1. Entrepreneurship: Starting and Managing Your Own Business CHAPTER 5 The Future of Business The Essentials 4 th Edition Gitman & McDaniel Prepared by Deborah Baker Chapter 5 Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved © Hemera Technologies / AbleStock.com / Jupiterimages

2. 2 Learning Goals CHAPTER 5 1 Why do people become entrepreneurs, and what are the different types of entrepreneurs? 2 Which characteristics do successful entrepreneurs share? 3 How do small businesses contribute to the U.S. economy? 4 What are the first steps to take if you are starting your own business?

3. 3 Learning Goals (continued) CHAPTER 5 5 Why does managing a small business present special challenges for the owner? 6What are the advantages and disadvantages facing owners of small businesses? 7How does the Small Business Administration help small businesses? 8 What trends are shaping entrepreneurship and small-business ownership?

4. 4 Entrepreneurship Today 1 Why do people become entrepreneurs, and what are the different types of entrepreneurs? 1

5. 5 Entrepreneurs entrepreneurs People with vision, drive, and creativity who are willing to take the risk of starting and managing a business to make a profit, or greatly changing the scope and direction of an existing firm. 1

6. 6 Types of Entrepreneurs Employees who apply their creativity, vision, and knowledge within a large corporation Risk takers who start their own companies Entrepreneurs who start a series of companies Multipreneurs Classic Entrepreneurs Intrapreneurs 1

7. 7 Why Become an Entrepreneur? 1  The challenge of building a business  The desire to control their own destiny  Financial independence  Frustration working for someone else  Personal satisfaction  Creating the desired lifestyle

8. 8 CONCEPT check 1 Describe several types of entrepreneurs. What differentiates an entrepreneur from a small-business owner? What are some major factors that motivate entrepreneurs to start businesses?

9. 9 Characteristics of Successful Entrepreneurs 2 Which characteristics do successful entrepreneurs share? 2

10. 10 CONCEPT check Describe the personality traits and skills characteristic of successful entrepreneurs. What does it mean when we say that an entrepreneur should work on the business, not in it? 2

11. 11 Small Business: Driving America’s Growth 3 How do small businesses contribute to the U.S. economy? 3

12. 12 What is a Small Business? Locally based Independently managed Owned by an individual or a small group Not a dominant company 3

13. 13 Industry Services Construction Retail Manufacturing, finance, transportation, communications, wholesale Percentage 60% 16% 14% 10% Exhibit 5.5 Source: “”The Small Business Economy 2004,” United States Government Printing Office, http://www.sbaonline.sba.gov (March 21, 2006). Home-Based Businesses, by Industry 3

14. 14 CONCEPT check What are the criteria the Small Business Administration uses to define a small business? What social and economic factors have prompted the rise in small business? 3

15. 15 Ready, Set, Start Your Own Business 4 What are the first steps to take if you are starting your own business? 4

16. 16 Checklist for Starting a Business Before your start your own business… Identify your reasons Self-analysis Personal skills and experience Finding a niche Market analysis Planning your startup Finances 4 Exhibit 5.6 Source: “Checklist for Starting a Business,” http://www.sba.gov/survey/checklist/(March 20, 2006).

17. 17 Choose a Form of Business Organization  Type of business  Number of employees  Capital requirements  Tax considerations  Level of risk 4 Sole proprietorship Partnership Corporation Limited liability company

18. 18 Developing the Business Plan Key Features  General description of the company  Qualifications of the owner(s)  Description of the product or service  Analysis of the market  Financial plan 4

19. 19 Developing the Business Plan Outline for a Business Plan 4  Title Page  Table of Contents  Executive Summary  Vision and Mission Statement  Company overview  Product and/or service plan  Marketing plan  Management plan  Operating plan  Financial plan  Appendix of supporting documents Exhibit 5.8 Source: From ACP-ECollege—Small Business Management: An Entrepreneurial Emphasis, 13 th edition, by Longenecker/moore/Petty/Palich. ©2006. Reprinted with permission of South-Western, a division of Cengage Learning. http://www.thomsonrights.com. Fax 800-730-2215.

20. 20 Common Causes for Business Failures  Economic factors  Financial causes  Lack of experience  Personal reasons 4

21. 21 CONCEPT check How can potential business owners find new business ideas? Why is it important to develop a business plan? What should such a plan include? What financing options do small-business owners have? What risks do they face? 4

22. 22 Managing a Small Business 5 Why does managing a small business present special challenges for the owner? 5

23. 23 Managing a Small Business Using outside consultants Hiring and retaining employees Entering the global marketplace 5

24. 24 CONCEPT check How does the small business owner’s role change over time? How does managing a small business contribute to its growth? What are the benefits to small firms of doing business internationally, and what steps can small businesses take to explore their options? 5

25. 25 Small Business, Large Impact 6 What are the advantages and disadvantages facing owners of small businesses? 6

26. 26 Why Stay Small? 6  React more quickly to changing market forces  Develop innovative product ideas faster, with fewer financial resources and fewer people  Serve specialized markets  Offer a higher level of personal service

27. 27 Disadvantages of Being Small 6  Difficulties in obtaining adequate financing  Limited managerial skills may impact growth  Expensive to comply with federal regulations  Requires a major commitment by owner

28. 28 CONCEPT check Why are small businesses becoming so popular? Discuss the major advantages and disadvantages of small businesses. 6

29. 29 The Small Business Administration 7 How does the Small Business Administration help small businesses? 7

30. 30 Small Business Administration (SBA) A government agency that helps people start and manage small businesses, helps small-business owners win federal contracts, and speaks on behalf of small business. The Small Business Administration http://www.sba.gov 7

31. 31 CONCEPT check What is the Small Business Administration? Describe the financial and management assistance programs offered by the SBA. 7

32. 32 8 What trends are shaping entrepreneurship and small-business ownership? 8 Trends in Entrepreneurship and Small Business Ownership

33. 33 Trends in Entrepreneurship and Small Business Ownership Demographics SocietyTechnology 8

34. 34 CONCEPT check What significant trends are occurring in the small- business arena? How is entrepreneurial diversity impacting small business and the economy? How is technology affecting small business? 8