Entrepreneurship:Starting and

Managing YourOwn Business C

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The Future of BusinessThe Essentials 4th EditionGitman & McDaniel

Prepared byDeborah Baker

Chapter 5Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved

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Learning Goals

CH

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R 51 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

Learning Goals (continued)

CH

AP

TE

R 55 Why does managing a small business present

special challenges for the owner?

6 What are the advantages and disadvantages facing owners of small businesses?

7 How does the Small Business Administration help small businesses?

8 What trends are shaping entrepreneurship and small-business ownership?

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Entrepreneurship Today

1

Why do people become entrepreneurs, and what are the different types of entrepreneurs?

1

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

Types of Entrepreneurs

Employees who apply theircreativity, vision, and

knowledge within a large corporation

Employees who apply theircreativity, vision, and

knowledge within a large corporation

Risk takers who start their own companies

Risk takers who start their own companies

Entrepreneurs who start a series of companies

Entrepreneurs who start a series of companiesMultipreneursMultipreneurs

Classic Entrepreneurs

Classic Entrepreneurs

IntrapreneursIntrapreneurs

1

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

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

Characteristics of Successful Entrepreneurs

2

Which characteristics do successful entrepreneurs share?

2

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

Small Business: Driving America’s Growth

3

How do small businesses contribute to the U.S. economy?

3

12

What is a Small Business?

Locally basedLocally based

Independently managedIndependently managed

Owned by an individualor a small group

Owned by an individualor a small group

Not a dominant companyNot a dominant company

3

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

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

Ready, Set, Start Your Own Business

4

What are the first steps to take if you are starting your own business?

4

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

Choose a Form of Business Organization

Type of business

Number of employees

Capital requirements

Tax considerations

Level of risk

4

Sole proprietorshipSole proprietorship

PartnershipPartnership

CorporationCorporation

Limited liability companyLimited liability company

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

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Developing the Business PlanOutline 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 documentsExhibit 5.8 Source: From ACP-ECollege—Small Business Management: An Entrepreneurial Emphasis, 13th 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.

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Common Causes for Business Failures

Economic factors

Financial causes

Lack of experience

Personal reasons

4

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

Managing a Small Business

5

Why does managing a small business present special challenges for the owner?

5

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Managing a Small Business

Using outside consultantsUsing outside consultants

Hiring and retaining employeesHiring and retaining employees

Entering the global marketplaceEntering the global marketplace

5

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?

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Small Business, Large Impact

6

What are the advantages and disadvantages facing owners of small businesses?

6

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

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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

CONCEPT check

Why are small businesses becoming so popular?

Discuss the major advantages and disadvantages of small businesses.

6

29

The Small Business Administration

7

How does the Small Business Administration help small businesses?

7

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

CONCEPT check

What is the Small Business Administration?

Describe the financial and management assistance programs offered by the SBA.

7

328

What trends are shaping entrepreneurship and small-business ownership?

8

Trends in Entrepreneurship and Small Business Ownership

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Trends in Entrepreneurship and Small Business Ownership

Demographics

Society Technology

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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