Understanding Entrepreneurship Leonardo Matarrese


Published on

Understanding Entrepreneurship - Leonardo Matarrese

Published in: Business, News & Politics
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Understanding Entrepreneurship Leonardo Matarrese

  1. 1. Chapter 7 Understanding Entrepreneurship & the Small Business Leonardo Matarrese @MyPlick
  2. 2. What is a Small Business? <ul><li>Small Business Administration (SBA)   </li></ul><ul><ul><li>Federal agency charged with assisting small businesses </li></ul></ul><ul><li>Small Business  </li></ul><ul><ul><li>Independently owned and managed business that does not dominate its market </li></ul></ul>Leonardo Matarrese @MyPlick
  3. 3. The Importance of Small Business in the U.S. Economy <ul><li>Most U.S. businesses employ fewer than 100 people. </li></ul><ul><li>Most U.S. workers are employed by small firms. </li></ul>Leonardo Matarrese @MyPlick
  4. 4. The Importance of Small Business 7 - Leonardo Matarrese @MyPlick 86.09 11.00 2.00 0.20 0.10 Percentage of All U.S. Businesses Total Employees Under 20 20-99 100-499 500-1000 1000 or more 25.60 29.10 25.50 7.10 12.70 Percentage of All U.S. Workers Total Employees Under 20 20-99 100-499 500-1000 1000 or more
  5. 5. The Importance of Small Business in the U.S. Economy <ul><li>Job Creation </li></ul><ul><li>Innovation </li></ul><ul><li>Importance to Big Business </li></ul>Leonardo Matarrese @MyPlick
  6. 6. Big Business: Jobs Created & Lost 7 - Leonardo Matarrese @MyPlick -181,100 -116,000 -92,153 -86,578 -86,475 -21,100 -16,340 -3,400 +639,000 +100,000 +45,000 +36,270 +29,000 +22,900 +21,631 +12,100 Gains Losses General Motors PepsiCo IBM General Mills Kmart National Semiconductor Quaker Oats General Motors Wal-Mart Dayton Hudson Albertson’s Circuit City Barnes & Noble Dell Computer ConAgra America Online
  7. 7. Popular Forms of Small-Business Enterprise <ul><li>Services </li></ul><ul><li>Retailing </li></ul><ul><li>Construction </li></ul><ul><li>Financial </li></ul><ul><li>Insurance </li></ul><ul><li>Wholesaling </li></ul><ul><li>Transportation </li></ul><ul><li>Manufacturing </li></ul>Leonardo Matarrese @MyPlick
  8. 8. Small Business by Industry 7 - Leonardo Matarrese @MyPlick Other 1.7% Manufacturing 5% Finance & Insurance 10% Wholesale 8% Transportation 5% Services 37.6% Retailing 22.7% Construction 10%
  9. 9. Entrepreneurship <ul><li>Although the concepts of entrepreneurship and small business are closely related, there are some important, though often subtle, differences between them. </li></ul>Leonardo Matarrese @MyPlick
  10. 10. The Distinction Between Entrepreneurship & Small Business <ul><li>Entrepreneur  </li></ul><ul><ul><li>Businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture </li></ul></ul>Leonardo Matarrese @MyPlick
  11. 11. Entrepreneurial Characteristics <ul><li>Most successful entrepreneurs have characteristics that set them apart from most other business owners—for example: </li></ul><ul><li>They are resourceful. </li></ul><ul><li>They have a concern for good, often personal, customer relations. </li></ul><ul><li>Most successful entrepreneurs also have a strong desire to be their own bosses. </li></ul><ul><li>Many express a need to “gain control over my life” or “build for the family” and believe that building successful businesses will help them do it. </li></ul><ul><li>They can also handle ambiguity and deal with surprises. </li></ul>Leonardo Matarrese @MyPlick
  12. 12. Success and Failure in Small Business <ul><li>For every Henry Ford, Walt Disney, Mary Kay Ash, or Bill Gates—people who transformed small businesses into major corporations—there are many small business owners and entrepreneurs who fail. </li></ul>Leonardo Matarrese @MyPlick
  13. 13. Trends in Small Business Start-Ups <ul><li>Thousands of new businesses are started in the United States every year. </li></ul><ul><li>The following five factors help account for this trend: </li></ul><ul><ul><li>The emergence of e-commerce </li></ul></ul><ul><ul><li>Entrepreneurs who cross over from big business </li></ul></ul><ul><ul><li>Increased opportunities for minorities and women </li></ul></ul><ul><ul><li>New opportunities in global enterprise </li></ul></ul><ul><ul><li>Improved rates of survival among small businesses </li></ul></ul>Leonardo Matarrese @MyPlick
  14. 14. Reasons for Failure <ul><li>Managerial incompetence or inexperience </li></ul><ul><li>Neglect </li></ul><ul><li>Weak control systems </li></ul><ul><li>Insufficient capital </li></ul>Leonardo Matarrese @MyPlick
  15. 15. Reasons for Success <ul><li>Hard work, drive, and dedication </li></ul><ul><li>Market demand for the products or services being provided </li></ul><ul><li>Luck </li></ul>Leonardo Matarrese @MyPlick
  16. 16. Starting & Operating the Small Business <ul><li>The Internet, of course, is rewriting virtually all of the rules for starting and operating a small business. </li></ul><ul><li>Getting into business is easier and faster than ever before, there are many more potential opportunities than at any time in history, and the ability to gather and assimilate information is at an all-time high. </li></ul>Leonardo Matarrese @MyPlick
