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
Goals
Identify characteristics of successful entrepreneurs.
Recognize the importance of entrepreneurship in the economy.
Describe opportunities and risks of entrepreneurship.

3. Key Terms
Entrepreneur~ someone who takes a risk in starting a business to earn a profit
Entrepreneurship~ process of starting, organizing, managing, and assuming the responsibility for a business
Venture capital~ money provided by large investors to finance new products and new businesses that have a good chance to be very profitable.
Innovation~ an invention or creation that is brand new
Improvement~ a design change that increases the usefulness of a product, service, or process.
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4. CHARACTERISTICS OF ENTREPRENEURS
Desire to be your own boss
Special skills and abilities
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5. ENTREPRENEURS IN ACTION
Pankaj Arora
Rich Stachowski
Jeffrey Rodriguez and John Serrano
Abbey Fleck
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6. WHAT DOES IT TAKE? Entrepreneurs are more persistent inquisitive
energetic
goal oriented
independent
self-confident
creative
reliable
competitive
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7. WHAT DOES IT TAKE? Entrepreneurs have problem-solving skills
(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
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8. Checkpoint >>
What personal characteristic are common to most successful entrepreneurs?
Answer
Any characteristics listed in Figure 6-1 are acceptable, such as persistence, inquisitiveness, self-confidence, creativity, and so forth.
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9. ENTREPRENEURSHIP AND THE ECONOMY
Employment-
Small businesses are responsible for most new employment. (Over 60% of new jobs were created by businesses with fewer than 500 employees.)
Financing
Most money to needed to start a new business comes from the entrepreneur and his/her friends and family.
Venture capital
Productivity
New and small businesses produce a large volume of goods and services (over $600 billion in sales annually).
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10. Employment Growth by Business Size
Source: U.S. Bureau of Labor Statistics
Employment Growth by Business Size
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11. Checkpoint >>
What are the sources of financing that entrepreneurs use for their new businesses?
Answer
personal savings
friends and family
venture capital
bank loans
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12. OPPORTUNITIES Innovation~ invention or creation of something new
Innovation vs invention
Innovation vs improvement
Innovation Life Cycle
Improvement~ design change that can increase the usefulness of a product, service, or process
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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
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14. Checkpoint >> Where do entrepreneurship opportunities begin?
Answer
Opportunities begin with innovations (ideas about new products and services) or improvements (ideas for changes to existing products, services, or processes).
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15. 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. Key Terms
small business
Small Business Administration (SBA)
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17. 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
Ownership diversity
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18. COMMON TYPES OF SMALL BUSINESSES
Source: Small Business Administration and U.S. Census Bureau
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19. Checkpoint >>
What percentage of employees in the United States work for small businesses?
Answer
Nearly 50 percent of the American workforce is employed by small businesses.
Small businesses are also responsible for 60–80 percent of all new jobs.
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20. SMALL BUSINESS ADVANTAGES
Meeting customer needs
Providing unique services
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21. Checkpoint >>
How can small businesses compete successfully with larger businesses?
Answer
Smaller businesses are able to provide more personalized products and services to their customers.
They are able to provide products and services where smaller orders and projects are required and tend to fill unique customer needs, which larger companies do not provide.
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22. 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
in-history/
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23. SMALL BUSINESS ASSISTANCE
Faculties of universities and colleges
Local groups of business people
Small Business Administration (SBA)
SCORE
Small Business Failure Example – Kell on Earth on-earth-teaches-about-small-business-failure.html
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24. Checkpoint>> List common reasons for small business failure.
Answer
not keeping adequate records
insufficient start-up money
lack of management experience
lack of experience with the type of business
not controlling operating expenses
poor location
failure to manage credit
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25. Starting a Small Business
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.

26. Key Terms business plan start-up financing short-term financing
long-term financing
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27. THE BUSINESS DECISION
An idea plus experience ~hobbies, interests, and business experiences
Right place and time ~location should attract a large number of people who are interested in the products and should be in a safe and pleasant area (‘Work as a Team’, p 139)
Team approach ~employees feel valued and motivated to take personal responsibility for the benefit of the business.
Preparation and research ~gather enough info to make decisions (info on customers, competitors, operations, gov’t regulations, etc.)
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28. Checkpoint >>
Why is it important to use a team approach when starting a new business?
Answer
A team approach allows employees to feel valued and motivated to take personal responsibility for the benefit of the business.
Owners cannot expect to be able to do everything alone. Building a team will allow the business to increase productivity and, ultimately, profits.
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29. 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.
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30. 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
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31. ELEMENTS OF A BUSINESS PLAN
(continued)
Description of Competition
Characteristics of the industry
Condition of the economy
Strengths and weaknesses of major competitors
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32. ELEMENTS OF A BUSINESS PLAN
(continued)
Customer Analysis
Description of customers
Location, number, and resources of customers
Sales forecasts
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33. ELEMENTS OF A BUSINESS PLAN
(continued)
Operations Plan
Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans
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34. ELEMENTS OF A BUSINESS PLAN
(continued)
Marketing Plan
Description of major marketing activities
Description of resources needed
Schedule of marketing activities
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35. ELEMENTS OF A BUSINESS PLAN
(continued)
Financial Plans
Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements
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36. STEPS IN DEVELOPING THE BUSINESS PLAN
Gather and review information
Develop the strategic alternatives
Write the plan
Ask an expert to review the plan
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37. Checkpoint >>
What is the “strategic alternatives” in a business plan?
Answer
Strategic alternatives are alternative plans for production, staffing, financing, and so on.
Even the best business plan cannot predict every possible circumstance.
An alternate plan allows a business to be prepared for the unforeseeable.
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38. FINANCING THE SMALL BUSINESS
Types of financing
Start-up financing ~amt of $ needed to open (building, equipment, inventory, supplies, licenses, etc)
Short-term financing ~ pays for current operating activities (less than a year)
Long-term financing ~ funds main resources that will last for years (land, building, equipment)
Sources of financing
Owner-supplied funds
Borrowed funds
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39. Checkpoint >>
In addition to owner-supplied capital, what are several other sources of financing for a small business?
Answer
Borrowed money may come from banks, finance companies, or other individuals, such as friends and family.
Some suppliers may also be willing to extend credit.
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