage of Ownership
This slide presents an interesting picture about business ownership by gender.
Ask the students: Why are more women starting their own businesses? (Some of the reasons may be: fighting or getting tired of the glass ceiling, balancing work with family life, opportunity, profit, independence, and/or challenge.)
Ask the students: Would you prefer working for a male-owned or female-owned business? Why?
Source: USA Today

16. Female Owners’ Top Industries
Also available on a Transparency Acetate
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
Female Owners’ Top Industries
Top sectors for female-owned companies are: Services (45%) and retail (16%).
Ask the students: If you were to start your own business, in what sector would it be? (Most likely it would be a service or retail establishment. A critical reason for the growth of small businesses is the decline in manufacturing segment and relative ease of starting or establishing a service business.)
SOURCE: USA Today

17. Small Business – Major Causes of Failure
Plunging in without first testing
Under/over pricing
Too little capital
Little/no experience
Borrowing money without planning
Trying to do too much with too little
Buying too much on credit
Expanding credit too freely and rapidly
Incomplete and/or inaccurate records
Not understanding business cycles
Forgetting about taxes, insurances, etc.
Owner working or not, according to whim
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
See text pages: 162

18. Small Business – Situations for Success
Personal attention
Products not easily made by mass production
Sales are not large enough for a large firm
Unattractive neighborhood
Franchising
Paying attention to new competitors
The business is in a growth industry
See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
See text pages: 163

19. Learning about Small Business Operations
Learn from Others
Get Experience
Take Over a Successful Firm
See Learning Goal 3: Summarize ways to learn about how small businesses operate.
See text pages:

20. Where Did They Start? Hallmark YMCA room Williams-Sonoma
Abandoned Hardware Store
Estee Lauder
Vacant Former Restaurant
Walt Disney
Created Mickey in a Garage
Also available on a Transparency Acetate
See Learning Goal 3: Summarize ways to learn about how small businesses operate.
Where Did They Start?
This slide presents the humble beginnings of these major companies.
This slide can also be used with the previous slide – Early sales of well-known companies.
Ask the students: What can be learned from this slide and such beginnings of these corporations? (Business startups are always difficult but good planning, hard work, and perseverance certainly pays.)
Source: World Features Syndicate

21. Early Sales of Well-Known Companies
Johnson & Johnson
$3,000 Worth of Band-Aids 1st Year
Cyrus McCormick
Sold No Reapers 1st 10 Years
Subway
312 Sandwiches 1st Day
Burton’s Snowboards
Sold One 1st Year
Bose
Sold 40 Speakers 1st Year (today #1 in market)
Also available on a Transparency Acetate
See Learning Goal 3: Summarize ways to learn about how small businesses operate.
Early Sales of Well-Known Companies
This is an interesting slide which should generate good reactions from students.
Ask the student: If you sold only one snowboard in the whole year, would you stay in business? Why or why not?
How can businesses survive such poor performances? (Determination and passion of the owners and founders plays a big role.)
As can be seen from the slide, the best performance has been from Subway, which is typical of starting a restaurant type businesses.
Source: World Features Syndicate

22. Managing a Small Business
Business Plan
Adequate Funding
Lenders/Investors
“Angels”
Venture Capitalists
Professional Advice/Help
SBA and SBIC Program
Lawyers, Loan Officers, Insurance Agents
SCORE
Local College/universities
Know Your Customer
Manage Human Resources
Keep Good Records
See Learning Goal 4: Analyze what it takes to start and run a small business.
See text pages:

23. 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.
Also available on a Transparency Acetate
See Learning Goal 4: Analyze what it takes to start and run a small business.
See text pages:
Reasons for a Banker to Say “NO”
The information provided should support the material in the book. Financial problems continue to be the number-one reason why businesses fail.
The key to dealing with bankers is to be prepared and have a very sound business plan. Develop a relationship with your banker to help negotiations during start-up and in the future.
The Small Business Administration offers a detailed Business Plan on their Website: The plan offers over 30 pages of information of what is required to have a detailed plan.

24. Small Business Collaborators
Small Business Administration (SBA)
Microloan program
SBICs
SBDCs
Service Corps of Retired Executives (SCORE)
See Learning Goal 4: Analyze what it takes to start and run a small business.
See text pages:

25. Small Business Strategies
Examine Marketing & ID Areas for Growth
Profile Best Customers & Market to Similar Prospects
Invest in Sales Training & Technology
Refresh Business Perspective With Outside Views
Streamline Business & Eliminate Waste
See Learning Goal 4: Analyze what it takes to start and run a small business.
See text pages:
Small Business Strategies
This acetate gives additional advice for entrepreneurs to examine when starting a new business.
Investment in sales training and technology will pay significant dividends in the future. Cost will be lower, and training will lead to greater performance.
When Federal Express introduced their ground division in 1985, they invested in new Material Handling Equipment reducing their labor cost by two-thirds.
Remember to examine every process within the organization for performance; Eliminate waste and look for continuous improvement. A recommended time period for review is every six months.

26. Saving a Business In Trouble
React/Not Overreact
Understand Financial Situation
Find Professional Help
Develop “Recovery Plan”
Be a Visible, Confident Leader
Remind Employees of Stake in Business
Don’t Get Stung By Killer “Bankruptcy”
Also available on a Transparency Acetate
See Learning Goal 4: Analyze what it takes to start and run a small business.
Saving a Business in Trouble
1. This slide offers many suggestions for dealing with a severe crisis with your business.
2. Additional tips that experts suggest you do to save your business:
Work with a turnaround expert.
Do not ignore how the economy or overall market conditions are negatively affecting your business.
Prepare a short-term cash projection.
Prioritize payments to keep cash flow.
Review staffing levels.
(Source: Entrepreneur.com)

27. Small Business & International Prospects
Positives
World Market
Absorb Excess Inventory
Soften U.S. Downturns
Extend Product Life
Negatives
Financing Difficult
How to Get Started?
Lack of Cultural Understanding
Paperwork
See Learning Goal 5: Outline the advantages and disadvantages small businesses have in entering global markets.
See text pages:

28. International Small Business
Advantages
Deal With Individuals
Begin Shipping Orders Faster
Variety of Suppliers
Professional Service with Undivided Attention
Information
Dept. of Commerce-
SBA- International-
See Learning Goal 5: Outline the advantages and disadvantages small businesses have in entering global markets.
See text pages: