Entrepreneurship and Starting a

Entrepreneurship and Starting a
Chapter 06 Entrepreneurship and Starting a Small Business McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

LEARNING GOALS Chapter Six Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. 6-2

LEARNING GOALS Chapter Six Summarize the ways to learn about how small businesses operate. Analyze what it takes to start and run a small business. Outline the advantages and disadvantages small businesses have in entering global markets. 6-3

JAY-Z Roc Nation Profile Founded Roc-A-Fella Records before entering into a joint venture with Def Jam. Maintains control over the Jay- Z brand - including his clothing line and nightclub chain. Regarded as a business leader, he has met with Bill Gates, Warren Buffett and former President Bill Clinton. 6-4

NAME that COMPANY Chapter Six When this company’s founder had financial problems in the business's early days, he asked his suppliers to help him out. They did and they were well rewarded for their risk. Today these suppliers still service this mammoth company that has franchises all over the world. Name that company! Company: McDonald’s 6-5

WHAT is ENTREPRENEURSHIP?
The Age of the Entrepreneur Entrepreneurship -- Accepting the risk of starting and running a business. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-6

NOTABLE ENTREPRENEURS
The Job-Creating Power of Entrepreneurship in the U.S. French immigrant Élruthère Irènèe du Pont de Nemours started Du Pont in 1802. David McConnell borrowed $500 from a friend to start Avon. George Eastman started Kodak with a $3,000 investment in 1880. Jeff Bezos started Amazon.com with investments from his family and friends. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. This slide will help in starting the chapter discussion. Students enjoy stories about how companies began. 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.) 6-7

SUCCESS KNOWS NO AGE (Spotlight on Small Business)
Derek Johnson – Launched mass-texting business, Tatango, as an undergrad. Peter Findley – Started Giant Campus, summer camps for middle- and high school age kids on college campuses. Sam Hogg – Started GiftZip.com, an electronic gift card aggregator site. John Goscha – Created IdeaPaint after many nights of brainstorming led to enormous sheets of paper plastered all over his dorm walls. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-8

YOU’RE NEVER TOO YOUNG to be an ENTREPRENEUR
Five reasons to start your business right away: You don’t have a mortgage or kids to take care of. You can survive on little funds and work long hours. No disruption to your career path. It hasn’t started yet! Use of your alma mater for resources. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. You’re Never Too Young to be an Entrepreneur This slide shows the students that it’s never too early to get started on your business ideas. Ask students: Can you think of other reasons you might want to start a business right after school? What are the potential downsides to starting a business right away? Source: Entrepreneurship, April 2010. 6-9

YOU’RE NEVER TOO OLD to be an ENTREPRENEUR EITHER!
The highest rate of entrepreneurship activity is in the age group! Since 1996, older Americans have opened businesses at a higher rate than year olds. Older entrepreneurs have greater experience and more financial resources. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. You’re Never Too Old to be an Entrepreneur Either This slide shows that in spite of popular belief that all older Americans retire at a certain age, many start their own businesses after leaving their careers. Ask students: Can you think of reasons (other than experience and funding) that older entrepreneurs are successful? Why do you think older Americans want to start businesses at this age? What are the downsides of starting a business late? Source: U.S. News and World Report, October 2010. 6-10

WHY TAKE the RISK? Opportunity Profit Independence Challenge
Why People Take the Entrepreneurial Challenge LG1 Opportunity Profit Independence Challenge See Learning Goal 1: Explain why people take the risks of entrepreneurship, list the attributes of successful entrepreneurs, and describe entrepreneurial teams, intrapreneurs, home-based and web-based businesses. 6-11

WHAT DOES IT TAKE to be an ENTREPRENEUR?
Why People Take the Entrepreneurial Challenge WHAT DOES IT TAKE to be an ENTREPRENEUR? LG1 Self-directed Self-nurturing Action-oriented Highly energetic Tolerant of uncertainty See Learning Goal 1: Explain why people take the risks of entrepreneurship, list the attributes of successful entrepreneurs, and describe entrepreneurial teams, intrapreneurs, home-based and web-based businesses. 6-12

FIVE STEPS to STARTING YOUR BUSINESS in SCHOOL
Why People Take the Entrepreneurial Challenge FIVE STEPS to STARTING YOUR BUSINESS in SCHOOL LG1 Find a problem or need. Zero in on specifics. Do research on campus, test products with students. Move forward with your ideas. Don’t wait! Sacrifice. See Learning Goal 1: Explain why people take the risks of entrepreneurship, list the attributes of successful entrepreneurs, and describe entrepreneurial teams, intrapreneurs, home-based and web-based businesses. Five Steps to Starting Your Business in School Just because you’re still in school doesn’t mean that starting a business is beyond grasp. Many students have turned their time in college into business creation. Ask students: Have you had an idea for a business? What triggered it? Why did you or did you not pursue it further? Source: Entrepreneur, May 2010. 6-13

An IDEA is a GOOD OPPORTUNITY IF…
Turning Your Passion and Problems into Opportunities An IDEA is a GOOD OPPORTUNITY IF… LG1 It fills customers’ needs. You have the skills and resources to start a business. You can sell the product or service at a reasonable price and still profit. You can get your product or service to customers before the window of opportunity closes. You can keep the business going. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-14

ENTREPRENEURIAL TEAMS
LG1 Entrepreneurial team -- A group of experienced people from different areas of business who join to form a managerial team with the skills to develop, make and market a new product. An entrepreneurial team (Steve Jobs, Steve Wozniak and Mike Markkula) was key to Apple’s success. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-15

MICROPRENEURS Micropreneurs and Home-Based Businesses LG1 Micropreneurs -- Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the work they want to do, and offers a balanced lifestyle. About half of U.S. micropreneurs are home- based business owners – writers, consultants, video producers, architects, bookkeepers, etc. Nearly 60% of home-based micropreneurs are men. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-16

HOME-BASED BUSINESS GROWTH
Micropreneurs and Home-Based Businesses LG1 Computer technology has leveled the playing field. Corporate downsizing has led many to venture on their own. Social attitudes have changed. New tax laws have loosened restrictions on deducting expenses for home offices. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. In the United States home-based businesses have experienced growth due to a variety of reasons. One of the most important reasons for the growth in home-based businesses is that technology has made it easier for home-based businesses to compete against their larger competitors. 6-17

HOME-BASED BUSINESS ISN’T EASY
Micropreneurs and Home-Based Businesses LG1 Getting new customers is difficult. Managing your time requires self-discipline. Work and family tasks are sometimes not separated. Government ordinances may restrict your business. Homeowner’s insurance may not cover business-related claims. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-18

BENEFITS of HOME-BASED BUSINESSES
Micropreneurs and Home-Based Businesses LG1 Ability to start your business immediately Minimal start-up capital needed No rent or excessive set-up charges Comfortable working conditions Reduced wardrobe expenses No commuting Tax benefits Elimination of office politics Low risk for trial and error Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Ups of Home-Based Businesses This slide lists some of the benefits of a home-based business. Before showing this slide, have students work alone, then with a partner, then with a group (doing all three will help promote discussion of students’ ideas) to see if they can come up with a list of benefits of home-based businesses. Then reveal the slide and have students compare their lists to the slide. 6-19

DOWNSIDES of HOME-BASED BUSINESSES
Micropreneurs and Home-Based Businesses LG1 Difficult to establish work habits Limited support system Isolation Work space may be limited Clients may be uncomfortable coming to your home Zoning restrictions Success is based 100% on your efforts Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Downs of Home-Based Businesses This slide walks students through some of the drawbacks of a home-based business. Before showing this slide, have students work alone, then with a partner, then with a group (doing all three will help promote discussion of students’ ideas) to see if they can come up with a list of disadvantages of home-based businesses. Then reveal the slide and have students compare their lists to the slide. 6-20

THINK YOU’RE READY to WORK from HOME?
Micropreneurs and Home-Based Businesses LG1 Yes? No? If I don’t know the answer, I can figure it out. I’m hardworking, self-directed and disciplined. I’m organized and can multitask. I don’t mind working long hours or weekends. I regularly set goals and measure progress. I’m happy being alone. I’m an excellent communicator. I can create relationships with people I’ve never met. I’m productive on my own. My family and friends don’t expect me to be available when I’m working at home. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Think You’re Ready to Work From Home? Running a business from home is hard work. After discussing both the ups and downs of home-based work, discuss this table with students. Ask students: What statements can you say “yes” and “no” to? What do each of these statements have to do with home business success? After looking at this table, do you think you’d be ready or want to work from home? Source: Entrepreneur, June 2010. 6-21

