1. Entrepreneurship and Small Business Management
CHAPTER 6
Entrepreneurship and Small Business Management
6-1 Becoming an Entrepreneur
6-2 Small Business Basics
6-3 Starting a Small Business

2. Becoming an Entrepreneur
6-1
Becoming an Entrepreneur
Learning Targets
Identify characteristics of successful entrepreneurs.
Recognize the importance of entrepreneurship in the economy.
Describe opportunities and risks of entrepreneurship.

3. WHAT DOES IT TAKE? Characteristics of Entrepreneurs persistent
Chapter 6
Characteristics of Entrepreneurs
persistent
inquisitive
energetic
goal oriented
Independent
Desire to be own boss
self-confident
creative
reliable
competitive
Have special skills and abilities

4. WHAT DOES IT TAKE? Entrepreneurs have problem-solving skills
Chapter 6
WHAT DOES IT TAKE?
(continued)
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

5. ENTREPRENEURSHIP AND THE ECONOMY
Chapter 6
Employment – small businesses are responsible for most new employment. Over 60% of new jobs were created by businesses with fewer than 500 employees from
Financing – most money to start new business comes from the entrepreneur, their family/friends. One main reason new businesses fail is inadequate capital.
Productivity – new and small businesses produce a large volume of goods and services for the economy

6. Employment Growth by Business Size
Chapter 6
Source: U.S. Bureau of Labor Statistics
Employment Growth by Business Size

7. RISKS Lack of adequate capital Low sales Higher than expected expenses
Chapter 6
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

8. 6-2 Small Business Basics Learning Targets
Identify important characteristics of small businesses.
Recognize the competitive advantages of small businesses.
Identify problems faced by many small businesses.

9. SMALL BUSINESS OWNERSHIP
Chapter 6
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
responsible for creating 60-80% of all new jobs
Large number of service businesses (professional and technical)
Ownership diversity
Women own more than ¼
Majority of owners are over 35 years of age
Almost all have high school diploma; 60% have some college
Half are home-based

10. COMMON TYPES OF SMALL BUSINESSES
Chapter 6
COMMON TYPES OF SMALL BUSINESSES
Common Types of Small Businesses
Source: Small Business Administration and U.S. Census Bureau

11. SMALL BUSINESS ADVANTAGES
Chapter 6
Meeting customer needs – too specialized for large businesses, number needed is too small for large businesses; located closer to customer; know customers better
Providing unique services – such as planning a wedding, customized sound systems, customized car parts

12. COMMON REASONS FOR SMALL BUSINESS FAILURE
Chapter 6
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

13. SMALL BUSINESS ASSISTANCE
Chapter 6
SMALL BUSINESS ASSISTANCE
Faculties of universities and colleges
Local groups of business people
Small Business Administration (SBA)

14. Starting a Small Business
6-3
Starting a Small Business
Learning Targets:
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.

15. THE BUSINESS DECISION
Chapter 6
An idea plus experience – hobbies, interests. Ideas from books, magazines
Right place and time – easy to get to; put into action when there is a demand
Team approach – few full or part-time employees; choose a good “team” with specialized knowledge
Preparation and research – gather information about customers, competitors, regulations; information is found through libraries, colleges, surveys.

16. ELEMENTS OF A BUSINESS PLAN
Chapter 6
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

17. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Description of Competition
Characteristics of the industry
Condition of the economy
Strengths and weaknesses of major competitors

18. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Customer Analysis
Description of customers
Location, number, and resources of customers
Sales forecasts

19. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Operations Plan
Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans

20. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Marketing Plan
Description of major marketing activities
Description of resources needed
Schedule of marketing activities

21. ELEMENTS OF A BUSINESS PLAN
Chapter 6
ELEMENTS OF A BUSINESS PLAN
(continued)
Financial Plans
Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements

22. STEPS IN DEVELOPING THE BUSINESS PLAN
Chapter 6
STEPS IN DEVELOPING THE BUSINESS PLAN
Gather and review information
Develop the strategic alternatives
Write the plan
Ask an expert to review the plan

23. FINANCING THE SMALL BUSINESS
Chapter 6
Types of financing
Start-up financing – building, equipment, inventory
Short-term financing – borrowed for less than a year (one or two months
Long-term financing – borrowed for many years
Sources of financing
Owner-supplied funds
Borrowed funds – banks, family, friends

24. Other Facts
Chapter 6
Nearly 10% of all Americans aged is involved in some type of entrepreneurial activity.
A small business is an independent business with few than 500 employees.
More than 25% of U.S. small businesses are owned by women.
Small businesses have an advantage when customers want more individual attention.
The business idea, ownership structure and long-terms goals are discussed in the description of the business.

25. Chapter 6
Small businesses are responsible for almost 50% of the U.S. gross domestic product each year.
Professional, scientific and technical services account for the largest percentage of small businesses in the U.S.
Start up financing is the amount of money needed to open a new business.