Understanding business 10th chapter 6 entrepreneurship and starting a small business

Chapter 06 Entrepreneurship and Starting * a Small Business The Age of the Entrepreneur WHAT is ENTREPRENEURSHIP? • Entrepreneurship Accepting the risk of starting and running a business 6-2 You’re NEVER too YOUNG nor too OLD to be an ENTREPRENEUR! Reasons to start your business right NOW! Being younger: a You don’t have a mortgage or kids to take care of You can survive on little funds and work long hours No disruption to your career path It hasn’t started yet! Use of your alma mater for resources Being older: a Have greater experience and more financial resources Use of established networking peers and business contacts 6-3 Why People Take the Entrepreneurial Challenge WHY TAKE the RISK? LG1 • Opportunity • Profit • Independence • Challenge 6-4 Who Starts New Businesses? AGE AT START-UP 55+ 18 - 24 8% 25 - 34 71% 35 - 44 13% 45 - 54 6% 2% 6-7 WHAT DOES IT TAKE to be an ENTREPRENEUR? • Self-directed • Self-nurturing • Action-oriented • Highly energetic • Tolerant of uncertainty 6-8 Why People Take the Entrepreneurial Challenge FIVE STEPS to STARTING YOUR BUSINESS while in SCHOOL LG1 Find a problem or need Zero in on specifics Do research on campus, test products with fellow students Move forward with your ideas Don’t wait! Sacrifice 6-9 Turning Your Passion and Problems into Opportunities An IDEA is a LG1 GOOD OPPORTUNITY IF… • It fills customers’ needs • You have the skills and resources to start a business • You can sell the product or service at a reasonable price and still profit • You can get your product or service to customers before the window of opportunity closes • You can keep the business going 6-10 Entrepreneurial Teams ENTREPRENEURIAL TEAMS LG1 • Entrepreneurial team A group of experienced people from different areas of business who join to form a managerial team with the skills to develop, make and market a new product • An entrepreneurial team (Steve Jobs, Steve Wozniak and Mike Markkula) were key to Apple’s success 6-11 Micropreneurs and Home-Based Businesses MICROPRENEURS LG1 • Micropreneur Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them the work they want to do, and offers a balanced lifestyle • Many micropreneurs are home-based business owners – writers, consultants, video producers, architects, bookkeepers, etc • Nearly 60% of home-based micropreneurs are men 6-12 A FAMILY AFFAIR What to Consider Before Starting a Family Business • Clarify Expectations – What will each person contribute? • Discuss Work/Family Boundaries – What is the line that separates work from personal relationships? • Develop Good Communication – Agree about types of decisions you’ll make jointly and on own • Clarify Long-Term Intentions – Discuss how long everyone will work full time and goals for the business • Have an Escape Hatch – Have a Plan B 6-40 SOCIAL LENDING & INVESTING (Social Media in Business) • Kickstarter, Lending Club and Indiegogo connect loan seekers to potential lenders or investors • Administrators assign interest rates between 6.78% and 24.95% based on credit history, how much money is needed, and what the person is using it for 6-43 The Small Business Market The MARKET LG4 • Market Consumers with unsatisfied wants and needs who have both resources and willingness to buy • Set out to fill the market’s needs by offering top quality and great service at a fair price • One of the greatest advantages of a small business is the ability to know the market and to quickly adapt to market needs 6-44 Looking for Help MARKETING RESEARCH LG4 • Marketing decisions need to be made long before introducing a product or opening a store • A marketing research study can help you: - Determine where to locate Whom to select as your target market What is an effective strategy for reaching the market 6-45 Managing Employees MANAGING EMPLOYEES LG4 • Hiring, training and motivating employees is critical • Employees of small companies are often more satisfied with their jobs – they feel challenged and respected • Entrepreneurs best serve themselves and the business if they recruit and groom employees for management positions 6-46 Keeping Records ACCOUNTING ASSISTANCE LG4 • Computers simplify the process by helping with inventory control, customer records and payroll • A good accountant can help in: - Deciding whether to buy or lease equipment Deciding whether to own or rent a building Tax planning Financial forecasting Choosing sources of financing Writing requests for funds 6-47 Looking for Help LEGAL HELP LG4 • Owners need outside consulting advice early in the process • Small and medium-sized firms cannot afford to hire experts as employees • A competent attorney can help with: - Leases Contracts Partnership agreements Protection against liabilities 6-48 Looking for Help OTHER FORMS OF HELP LG4 • A commercial loan officer can help: - • Give financial advice Lend money An insurance agent can help you: - • Design an acceptable business plan Know the risks associated with the business How to cover risks with insurance How to prevent risks with safety devices Service Corps of Retired Executives (SCORE) More than 10,500 volunteers from industry, trade associations, and education who counsel small business at no cost 6-49 Progress Assessment PROGRESS ASSESSMENT A business plan is probably the most important document a small business owner will ever create There are nine sections in the business plan outline on pp 165-166 • Can you describe at least five sections of a business plan? 6-50 The Small Business Administration The SMALL BUSINESS ADMINISTRATION LG4 • Small Business Administration (SBA) A U.S government agency that advises and assists small businesses by providing management training and financial advice • SBA started a microloan program in 1991 that provides very small loans to small business owners • Program judges worthiness on belief of the borrower’s integrity and soundness of their business ideas The Small Business Administration LG4 • The SMALL BUSINESS INVESTMENT COMPANY Small Business Investment Company (SBIC) A program through which private investment companies licensed by the SBA lend money to small businesses • A SBIC must have a minimum of $5 million in capital and can borrow up to $2 from the SBA for each $1 of capital it has • SBICs are able to identify a business’s trouble spots early, giving entrepreneurs advice, and in some cases rescheduling loan payments 6-52 The Small Business Administration HELP PLEASE! More SBA Resources and Other Helpful Groups LG4 • Entrepreneurship.org • Entrepreneurs.com • Founders Card • SCORE • The Office of Innovation & Entrepreneurship • Young Entrepreneur Council • Young Presidents’ Organization • Vistage 6-53 The Small Business Administration SMALL BUSINESS LG4 • DEVELOPMENT CENTERS Small Business Development Centers (SBDC) are funded jointly by the federal government and individual states • SBDCs are able to evaluate the feasibility of your idea, develop your business plan and complete your funding application – for no charge 6-54 Going International: Small Business Prospects SMALL BUSINESS PROSPECTS ABROAD LG5 • Small and medium-sized businesses accounted for 99% of recent export growth • Advantages of global trade for small businesses: - Overseas buyers enjoy dealing with individuals Small companies can usually begin shipping much faster They provide a wide variety of suppliers They can give more personal service and attention 6-55 Progress Assessment PROGRESS ASSESSMENT • Why many small businesses avoid doing business globally? • What are some of the advantages small businesses have over large businesses in selling in global markets? 6-56 ... willing to accept the risk of starting and managing a business that remains small, lets them the work they want to do, and offers a balanced lifestyle • Many micropreneurs are home-based business. .. 6- 23 Small Versus Big Business What is a: SMALL BUSINESS LG2 Small Business Independently owned and operated, not dominant in its field of operation and meets certain standards of size Businesses... Businesses are small in relation to other businesses in their industries (less employees, less sales, not a franchise, and may only be a single store front) 6- 25 Importance of Small ADVANTAGES of SMALL