ONLINE BUSINESS Web-Based Businesses LG1 Online sales reached $172.9 billion in 2010, 7% of all retail sales. All retail sales were up 2.5% in However, online retail sales grew 11%. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. It’s expected online sales will reach $250 billion by 2014. 6-22

AFFILIATE MARKETING Web-Based Businesses LG1 Affiliate Marketing -- An Internet-based marketing strategy in which a business rewards individuals or other businesses for each visitor or customer the affiliate sends to its website. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. 6-23

BOOSTING YOUR BUSINESS’S ONLINE PRESENCE
Web-Based Businesses LG1 Establish an identity. Be easy to find. Steal good ideas and make them your own. Look out for opportunities. Remember other forms of marketing. Be friendly! Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Boosting Your Business’ Online Presence Activity online, both in retail and marketing, continues to grow each year. It’s important that businesses (even the small ones!) have an online, user-friendly presence. This slide provides some guidelines to successfully navigate the process of creating an online business identity, Ask students: Do you have any other ideas for important steps to take in creating an online personality for a business? Through Facebook? Twitter? Ads on Pandora or Hulu? Photo Courtesy of: Marc Wathieu Source: Entrepreneur, May 2010. 6-24

INTRAPRENEURS Entrepreneurship Within Firms LG1 Intrapreneur -- A creative person who works as an entrepreneur within a corporation. Intrapreneurs use a company’s existing resources to launch new products for the company. Art Fry of 3M developed Post-Its when he was trying to mark pages of his hymnal without damage. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. In order to develop new ideas, engineers at Google are allowed to work on projects that interest them for up to twenty percent of their time at work. The idea is to support creative people and ideas in an effort to launch new products. This work can be more motivating than working on someone else’s ideas. 6-25

GOVERNMENT and ENTREPRENEURSHIP
Encouraging Entrepreneurship: What Government Can Do GOVERNMENT and ENTREPRENEURSHIP LG1 Immigration Act passed in 1990 created a category of “investor visas” that encourage entrepreneurs to come to the U.S. Enterprise Zones -- Specific geographic areas to which governments attract private business investment by offering lower taxes and other government support. Incubators -- Offer new businesses low-cost offices with basic services. Learning Goal 1: Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Small-business is the economic engine of the United States economy. Due to the economic power of small-businesses the government has used “investor visas,” enterprise zones and business incubators to encourage entrepreneurship. A good website to further explore incubators is 6-26

PROGRESS ASSESSMENT Progress Assessment Why are people willing to take the risks of entrepreneurship? What are the advantages of entrepreneurial teams? How do micropreneurs differ from other entrepreneurs? What are some opportunities and risks of web- based businesses? The primary reasons people are will to take the risk of entrepreneurship are: (a) opportunity to share in the American dream; (b) profit, the potential to become wealthy and successful; (c) independence, becoming you own boss; and (d) challenge, the desire to take a chance. 2) Whereas an entrepreneur has to wear many hats and take huge responsibility, a team allows members to combine creative skills with production and marketing skills right from the start. Having a team can also ensure more cooperation and coordination later among functions in the business. 3) Most entrepreneurs are committed to the quest for growth in their business. Mircorpreneurs know they can be content even if their companies never appear on a list of top-ranked businesses. Many micropreneurs are home-based businesses. 4) The Internet has opened the world of entrepreneurship wider than ever. Online sales have grown six times faster than retail sales and in 2010 topped $172 billion. Today anything that can be offered in a retail environment can be offered online. However, a web-based business is not an automatic ticket to success. It can often be a shortcut to failure. Web-based businesses must remember that they need to offer unique products or services that customers cannot easily purchase at retail locations. 6-27

SMALL BUSINESSES Small Versus Big Business LG2 Small Business -- Independently owned and operated, not dominant in its field of operation and meets certain standards of size. Businesses are “small” in relation to other businesses in their industries. See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. 6-28

SMALL BUSINESS STATISTICS
Small Versus Big Business LG2 There are 27.8 million small businesses in the U.S. Of all nonfarm businesses in the U.S., almost 97% are considered small. Small businesses account for over 50% of the GDP. Small businesses generate 60-80% of new jobs. About 80% of U.S. workers’ first jobs were in small business. See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. The power of small business is immense. Students are often shocked to see how small businesses contribute to the U.S. economy. 6-29

