1. 5-1 Chapter 5: The Challenges of Starting a Business Exploring Business 2.0 © 2012 Flat World Knowledge

2. 5-2 Chapter Objectives 1.Define entrepreneur. 2.Describe the three characteristics of entrepreneurial activity. 3.Identify five potential advantages to starting your own business. 4.Explain the differences among three types of start-up firms. 5.Define a small business. 6.Explain the importance of small businesses to the U.S. economy. Exploring Business 2.0 © 2012 Flat World Knowledge

3. 5-3 Chapter Objectives 7.Explain why small businesses tend to foster innovation more effectively than large ones. 8.Describe some of the ways in which small companies work with big ones 9.Describe the goods-producing and service-producing sectors of an economy. 10.Identify the industries in which small businesses are concentrated. 11.Summarize the advantages and disadvantages of business ownership. 12.Explain what it takes to start a business. Exploring Business 2.0 © 2012 Flat World Knowledge

4. 5-4 Chapter Objectives 13.Evaluate the advantages and disadvantages of several small business ownership options—starting a business from scratch, buying an existing business, and obtaining a franchise. 14.Discuss the importance of planning for your business, and identify the key sections of a business plan. 15.Discuss ways to succeed in managing a business, and explain why some businesses fail. 16.Identify sources of small business assistance from the Small Business Administration. Exploring Business 2.0 © 2012 Flat World Knowledge

5. 5-5 Entrepreneur “…someone who identifies a business opportunity and assumes the risk of creating and running a business to take advantage of it.” Exploring Business 2.0 © 2012 Flat World Knowledge

6. 5-6 Why Be An Entrepreneur? Be Own Boss Be Own Boss Financial Independence Financial Independence Creative Freedom Creative Freedom Use Own Skills & Knowledge Use Own Skills & Knowledge Exploring Business 2.0 © 2012 Flat World Knowledge

7. Exploring Business © 2009 FlatWorld Knowledge 5-7 Entrepreneurs Vs. Lifestyle Business Owners Entrepreneurs Innovators Innovators New/Improved Products New/Improved Products Grow & Expand Grow & Expand Owners of Lifestyle Businesses Provide Income Provide Income Not Innovative Not Innovative No Plan For Expansion No Plan For Expansion Exploring Business 2.0 © 2012 Flat World Knowledge

8. 5-8 Small Business SBA Classification  Independent Ownership  Little Influence In Industry  Fewer Than 500 Employees Economic Impact  25M+ Businesses  50% of GDP Exploring Business 2.0 © 2012 Flat World Knowledge

9. 5-9 Small Business Importance  Job Creation  Innovative  Opportunities For Women & Minorities  Helps Big Business Exploring Business 2.0 © 2012 Flat World Knowledge

10. 5-10 Small Firm Job Gains and Losses, 1993–2008 (in millions of jobs) Exploring Business 2.0 © 2012 Flat World Knowledge

11. 5-11 Businesses Owned by Women and Minorities Exploring Business 2.0 © 2012 Flat World Knowledge

12. 5-12 Small Business Industries 80% = Intangible Services 80% = Intangible Services 20% = Tangible Goods 20% = Tangible Goods Exploring Business 2.0 © 2012 Flat World Knowledge

13. 5-13 Small Business By Industry Exploring Business 2.0 © 2012 Flat World Knowledge

14. 5-14 Small Business Ownership AdvantagesAdvantages  Independence  Financial Rewards  Lifestyle  Learning Opps.  Creative Freedom  Personal Satisfaction  Disadvantages  Financial Risk  Stress  Time Commitment  Undesirable Duties Exploring Business 2.0 © 2012 Flat World Knowledge

15. 5-15 Entrepreneur’s Work Week Exploring Business 2.0 © 2012 Flat World Knowledge

16. 5-16 Business Plan “…a document that identifies the goals of your proposed company and explains how they will be achieved...” Exploring Business 2.0 © 2012 Flat World Knowledge

17. 5-17 Blueprint for Company How Business Will be BuiltHow Business Will be Built How Intend To Make It SturdyHow Intend To Make It Sturdy Get FinancingGet Financing Exploring Business 2.0 © 2012 Flat World Knowledge

18. 5-18 Sources For Business Idea IndustryExperienceHobbies Exploring Business 2.0 © 2012 Flat World Knowledge

19. 5-19 Ownership Options  Start From Scratch  Buy Existing  Buy A Franchise Exploring Business 2.0 © 2012 Flat World Knowledge