  17. 17. Starting the Small Business <ul><li>Buy Out an Existing Business? </li></ul><ul><li>Start from Scratch? </li></ul>Would-be entrepreneurs must decide how to get into business. Should they: Leonardo Matarrese @MyPlick
  18. 18. When starting from scratch, entrepreneurs must determine: <ul><li>Who are my customers? </li></ul><ul><li>Where are they? </li></ul><ul><li>At what price will they buy my product? </li></ul><ul><li>In what quantities will they buy? </li></ul><ul><li>Who are my competitors? </li></ul><ul><li>How will my product differ from those of my competitors? </li></ul>Leonardo Matarrese @MyPlick
  19. 19. Where can a small business owner get necessary information? <ul><li>The best way to gain knowledge about a market is to work in it before going into business in it. </li></ul><ul><li>The local Yellow Pages or an Internet search will reveal many potential competitors. </li></ul><ul><li>Studying magazines, books, and web sites aimed specifically at small businesses can be helpful. </li></ul><ul><li>You can hire professionals to survey the market for. </li></ul>Leonardo Matarrese @MyPlick
  20. 20. Financing the Small Business <ul><li>Common sources for funding are: </li></ul><ul><li>Family & Friends </li></ul><ul><li>Personal Savings </li></ul><ul><li>Banks & Similar Lending Institutions </li></ul><ul><li>Investors </li></ul><ul><li>Governmental Agencies </li></ul><ul><li>Lending institutions are more likely to help finance the purchase of an existing business than a new business because the risks are better understood. </li></ul><ul><li>Individuals starting up new businesses, on the other hand, are more likely to have to rely on their personal resources. </li></ul>Leonardo Matarrese @MyPlick
  21. 21. Other Sources of Investment <ul><li>Venture Capital Company  </li></ul><ul><ul><li>Group of small investors that invest money in companies with rapid growth potential </li></ul></ul><ul><li>Small-Business Investment Company (SBIC)  </li></ul><ul><ul><li>A government-regulated investment company that borrows money from the SBA to invest in or lend to a small business </li></ul></ul><ul><li>Minority Enterprise Small-Business Investment Company (MESBIC)  </li></ul><ul><ul><li>Federally sponsored company that specializes in financing businesses that are owned and operated by minorities </li></ul></ul>Leonardo Matarrese @MyPlick
  22. 22. SBA Financial Programs <ul><li>Guaranteed Loans Program   </li></ul><ul><ul><li>Program in which the SBA guarantees to repay 75 to 85 percent of small-business commercial loans up to $750,000 </li></ul></ul><ul><li>Immediate Participation Loans Program   </li></ul><ul><ul><li>Program in which small businesses are loaned funds put up jointly by banks and the SBA </li></ul></ul><ul><li>Local Development Companies (LDCs) Program  </li></ul><ul><ul><li>Program in which the SBA works with local for-profit or nonprofit organizations seeking to boost a community’s economy </li></ul></ul>Leonardo Matarrese @MyPlick
  23. 23. Sources of Management Advice <ul><li>Advisory Boards </li></ul><ul><li>Management Consultants </li></ul><ul><li>Small Business Administration (SBA) </li></ul><ul><li>Networking </li></ul>Leonardo Matarrese @MyPlick
  24. 24. Management Consultant  <ul><li>Independent, outside specialist hired to help managers solve business problems </li></ul>Leonardo Matarrese @MyPlick
  25. 25. Small Business Administration <ul><li>Service Corps of Retired Executives (SCORE)  </li></ul><ul><ul><li>SBA program in which retired executives work with small businesses on a volunteer basis </li></ul></ul><ul><li>Active Corps of Executives (ACE)  </li></ul><ul><ul><li>SBA program in which currently employed executives work with small businesses on a volunteer basis </li></ul></ul><ul><li>Small Business Institute (SBI)  </li></ul><ul><ul><li>SBA program in which college and university students and instructors work with small-business owners to help solve specific problems </li></ul></ul><ul><li>Small Business Development Center (SBDC)  </li></ul><ul><ul><li>SBA program designed to consolidate information from various disciplines and make it available to small businesses </li></ul></ul>Leonardo Matarrese @MyPlick
  26. 26. Networking <ul><li>Interactions among businesspeople for the purpose of discussing mutual problems and opportunities and perhaps pooling resources </li></ul>Leonardo Matarrese @MyPlick
  27. 27. Franchising <ul><li>Franchise </li></ul><ul><ul><li>Arrangement in which a buyer (franchisee) purchases the right to sell the good or service of the seller (franchiser) </li></ul></ul><ul><li>Franchisee </li></ul><ul><ul><li>Buyer </li></ul></ul><ul><li>Franchiser </li></ul><ul><ul><li>Seller or parent company </li></ul></ul>Leonardo Matarrese @MyPlick
  28. 28. Advantages & Disadvantages of Franchising <ul><li>ADVANTAGES </li></ul><ul><li>Franchiser (parent company) supplies financial, managerial, & marketing assistance </li></ul><ul><li>Franchising enables small businesses to grow rapidly </li></ul><ul><li>Franchising risks are lower than those in starting a new business from scratch </li></ul><ul><li>DISADVANTAGES </li></ul><ul><li>High cost of purchasing a franchise </li></ul><ul><li>The franchisee sacrifices independence and creativity </li></ul><ul><li>Owning franchises provides no guarantee of success </li></ul>Leonardo Matarrese @MyPlick