ADVANTAGES of SMALL OVER BIG BUSINESS
Importance of Small Business LG2 More personal customer service. The ability to respond quickly to opportunities. See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Photo Courtesy of: Elliot Brown 6-30

BUSINESS FAILURES are LOWER THAN the REPORTS BECAUSE…
Small Business Success & Failure BUSINESS FAILURES are LOWER THAN the REPORTS BECAUSE… LG2 Owner closing a business to start another is reported as a “failure.” Changing forms of ownership is reported as a “failure.” Retirement is reported as a “failure.” See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. 6-31

THEY DID WHAT? Famous Business Failures
Small Business Success & Failure LG2 Tommy Hilfiger – First store went bankrupt Milton Hershey – First confectionery failed H.J. Heinz – Company went bankrupt six years after start Walt Disney – First film company went bankrupt Henry Ford – First two car companies failed L.L. Bean – Almost went bankrupt in first year See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. They Did What? Starting a successful new business is never easy and many famous entrepreneurs failed at their first and subsequent attempts. Ask students: How can a business failure actually be a positive experience? (While failure is never a goal, it often gives the entrepreneur an invaluable experience. Old adage: Learn from your mistakes.) Ask the student: If your first business failed, would you try again? Why or why not? How can businesses survive such poor performances? (Determination and passion of the owners and founders plays a big role.) Source: World Features Syndicate. 6-32

LEARNING ABOUT SMALL BUSINESS
Learning About Small Business Operations LG3 Learn from Others – Investigate your local colleges for classes on small business and entrepreneurship; talk to and work for successful local entrepreneurs. Get Some Experience – Gain three years experience in the field; then start a part-time small business. Take Over a Successful Firm – Serve as an apprentice and eventually take over once the owner steps down. See Learning Goal 3: Summarize ways to learn about how small businesses operate. 6-33

GOING DOWN with the SHIP (Making Ethical Decisions)
Suppose you worked in a company for two years and you see signs of it faltering. You and a coworker have ideas about how to succeed and are considering quitting to start your own company. Should you approach other coworkers about working for your new venture? Will you try to lure your old boss’s customers? What are the alternatives? What are the consequences? What is the most ethical choice? See Learning Goal 3: Summarize ways to learn about how small businesses operate. 6-34

MAJOR BUSINESS FUNCTIONS
Managing a Small Business LG4 Planning Financing Knowing customers Managing employees Keeping records See Learning Goal 4: Analyze what it takes to start and run a small business. Starting a business is when the real work begins. It is important that entrepreneurs understand the major business functions such as planning, financing, understanding your customer, managing employees and keeping good records. Many entrepreneurs create business plans which may in part outline the major business functions. 6-35

BUSINESS PLANS Begin with Planning LG4 Business Plan -- A detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and owners’ qualifications. A business plan forces potential owners to be specific about what they will offer. A business plan is mandatory for talking with bankers or investors. See Learning Goal 4: Analyze what it takes to start and run a small business. The business plan is the entrepreneur’s road map to success. While a well-designed business plan will not guarantee success, the lack of one may lead to failure. To borrow money or to seek investors a business plan is a must. 6-36

WRITING a BUSINESS PLAN
LG4 A good plan takes a long time to prepare. A good executive summary catches interest and tempts potential investors to read on. Getting the plan into the right hands is almost as important as getting the right information in it. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-37

A FAMILY AFFAIR What to Consider Before Starting a Family Business
Writing a Business Plan LG4 Clarify Expectations – What will each person contribute? Discuss Work/Family Boundaries – What is the line that separates work from personal relationships? Develop Good Communication – Agree about types of decisions you’ll make jointly and on your own. Clarify Long-Term Intentions – Discuss how long everyone will work full time and goals for the business. Have an Escape Hatch – Have a Plan B. See Learning Goal 4: Analyze what it takes to start and run a small business. A Family Affair This slide illustrates what needs to be considered before starting a business with family members. Communication and the establishment of clear expectations are the keys to making a family business work. Ask students: Why do family businesses need extra care? Source: Bloomberg Businessweek, accessed June 2011. 6-38

