Chap006

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Intro to Bus chapter 6

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  • See Learning Goal 1: Explain why people take the risks of entrepreneurship, list the attributes of successful entrepreneurs, and describe entrepreneurial teams, intrapreneurs, home-based and Web-based businesses.
  • See Learning Goal 1: Explain why people take the risks of entrepreneurship, list the attributes of successful entrepreneurs, and describe entrepreneurial teams, intrapreneurs, home-based and Web-based businesses. In order to develop new ideas engineers at Google are allowed to work on projects that interest them for up to twenty percent of the time at work. The idea is to support creative people and ideas in an effort to launch new products. This work can be more motivating than working on someone else’s ideas.
  • See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Small-business is the economic engine of the United States economy. Due to the economic power of small-businesses the government has used “investor visas”, enterprise zones and business incubators to encourage entrepreneurship. A good website to further explore incubators is http://www.nbia.org/.
  • See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
  • See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. The power of small business is immense. Students are often shocked to see how small businesses contribute to the U.S. economy.
  • See Learning Goal 2: Discuss the importance of small business to the American economy and summarize the major causes of small-business failure.
  • See Learning Goal 3: Summarize ways to learn about how small businesses operate.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. Starting a business is when the real work begins. It is important that entrepreneurs understand the major business functions such as planning, financing, understanding your customer, managing employees and keeping good records. Many entrepreneurs create business plans which may in part outline the major business functions.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. The business plan is the entrepreneur’s road map to success. While a well designed business plan will not guarantee success the lack of one may surely lead to failure. To borrow money or to seek investors a business plan is a must.
  • See Learning Goal 4: Analyze what it takes to start and run a small business.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. A Family Affair This slide illustrates what needs to be considered before starting a business with family members. Communication and the establishment of clear expectations are the keys to making a family business work. To start a discussion in class about issues faced by family run businesses have students read the following article: http://www.postbulletin.com/newsmanager/templates/localnews_story.asp?z=7&a=399177 After reading the article ask students: Why do family businesses need extra care?
  • See Learning Goal 4: Analyze what it takes to start and run a small business. One reason that businesses fail is a lack of capital. Capital can come from internal sources (personal saving, employees etc.) or from external sources (relatives, banks and angel investors). One source of external funding is via venture capital. Venture capitalist are individuals or companies that invest in new businesses in exchange for a stake in ownership. Many well known businesses such as Google, Zappos and Apple received a first round of funding from venture capitalists.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. The importance of small business to the U.S. economy cannot be overstated. The Small Business Administration or SBA is the government agency that advises and assists small businesses with financial advice and management training. For more information on the SBA visit their website www.sba.gov.
  • See Learning Goal 4: Analyze what it takes to start and run a small business.
  • See Learning Goal 4: Analyze what it takes to start and run a small business.
  • See Learning Goal 4: Analyze what it takes to start and run a small business.
  • See Learning Goal 4: Analyze what it takes to start and run a small business.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. The most important assistance to small business owners is in accounting.
  • See Learning Goal 4: Analyze what it takes to start and run a small business.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. If marketing is about finding and filling customer needs, how can an entrepreneur better understand what customers need? Market research helps determine where to locate customers, whom to target as customers, and an effective strategy for reaching the market.
  • See Learning Goal 4: Analyze what it takes to start and run a small business. Asking good questions is the key to success in any business. Fortunately for entrepreneurs some of the best advice comes free. Commercial loan officers can help with the creation of a business plan as well as financial advice. Insurance agents can help new entrepreneurs understand and insure against risk. One interesting and free source of information is SCORE, Service Corps of Retired Executives. To start a discussion in class have students research SCORE (www.score.org) and the programs offered at local SCORE offices.
