1. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 1 6-1 6-1Becoming an Entrepreneur 6-2 6-2Small Business Basics 6-3 6-3Starting a Small Business 6 C H A P T E R Entrepreneurship and Small Business Management

2. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 2 CHARACTERISTICS OF ENTREPRENEURS ●Desire to be your own boss ●Special skills and abilities

3. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 3 WHAT DOES IT TAKE? ●Not all business owners and managers are entrepreneurs. ●Entrepreneurs have unique skills and personal characteristics.

4. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 4 ENTREPRENEURS ARE MORE ●Persistent ●Inquisitive ●Energetic ●Goal-oriented ●Independent ●Self-confident ●Creative ●Reliable ●Competitive

5. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 5 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

6. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 6 ENTREPRENEURSHIP AND THE ECONOMY ●Employment ●Financing ●Productivity

7. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 7 Checkpoint ●What are the sources of financing that entrepreneurs use for their new businesses? ●Personal savings ●Friends and family ●Venture capital ●Bank loans

8. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 8 OPPORTUNITIES AND RISKS ●Before deciding to start a business, you need to think about the opportunities and risks.

9. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 9 NEW BUSINESS OPPORTUNITIES ●Innovation ●Improvement

10. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 10 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

11. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 11 KEY TERMS ●small business ●Small Business Administration (SBA)

12. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 12 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

13. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 13 Common Types of Small Businesses as Percent of All Small Businesses

14. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 14 SMALL BUSINESS ADVANTAGES ●Meeting customer needs ●Providing unique services

15. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 15 Checkpoint ●How can small businesses compete successfully with larger businesses? ●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.

16. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 16 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

17. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 17 SMALL BUSINESS ASSISTANCE ●University and college faculty members ●Local groups of business people ●Small Business Administration (SBA)

18. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 18 KEY TERMS ●business plan ●start-up financing ●short-term financing ●long-term financing

19. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 19 THE BUSINESS DECISION ●An idea plus experience ●Right place and time ●Team approach ●Preparation and research

20. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 20 Checkpoint ●Why is it important to use a team approach when starting a new business? ●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.

21. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 21 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.

22. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 22 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

23. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 23 ELEMENTS OF A BUSINESS PLAN ●Description of Competition ●Characteristics of the industry ●Condition of the economy ●Strengths and weaknesses of major competitors (continued)

24. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 24 ELEMENTS OF A BUSINESS PLAN ●Customer Analysis ●Description of customers ●Location, number, and resources of customers ●Sales forecasts (continued)

25. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 25 ELEMENTS OF A BUSINESS PLAN ●Operations Plan ●Organization of the company ●Description of major operations ●Analysis of resources needed ●Human resource plans (continued)

26. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 26 ELEMENTS OF A BUSINESS PLAN ●Marketing Plan ●Description of major marketing activities ●Description of resources needed ●Schedule of marketing activities (continued)

27. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 27 ELEMENTS OF A BUSINESS PLAN ●Financial Plans ●Start-up costs ●Short- and long-term financial needs ●Sources of financing ●Budgets and financial statements (continued)

28. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 28 STEPS IN DEVELOPING THE BUSINESS PLAN ●Gather and review information ●Develop the strategic alternatives ●Write the plan ●Ask an expert to review the plan

29. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 29 Checkpoint ●What are the “strategic alternatives” in a business plan? ●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.

30. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 6 SLIDE 30 FINANCING THE SMALL BUSINESS ●Types of financing ●Start-up financing ●Short-term financing ●Long-term financing ●Sources of financing ●Owner-supplied funds ●Borrowed funds