SOURCES of CAPITAL Personal savings Relatives Former employers
Getting Money to Fund a Small Business LG4 Personal savings Relatives Former employers Banks & finance companies Government agencies Angel investors Venture capitalists -- Individuals or companies that invest in new businesses in exchange for partial ownership. See Learning Goal 4: Analyze what it takes to start and run a small business. One reason that businesses fail is a lack of capital. Capital can come from internal sources (personal saving, employees, etc.) or from external sources (relatives, banks and angel investors). One source of external funding is venture capital. Venture capitalists are individuals or companies that invest in new businesses in exchange for a stake in ownership. Many well-known businesses, such as Google, Zappos and Apple, received a first round of funding from venture capitalists. 6-39

FUNDING YOUR DREAM Getting Cash When Financing Isn’t an Option
Getting Money to Fund a Small Business LG4 Get close to your customers. Make clients pay upfront. Outsource tasks on the cheap. Get in front of customers quickly. Become an expert. Ask for help. Be patient. See Learning Goal 4: Analyze what it takes to start and run a small business. Funding Your Dream Financing is hard to come by in this economy. This slide outlines Seth Godin’s advice on how to self-fund start-ups. Source: Inc., October 2010. 6-40

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS
Getting Money to Fund a Small Business LG4 CDFIs are playing a big role in the economic recovery. First formed in the early 1980s; by 2009, over $1 billion flowed into CDFIs from investment companies. Only 1% of loans were not paid back in the last 30 years! See Learning Goal 4: Analyze what it takes to start and run a small business. 6-41

SOCIAL LENDING (Social Media in Business)
Kickstarter and Lending Club connect loan seekers to potential lenders. Administrators assign interest rates between 6.78% and 24.95% based on their credit history, how much money is needed, and what the person is using it for. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-42

The SMALL BUSINESS ADMINISTRATION
LG4 Small Business Administration (SBA) -- A U.S. government agency that advises and assists small businesses by providing management training and financial advice. SBA started a microloan program in 1991 that provides very small loans to small business owners. Program judges worthiness based on the borrowers’ integrity and soundness of their business ideas. See Learning Goal 4: Analyze what it takes to start and run a small business. The importance of small business to the U.S. economy cannot be overstated. The SBA is the government agency that advises and assists small businesses with financial advice and management training. For more information on the SBA visit their website 6-43

The SMALL BUSINESS INVESTMENT COMPANY
The Small Business Administration The SMALL BUSINESS INVESTMENT COMPANY LG4 Small Business Investment Company (SBIC) -- A program through which private investment companies licensed by the SBA lend money to small businesses. A SBIC must have a minimum of $5 million in capital and can borrow up to $2 from the SBA for each $1 of capital it has. SBICs are able to identify a business’s trouble spots early, giving entrepreneurs advice, and in some cases rescheduling loan payments. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-44

SMALL BUSINESS DEVELOPMENT CENTERS
The Small Business Administration SMALL BUSINESS DEVELOPMENT CENTERS LG4 Small Business Development Centers (SBDC) are funded jointly by the federal government and individual states. SBDCs are able to evaluate the feasibility of your idea, develop your business plan and complete your funding application – for no charge. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-45

COMMUNITY ADVANTAGE and SMALL LOAN ADVANTAGE PROGRAM
The Small Business Administration LG4 Announced by the SBA in February 2011, this program’s aim was to provide a simpler and easier way for lenders to make smaller loans in underserved areas. In March 2011, the House Small Business Committee recommended the SBA budget be cut and the program couldn’t be funded. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-46

HELP PLEASE! More SBA Resources and Other Helpful Groups
The Small Business Administration LG4 Small Business Investment Companies The Office of Innovation & Entrepreneurship SCORE Entrepreneurship.org See Learning Goal 4: Analyze what it takes to start and run a small business. Help Please! These are other sources for helpful information about starting and running a small business. Encourage students to go to these websites to learn what services each offers. Source: Inc., October 2010. 6-47

The MARKET Knowing Your Customers LG4 Market -- Consumers with unsatisfied wants and needs who have both resources and willingness to buy. Set out to fill the market’s needs by offering top quality and great service at a fair price. One of the great advantages of small businesses is the ability to know the market and quickly adapt to market needs. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-48

MANAGING EMPLOYEES Managing Employees LG4 Hiring, training and motivating employees is critical. Employees of small companies are often more satisfied with their jobs – they feel challenged and respected. Entrepreneurs best serve themselves and the business if they recruit and groom employees for management positions. See Learning Goal 4: Analyze what it takes to start and run a small business. 6-49