  • Chap006

    1. 1. * * Chapter Six Entrepreneurship and Starting a Small Business McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. * * The Job-Creating Power of Entrepreneurship in the U.S. <ul><li>Entrepreneurship -- Accepting the risk of starting and running a business. </li></ul>6-
    3. 3. WHY TAKE ON CHALLENGE OF ENTREPRENEURSHIP???? <ul><li>I. Oppty “ start bus freely” </li></ul><ul><li>II. Profit motive </li></ul><ul><li>III. Independence </li></ul><ul><li>IV. Challenge </li></ul>
    4. 4. What does it take to be an entrepreneur <ul><li>I. self directed – you must be disciplined </li></ul><ul><li>II. Self nurturing – you must believe in your idea when others don’t, you must maintain enthusiasm, remain committed </li></ul><ul><li>III. Action oriented – build your dream into reality </li></ul><ul><li>IV. Highly energetic – you must be physically, emotionally, and mentally ready all the time </li></ul><ul><li>V. Tolerant of uncertainty </li></ul>
    5. 5. What if I can’t do it myself <ul><li>ENTREPRENEURAL TEAMS – </li></ul><ul><li>a group of experienced people from different areas of business that form a team to develop, make, and market a product </li></ul>
    6. 6. * * Entrepreneurship Within Firms <ul><ul><li>Intrapreneur -- A creative person who works as an entrepreneur within a corporation. </li></ul></ul><ul><ul><li>Intrapreneurs use a company’s existing resources to launch new products for the company. </li></ul></ul><ul><ul><ul><li>Art Fry of 3M developed Post-Its when he was trying to mark pages of his hymnal without damage. </li></ul></ul></ul>LG1 6-
    7. 7. * * Encouraging Entrepreneurship: What Government Can Do <ul><li>Immigration Act passed in 1990 created a category of “investor visas” that encourage entrepreneurs to come to the U.S. </li></ul><ul><li>Enterprise Zones -- Specific geographic areas to which governments attract private business investment by offering lower taxes and other government support. </li></ul><ul><li>Incubators -- Offer new businesses low-cost offices with basic services. </li></ul>LG1 6-
    8. 8. * * Small Versus Big Business <ul><ul><li>Small Business -- Independently owned and operated, not dominant in its field of operation and meets certain standards of size. </li></ul></ul><ul><ul><ul><li>Businesses are “small” in relationship to other businesses in their industries. </li></ul></ul></ul>LG2 6-
    9. 9. * * Small Versus Big Business <ul><ul><ul><ul><li>There are 26.8 million small businesses in the U.S. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Of all nonfarm business in the U.S., almost 97% are considered small. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Small businesses account for over 50% of the GDP. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Small businesses generate 60-80% of new jobs. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>About 80% of U.S. workers first jobs were in small business. </li></ul></ul></ul></ul>LG2 6-
    10. 10. * * Importance of Small Business <ul><ul><li>More personal customer service. </li></ul></ul><ul><ul><li>The ability to respond quickly to opportunities. </li></ul></ul>LG2 6-
    11. 11. * * Learning About Small Business Operations <ul><ul><ul><li>Learn from Others – Investigate your local colleges for classes on small business and entrepreneurship; talk to and work for successful local entrepreneurs. </li></ul></ul></ul><ul><ul><ul><li>Get Some Experience – Gain three years experience in the field; then start a part-time small business. </li></ul></ul></ul><ul><ul><ul><li>Take Over a Successful Firm – Serve as an apprentice and eventually take over once the owner steps down. </li></ul></ul></ul>LG3 6-
    12. 12. * * Managing a Small Business <ul><ul><ul><ul><li>Planning </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Financing </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Knowing customers </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Managing employees </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Keeping records </li></ul></ul></ul></ul>LG4 6-
    13. 13. * * Begin with Planning <ul><ul><li>Business Plan -- A detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and owners qualifications. </li></ul></ul><ul><ul><ul><li>A business plan forces potential owners to be specific about what they will offer. </li></ul></ul></ul><ul><ul><ul><li>A business plan is mandatory for talking with bankers or investors. </li></ul></ul></ul>LG4 6-
    14. 14. * * Writing a Business Plan <ul><ul><ul><li>A good plan takes a long time to prepare. </li></ul></ul></ul><ul><ul><ul><li>A good executive summary catches interest and tempts potential investors to read on. </li></ul></ul></ul>LG4 <ul><ul><ul><li>Getting the plan into the right hands is almost as important as getting the right information in it. </li></ul></ul></ul>6-
    15. 15. * * Source: Business Week Small Biz, www.businessweek.com , February/March, 2008. <ul><li>Clarify Expectations – What will each person contribute? </li></ul><ul><li>Discuss Work/Family Boundaries – What is the line that separates work from personal relationships? </li></ul><ul><li>Develop Good Communication – Agree about types of decisions you’ll make jointly and on own. </li></ul><ul><li>Clarify Long-Term Intentions – Discuss how long everyone will work full time and goals for the business. </li></ul><ul><li>Have an Escape Hatch – Have a Plan B. </li></ul>Writing a Business Plan LG4 6-
