1. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-1 ©2013 John Wiley & Sons, Inc. All rights reserved. JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter 6 Entrepreneurship and New Ventures

2. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-2 Planning Ahead – Chapter 6 Study Questions 1.What is entrepreneurship and who are entrepreneurs? 2.What is special about small business entrepreneurship? 3.How do entrepreneurs start and finance new ventures?

3. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-3 Chapter 6 Learning Dashboard 1.Nature of Entrepreneurship 1.Who are the entrepreneurs? 2.Characteristics of entrepreneurs 3.Women and minority entrepreneurs 4.Social entrepreneurship 2.Entrepreneurship and Small Business 1.Why and how to get started 2.Web-based business models 3.Family businesses 4.Why small businesses fail 5.Small business development

4. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-4 Chapter 6 Learning Dashboard 3.New Venture Creation 1.Life cycles of entrepreneurial firms 2.Writing the business plan 3.Choosing the form of ownership 4.Financing the new venture

5. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-5 Takeaway 1: Nature of Entrepreneurship Entrepreneurship Risk-taking behavior that results in new opportunities Classic entrepreneur Pursues opportunities others view as problems Serial entrepreneur Starts and runs business and nonprofits over and over again First-mover advantage First to exploit a niche or enter a market

6. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-6 Takeaway 1: Nature of Entrepreneurship Intrapreneurs – Display entrepreneurial behavior as employees of larger firms

7. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-7 Takeaway 1: Nature of Entrepreneurship

8. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-8 Takeaway 1: Nature of Entrepreneurship Women and minority entrepreneurs are growing in numbers Necessity-based entrepreneurship – People start a business because no other employment opportunities exist

9. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-9 Takeaway 1: Nature of Entrepreneurship Social entrepreneurship – Unique form of ethical entrepreneurship that seeks new ways to solve pressing social problems – Social entrepreneurs Take risks to find new ways to solve pressing social problems such as poverty, literacy, illness, homelessness

10. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-10 Takeaway 2: Entrepreneurship and Small Business A small business has fewer than 500 employees Small business statistics Provide just over 55% of private-sector workers Create as many as 6 out of 10 new jobs Employ 40% of high-tech workers Receive 35% of federal government contract dollars Export more than $500 billion worth of goods and services annually

11. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-11 Takeaway 2: Entrepreneurship and Small Business Starting a small business – Franchise One business owner sells to another the right to operate the same business in another location – Business model Plan for making a profit by generating revenues that are greater than costs – Startup New and temporary venture that is trying to establish a profitable business model – Lean startups Use open source software and free web services to contain costs while staying small and keeping operations simple

12. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-12 Takeaway 2: Entrepreneurship and Small Business Internet Entrepreneurship Advertising model Brokerage model Community model Freemium model Infomediary model Referral model Merchant model Subscription model Types of web-based business models

13. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-13 Takeaway 2: Entrepreneurship and Small Business Family owned businesses – Account for 78% of new jobs created in the U.S. – Provide 60% of the nation’s employment – Feuds result when family members disagree over how the business is run – Possible succession problems Who will run the business when the current head leaves? Succession plan outlines leadership transition and financial matters

14. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-14 Takeaway 2: Entrepreneurship and Small Business Why small businesses fail – SBA reports that as many as 60 to 80% of new businesses fail in first five years – Reasons why small businesses fail - Lack of experience- Lack of expertise - Lack of commitment- Growing too fast - Lack of strategy- Lack of strategic leadership - Ethical failure- Poor financial control

15. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-15 Takeaway 2: Entrepreneurship and Small Business Small business development – Business incubator Offers space, shared services and advice to get small businesses started – Small Business Development Centers Founded with U.S. Small Business Administration to provide advice to new and existing small businesses

16. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-16 Takeaway 3: New Venture Creation Life cycles of entrepreneurial firms

17. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-17 Takeaway 3: New Venture Creation Business plan – Describes the direction for a new business and the financing needed to operate it – Banks want to see a well-developed business plan before loaning money

18. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-18 Takeaway 3: New Venture Creation Sample Business Plan Outline: – Executive Summary – Industry Analysis – Company description – Products and services description – Market description – Marketing Strategy – Operations description – Staffing description – Financial projections – Capital needs – Milestones

19. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-19 Takeaway 3: New Venture Creation Forms of ownership – Sole Proprietorship An individual or married couple pursuing business for a profit. This does not involve incorporation.

20. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-20 Takeaway 3: New Venture Creation Forms of ownership – Partnership Two or more people agree to contribute resources to start and operate a business together General Partnership The owners share management responsibilities Limited Partnership General partner manages the business Limited partners share profit but losses are limited to the amount of their investment Limited Liability Partnership Limits the liability of one partner for the negligence of another

21. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-21 Takeaway 3: New Venture Creation Forms of ownership – Corporation A legal entity that exists separately from its owners – Limited Liability Corporation (LLC) A combination of sole proprietorship, partnership, and corporation – Protects owners against personal loss other than what is invested in the company – Treated as a proprietorship or partnership for tax purposes

22. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-22 Takeaway 3: New Venture Creation Financing – Debt Financing involves borrowing money from another person, a bank, or a financial institution – Equity Financing involves exchanging ownership shares for outside investment monies – Venture Capitalists Involves making large investments in new ventures in return for an equity stake in the business

23. Place Slide Title Text Here ©2013 John Wiley & Sons, Inc. All rights reserved. 6-23 Takeaway 3: New Venture Creation Financing – Angel Investor A wealthy individual willing to invest in return for equity in a new venture – Initial Public Offering (IPO) An initial selling of shares of stock to the public at large