1. Chapter 6 Managing Small Business Start-Ups

2. The process of initiating a business venture Organizing necessary resources: risk/reward An entrepreneur engages in entrepreneurship – Recognizes a valuable idea – Assumes financial and legal risks Successful entrepreneurs have many different motivations What is Entrepreneurship? Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 2

3. 6.1 Five Types of Small Business Owners Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 3

4. Vital, dynamic, and increasingly important to the economy – Generated 64% of new jobs over the last 15 years – Employs more than ½ private sector jobs – Represent 99.7% of all firms Entrepreneurial companies are engines for job creation and innovation Entrepreneurship is booming around the world Entrepreneurship Today Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 4

5. Independently owned and operated, organized for profit but not dominant in the field Size standards for small business are currently under revision – Meet change and shifting economy – Daunting task but will provide greater flexibility Definition of Small Business Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 5

6. 6.2 Entrepreneurial Activity Around the World Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 6

7. 6.3 Examples of SBA Definitions of Small Business Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 7

8. More likely to be the first-born Parents are likely entrepreneurs Immigrants often start businesses Women are embracing entrepreneurship Minorities show a high rate of entrepreneurship As younger people become entrepreneurs due to the economy; entrepreneurship will be increasingly diverse Who Are Entrepreneurs? Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 8

9. 6.4 Racial & Ethnic Composition of Small Business Owners Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 9

10. High importance on being free to achieve Want to maximize their potential Six important traits:  Internal Locus of Control  High Energy Level  Need to Achieve  Self-Confidence  Awareness of Passing Time  Tolerance for Ambiguity Personality Traits Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 10

11. 6.5 Characteristics of Entrepreneurs Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 11

12. Combines the creativity, business smarts, passion, and hard work of the traditional entrepreneur with a mission to change the world for the better Social Entrepreneurship Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 12

13. Start with an idea Write a business plan Choose a legal structure Arrange financing Start with an idea Write a business plan Choose a legal structure Arrange financing Launching an Entrepreneurial Start-Up Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 13

14. 6.6 Entrepreneurial Motivation and New Business Ideas Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 14

15. 1.Clear, compelling vision 2.Realistic financial projects 3.Profile target market 4.Profile the industry and competition 5.Introduce the management team 6.Well written and formatted 7.Keep it short 8.Highlight critical risks 9.Outline sources of funding 10.Capture attention with a great summary Writing a Business Plan Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 15

16. Sole proprietorship – unincorporated business owned by an individual for profit  Unlimited liability Partnership – an unincorporated business owned by two or more people  Possible disagreements  Unlimited liability Corporation – an artificial entity created by the state and existing apart from its owners  Expensive and complex Choosing a Legal Structure Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 16

17. Debt Financing, money that must be repaid: – Family and friends – Bank loans/Finance companies – Personal credit cards – Wealthy individuals – Angel financing Equity Financing, money invested by owners or those purchasing stock – Venture capital firms Arranging Financing Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 17

18. 6.7 Sources of Start-up Capital for Entrepreneurs Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 18

19.  Start a new business  Buy an existing business  Buy a franchise  Participate in a business incubator Tactics for Becoming a Business Owner Franchising is an arrangement to purchase the right to distribute the product or service with the help of the owner Business incubators provide resources to entrepreneurs like office space, support services, and legal advice Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 19

20. 6.8 Top Ten Fastest Growing Franchises for 2010 Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 20

21. 6.9 Sample Questions for Choosing a Franchise Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 21

22. The Internet is aiding in the launch of new businesses and new ventures Starting an online business: – Find a market niche – Create a professional website – Create a domain name – Build online relationships Starting an Online Business Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 22

23. 6.10 Five Stages of Growth for an Entrepreneurial Company Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 23

24. Planning – The business plan should be treated as a living document – Recognize the value of the web for operations Organizing – Delegate and decentralize as the business grows – Teams, policies, and divisions will be required Leading – Motivate employees for cooperation and growth Controlling – Accounting records, budgets, statistical reports, and technology Managing A Growing Business Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 24