    16. 16. * * Getting Money to Fund a Small Business <ul><ul><ul><li>Personal savings </li></ul></ul></ul><ul><ul><ul><li>Relatives </li></ul></ul></ul><ul><ul><ul><li>Former employers </li></ul></ul></ul><ul><ul><ul><li>Banks & finance companies </li></ul></ul></ul><ul><ul><ul><li>Government agencies </li></ul></ul></ul><ul><ul><ul><li>Angel investors </li></ul></ul></ul><ul><ul><ul><li>Venture capitalists -- Individuals or companies that invest in new businesses in exchange for partial ownership. </li></ul></ul></ul>LG4 6-
    17. 17. * * The Small Business Administration <ul><ul><li>Small Business Administration (SBA) -- A U.S. government agency that advises and assists small businesses by providing management training and financial advice. </li></ul></ul><ul><ul><ul><li>SBA started a microloan program in 1991 that provides very small loans to small business owners. </li></ul></ul></ul><ul><ul><ul><li>Program judges worthiness on belief of the borrower’s integrity and soundness of their business ideas. </li></ul></ul></ul>LG4 6-
    18. 18. * * The Small Business Administration <ul><ul><li>Small Business Investment Company (SBIC) -- A program through which private investment companies licensed by the SBA lend money to small businesses. </li></ul></ul><ul><ul><ul><li>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. </li></ul></ul></ul><ul><ul><ul><li>SBICs are able to identify a business’s trouble spots early, giving entrepreneurs advice, and in some cases rescheduling loan payments. </li></ul></ul></ul>LG4 6-
    19. 19. * * The Small Business Administration <ul><ul><ul><li>Small Business Development Centers (SBDC) are funded jointly by the federal government and individual states. </li></ul></ul></ul><ul><ul><ul><li>SBDCs are able to evaluate the feasibility of your idea, develop your business plan and complete your funding application – for no charge. </li></ul></ul></ul>LG4 6-
    20. 20. * * Knowing Your Customers <ul><ul><ul><li>Market -- Consumers with unsatisfied wants and needs who have both resources and willingness to buy. </li></ul></ul></ul><ul><ul><ul><ul><li>Set out to fill the market’s needs by offering top quality and great service at a fair price. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>One of the great advantages of small businesses is the ability to know the market and quickly adapt to market needs. </li></ul></ul></ul></ul>LG4 6-
    21. 21. * * Managing Employees <ul><ul><ul><li>Hiring, training and motivating employees is critical. </li></ul></ul></ul><ul><ul><ul><li>Employees of small companies are often more satisfied with their jobs – they feel challenged and respected. </li></ul></ul></ul><ul><ul><ul><li>Entrepreneurs best serve themselves and the business if they recruit and groom employees for management positions. </li></ul></ul></ul>LG4 6-
    22. 22. * * Keeping Records <ul><ul><ul><ul><li>Computers simplify the process by helping with inventory control, customer records and payroll. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A good accountant can help in: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Deciding whether to buy or lease equipment. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Deciding whether to own or rent a building. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Tax planning. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Financial forecasting. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Choosing sources of financing. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Writing requests for funds. </li></ul></ul></ul></ul></ul>LG4 6-
    23. 23. * * Looking for Help <ul><ul><ul><ul><li>Owners need outside consulting advice early in the process. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Small and medium-sized firms cannot afford to hire experts as employees. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A competent lawyer can help with: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Leases </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Contracts </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Partnership agreements </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Protection against liabilities </li></ul></ul></ul></ul></ul>LG4 6-
    24. 24. * * Looking for Help <ul><ul><ul><ul><li>Marketing decisions need to be made long before introducing a product or opening a store. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>A marketing research study can help you: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Determine where to locate. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Whom to select as your target market. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>What is an effective strategy for reaching the market. </li></ul></ul></ul></ul></ul>LG4 6-
    25. 25. * * Looking for Help LG4 6-

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