20. 5-20 The Growth of Franchising, 1980–2007 Exploring Business 2.0 © 2012 Flat World Knowledge

21. 5-21 Franchise FranchiseAdvantages  Recognized Name Product Product  Help In Start-up  Advertising  Ongoing Support Disadvantages  Expensive Franchise FeeFranchise Fee Royalty FeeRoyalty Fee  Franchiser’s Rules  Franchiser May Not Follow Through Through Exploring Business 2.0 © 2012 Flat World Knowledge

22. 5-22 Benefits Of Business Plan  Forces You To Think Critically Critically  Reduces Risk  Analyze Concept/ Industry Industry Exploring Business 2.0 © 2012 Flat World Knowledge

23. 5-23 Audiences of Plan  Investors Quality of Concept Quality of Concept Ability to Manage Ability to Manage  Bankers- Ability To Repay Loan Exploring Business 2.0 © 2012 Flat World Knowledge

24. 5-24 Business Plan 1)Executive Summary 2)Description of Business 3)Industry Analysis 4)Mission Statement/Core Values 5)Management Plan 6)Goods/Services 7)Development & Production 8)Marketing 9)Global Issues 10)Financial Plan 11)Appendices Exploring Business 2.0 © 2012 Flat World Knowledge

25. 5-25 Executive Summary  1-3 Page Overview  Most Important Part  Written After Plan Completed Exploring Business 2.0 © 2012 Flat World Knowledge

26. 5-26 Description Of Business  What Will Do?  Goods/Services Provided?  Unique?  Customers?  How Sold?  Location? Exploring Business 2.0 © 2012 Flat World Knowledge

27. 5-27 Industry Analysis  Players?  Outlook?  Total Projected Sales?  Factors of Expansion/Contraction?  Future Economic Conditions? Exploring Business 2.0 © 2012 Flat World Knowledge

28. 5-28 Mission Statement & Core Values  Mission Statement- Purpose or mission of company  Core Values- Fundamental beliefs...what is/is not appropriate in business activities, ideals Exploring Business 2.0 © 2012 Flat World Knowledge

29. 5-29 Management Plan o Member Qualifications Education Education Experience Experience Expertise Expertise o Legal Form Sole Proprietorship Sole Proprietorship Partnership Partnership Corporation Corporation Exploring Business 2.0 © 2012 Flat World Knowledge

30. 5-30 Goods & Services  Description  Better Than Competitors  Market Needs  Competitive Advantage Exploring Business 2.0 © 2012 Flat World Knowledge

31. 5-31 Development & Production  Product Design  Technology  Own Or Contract For Facilities  Where?  Equipment  Design/Layout Of Facilities  Number of Employees  Units Produced  Ensure High Quality? Exploring Business 2.0 © 2012 Flat World Knowledge

32. 5-32Marketing  Target Market  Pricing  Distribution  Promotion Exploring Business 2.0 © 2012 Flat World Knowledge

33. 5-33 Global Issues  Buying/Selling In Other Countries  Identify Cross Border Challenges  How Overcome Challenges  Strategies For Future Exploring Business 2.0 © 2012 Flat World Knowledge

34. 5-34 Financial Plan  Cash Needs Start-up Start-up Operations Operations Funding Sources Funding Sources  Repay Debt  Projections Expected Sales Expected Sales Costs Costs Profits (Losses) Profits (Losses) Exploring Business 2.0 © 2012 Flat World Knowledge

35. 5-35Appendices  Resumes  Financial Statements Exploring Business 2.0 © 2012 Flat World Knowledge

36. 5-36 Succeeding In Business  Know Business  Know Management  Proper Attitude  Get Adequate Funding  Manage Money  Manage Time  Know People  Satisfy Customer  Know How To Compete Exploring Business 2.0 © 2012 Flat World Knowledge

37. 5-37 SBA Assistance Assistance In: Assistance In: – Business Plan – Starting – Managing Financing Financing Management/Technical Management/Technical Services/Training Services/Training Exploring Business 2.0 © 2012 Flat World Knowledge

38. 5-38 SBA Programs  SBDCs Assist with  Business Problems  Free Training & Technical Info.  Service Corps of Retired Executives Exploring Business 2.0 © 2012 Flat World Knowledge

39. 5-39 Why Businesses Fail  Bad Business Idea  Cash Problems  Inexperience or Incompetence  Lack Of Customer Focus  Inability To Handle Growth Exploring Business 2.0 © 2012 Flat World Knowledge