Chapter 18 - Entrepreneurship and small business. After reading this chapter, you should be able to answer the following questions: Understand the nature of entrepreneurship and entrepreneurs, discuss small business and how to start one.
Exploring Management Chapter 18 Entrepreneurship and Small Business Chapter 18 • • What is entrepreneurship and who are entrepreneurs? What should we know about small businesses and how to start one? 18.1 Entrepreneurship • • • • • Entrepreneurs are risk takers who spot and pursue opportunities Entrepreneurs often share similar backgrounds and experiences Entrepreneurs often share similar personality traits Women and minority entrepreneurs are growing in numbers Social entrepreneurs seek novel solutions ENTREPRENEURSHIP Entrepreneurs Are Risk Takers • Entrepreneurship – • Dynamic, risk-taking, creative, growthoriented behavior Entrepreneur – Person willing to pursue opportunities that others fail to recognize or view as problems ENTREPRENEURSHIP Entrepreneurs Are Risk Takers • First mover advantage – Exploiting a new market opportunity before competitors ENTREPRENEURSHIP Entrepreneurs Are Risk Takers • Successful entrepreneurs ENTREPRENEURSHIP Entrepreneur Characteristics • Similar backgrounds – Family environment – Career and work history – Windows of career opportunity ENTREPRENEURSHIP Entrepreneur Characteristics • Intrapreneurs – Employees of a larger firm that display entrepreneurial behavior such as developing a new product or process ENTREPRENEURSHIP Entrepreneur Characteristics • Who are the entrepreneurs? ENTREPRENEURSHIP Women and Minorities • • Women and minority entrepreneurs are growing in numbers Necessity-based entrepreneurship – People start a business because no other employment opportunities exist ENTREPRENEURSHIP Social Entrepreneurs • Social entrepreneurs – are driven by a social mission • Poverty • Illiteracy • Health problems • Social opression 18.2 Small Businesses • • • • • • Small businesses are mainstays of the economy Small businesses must master three life-cycle stages Family owned businesses can face unique challenges Most small businesses fail within five years Assistance is available to help small businesses get started A small business should start with a sound SMALL BUSINESS Importance of Small Business • Small business – • Fewer than 500 employees Small business statistics – Employ some 52 percent of private workers – Provide 51 percent of private-sector output – Receive 35 percent of federal government contract dollars – Provide as many as out of every 10 new jobs in the economy SMALL BUSINESS Small Business Life Cycle SMALL BUSINESS Challenges • Family owned businesses – Largest percentage of businesses worldwide – Feuds result when family members disagree over how the business is run – Succession problem • • Who will run the business when the current head leaves? Succession plan outlines leadership transition and financial matters SMALL BUSINESS Challenges • Most small businesses fail within five years – As many as 60% to 80% fail SMALL BUSINESS Small Business Assistance • Business incubator – • Provides services to help new businesses get started Small Business Development Centers – Supported by Small Business Administration – Offer help to small business owners to set up and manage their businesses SMALL BUSINESS Business Plans • Business plan – Describes goals, operating plans and financing for a new business – Banks want to see a well-developed business plan before loaning money SMALL BUSINESS Forms of Ownership • Sole Proprietorship – An individual or married couple pursuing business for a profit SMALL BUSINESS Forms of Ownership • Partnership – Two or more people agree to contribute resources to start and operate a business together SMALL BUSINESS Forms of Ownership • Corporation – • A legal entity that exists separately from its owners Limited Liability Company (LLC) – A combination of sole proprietorship, partnership, and corporation • • Protects owners against personal loss other than what is invested in the company Treated as a proprietorship or partnership for tax purposes SMALL BUSINESS Financing • Debt Financing – • Equity Financing – • involves borrowing money from another person, a bank, or a financial institution involves exchanging ownership shares for outside investment monies Venture Capitalists – Involves making large investments in new ventures in return for an equity stake in the business SMALL BUSINESS Financing • Angel Investor – • A wealthy individual willing to invest in return for equity in a new venture Initial Public Offering (IPO) – An initial selling of shares of stock to the public at large ... available to help small businesses get started A small business should start with a sound SMALL BUSINESS Importance of Small Business • Small business – • Fewer than 500 employees Small business statistics... new businesses get started Small Business Development Centers – Supported by Small Business Administration – Offer help to small business owners to set up and manage their businesses SMALL BUSINESS. .. leadership transition and financial matters SMALL BUSINESS Challenges • Most small businesses fail within five years – As many as 60% to 80% fail SMALL BUSINESS Small Business Assistance • Business incubator