ACCOUNTING ASSISTANCE
Keeping Records LG4 Computers simplify the process by helping with inventory control, customer records and payroll. A good accountant can help in: Deciding whether to buy or lease equipment. Deciding whether to own or rent a building. Tax planning. Financial forecasting. Choosing sources of financing. Writing requests for funds. See Learning Goal 4: Analyze what it takes to start and run a small business. Some of the most important assistance to small business owners is in accounting. 6-50

LEGAL HELP Owners need outside consulting advice early in the process.
Looking for Help LG4 Owners need outside consulting advice early in the process. Small and medium-sized firms cannot afford to hire experts as employees. A competent lawyer can help with: Leases Contracts Partnership agreements Protection against liabilities See Learning Goal 4: Analyze what it takes to start and run a small business. 6-51

MARKETING RESEARCH Looking for Help LG4 Marketing decisions need to be made long before introducing a product or opening a store. A marketing research study can help you: Determine where to locate. Whom to select as your target market. What is an effective strategy for reaching the market. See Learning Goal 4: Analyze what it takes to start and run a small business. If marketing is about finding and filling customer needs, how can an entrepreneur better understand what customers need? Market research helps determine where to locate customers, whom to target as customers, and how to develop an effective strategy for reaching the market. 6-52

OTHER FORMS OF HELP A commercial loan officer can help:
Looking for Help LG4 A commercial loan officer can help: Design an acceptable business plan. Give financial advice. Lend money. An insurance agent can help you: Know the risks associated with the business. How to cover risks with insurance. How to prevent risks with safety devices. Service Corps of Retired Executives More than 10,500 volunteers from industry, trade associations, and education who counsel small business at no cost. See Learning Goal 4: Analyze what it takes to start and run a small business. Asking good questions is the key to success in any business. Fortunately for entrepreneurs some of the best advice comes free. Commercial loan officers can help with the creation of a business plan as well as financial advice. Insurance agents can help new entrepreneurs understand and insure against risk. One interesting and free source of information is SCORE, Service Corps of Retired Executives. To start a discussion in class, have students research SCORE ( and the programs offered at local SCORE offices. 6-53

PROGRESS ASSESSMENT Progress Assessment A business plan is probably the most important document a small business owner will ever create. There are nine sections in the business plan outline on pp Can you describe at least five sections of a business plan? A business plan needs to start with a strong cover letter. The nine key sections are: (a) executive summary, (b) company background, (c) management team, (d) financial plan, (e) capital required, (f) marketing plan, (g) location analysis, (h) manufacturing plan, and (i) appendix. 6-54

SMALL BUSINESS PROSPECTS ABROAD
Going International: Small Business Prospects SMALL BUSINESS PROSPECTS ABROAD LG5 Small- and medium-sized businesses accounted for 99% of recent export growth. Advantages of global trade for small businesses: Overseas buyers enjoy dealing with individuals. Small companies can usually begin shipping much faster. They provide a wide variety of suppliers. They can give more personal service and attention. See Learning Goal 5: Outline the advantages and disadvantages small businesses have in entering global markets. 6-55

EMERGING MARKETS, EMERGING ENTREPRENEURSHIP (Reaching Beyond Our Borders)
In emerging markets, entire industries and services are wide open for innovation. Many entrepreneurs in the developing world hold degrees and have worked at high-level companies. Entrepreneurs must often expand into different areas of business in order for their venture to grow. See Learning Goal 5: Outline the advantages and disadvantages small businesses have in entering global markets. 6-56

PROGRESS ASSESSMENT Progress Assessment Why do many small businesses avoid doing business globally? What are some of the advantages small businesses have over large businesses in selling in global markets? Key reasons why many small businesses avoid doing business overseas include: (a) financing is often difficult to find, (b) would-be exporters don’t know how to get started and do not understand the cultural differences between markets, and (c) the bureaucratic paperwork can threaten to bury a small business. 2) Small businesses have several advantages over large businesses in global markets. These include: (a) global buyers often enjoy dealing with individuals rather than with large corporate bureaucracies, (b) small companies can usually begin shipping much faster, (c) small companies can provide a wide variety of suppliers, and (d) mall companies can give global customers personal service and undivided attention because each overseas account is a major source of business for them. 6-57

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