Brittany Killins exploring here about small business and she also describe tips to grow a small business into a big business here.

1. What Is a Small Business?
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Brittany Killins

2. What Is a “Small” Business?
• Small Business Defined
– A business that is independent and that has relatively little
influence in its market.
• The Importance of Small Business in the U.S.
Economy
– Job creation
– Innovation
– Contributions to big business
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3. FIGURE 3.2: Small Business by Industry
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4. Entrepreneurship
• Entrepreneurship
– The process of seeking business opportunities under
conditions of risk
• Entrepreneur
– One who accepts the risks and opportunities of creating,
operating, and growing a new business
• Small Business Owner
– A person who independently owns a business that has
relatively little impact in its market
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5. Entrepreneurial Characteristics
• Successful Entrepreneurs:
– Are resourceful and open-minded
– Are concerned about good customer relations
– Desire to be their own boss
– Can deal with uncertainty and risk
– Rely on networks, business plans, and
consensus
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6. Starting and Operating a New Business
• Crafting a Business Plan
– State business plan and implementation
• Preparing a Business Plan
– Setting goals and objectives
– Sales forecasting
– Financial planning
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7. Starting the Small Business
• Buying an Existing Business
– Less risk
• Franchising
– Advantages for franchisee
• Proven business opportunity
• Access to management expertise
– Disadvantages for franchisee
• Start-up costs
• Ongoing payments
• Management rules and restrictions
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8. Starting the Small Business (cont.)
• Starting from Scratch
– Disadvantage: Higher risk of business failure
– Advantage: Avoids problems of an existing business
• Questions to Be Answered:
– Who and where are my customers?
– How much will they pay for my product?
– How much product can I expect to sell?
– Who are my competitors?
– Why will customers buy my product rather than the
competitors?
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9. Financing the Small Business
• Personal Resources
• Loans from Family and Friends
• Bank Loans
• Venture Capital Companies
• Small-Business Investment Companies (SBICs)
• Minority Enterprise Small-Business Investment Companies
(MESBICs)
• SBA Financial Programs
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10. Trends in Small-Business Startups
Emergence of
E-commerce
Crossovers from
Big Business
Opportunities for
Minorities & Women
Global
Opportunities
Better
Survival Rates
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11. Reasons for Failure and Success
• Failure
– Poor management
– Neglect
– Weak control systems
– Insufficient capital
• Success
– Hard work, drive, and dedication
– Market demand
– Managerial competence
– Luck!!!
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12. Business Ownership
• Forms of Legal Ownership
– Sole proprietorship: Owned and operated by one person
– Partnership: Sole proprietorship multiplied by the number
of partner-owners
– Corporation
• Choice of Ownership Form
– Based on the entrepreneur’s needs/desires for control,
ownership participation, financing sources, and
appropriateness of the chosen form for the industry in
which the firm will compete
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13. Sole Proprietorships
• Advantages:
– Freedom
– Simple to form
– Low start-up costs
– Tax benefits
– Formation of
cooperatives
• Disadvantages:
– Unlimited liability:
Owners are responsible
for all debts
– Limited resources
– Limited fundraising
capability
– Lack of continuity
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14. Partnerships
• Advantages:
– More talent and
money
– More fundraising
capability
– Relatively easy to
form
– Limited liability for
limited partners
– Tax benefits
• Disadvantages:
– Unlimited liability for
general partner(s)
– Disagreements
among partners
– Lack of continuity
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15. Alternatives to General Partnerships
• Limited Partnership
– Allows for limited partners who invest money but are
liable for debts only to the extent of their investments
– General (or active) partner(s), runs the business
• Master Limited Partnership
– Organization sells shares (partnership interests) to
investors on public exchange; investors paid back from
profits
– Master partner has majority ownership and runs the
business; minority partners have no management voice
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16. Cooperatives
• Combine the freedom of sole
proprietorships with the financial power of
corporations
• Groups of sole proprietorships or
partnerships agree to work together for
their common benefit
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17. Corporations
• Corporation
– Legal status as separate entities
• Corporations may:
– Be small or large
– Sue and be sued
– Buy, hold, and sell property
– Make and sell products
– Commit crimes and be tried and punished for them
– Have limited liability for individuals who form them
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18. Corporations (cont.)
• Advantages:
– Limited liability:
owners’ financial
responsibility is limited
to their investment
– Continuity
– Stronger fundraising
capability
• Disadvantages:
– Double taxation of
dividends
– Fluid control
– Complicated and
expensive to form
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19. Types of Corporations
• Closely Held (Private) Corporation
• Publicly Held (Public) Corporation
• Subchapter S Corporation
• Limited Liability Corporation (LLC)
• Professional Corporation
• Multinational (Transnational) Corporation
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20. Managing a Corporation
• Corporate Governance
– Who makes corporate decisions and who is accountable
– Established by the firm’s bylaws and involves three bodies:
• Stockholders (shareholders): Investors who buy ownership shares
in the form of stock
• Board of Directors: elected by stockholders to oversee corporate
management
• Corporate officers: Top managers hired by the board to run the
corporation
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21. Stockholders: Owners of Corporations
• Stock: A share of ownership in a corporation
• Dividends: Profits distributed among stockholders
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22. Special Issues in Corporate Ownership
• Joint Ventures and Strategic Alliances:
– Strategic alliance: Two or more organizations collaborate
on a project for mutual gain
– Joint venture: Partners share ownership of a new
enterprise
• Employee Stock Ownership Plans
– Allows employees to own a share of the corporation
through trusts established on their behalf
• Institutional Investors
– Control enormous resources and can buy huge blocks of
stock
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23. Special Issues in Corporate Ownership (cont.)
• Mergers, Acquisitions, Divestitures, and Spin-
Offs:
– Merger: Two firms combine to create a new
company
– Acquisition: One firm buys another
– Divestiture: A firm sells one or more of its
business units
– Spin-off: A firm sells part of itself to raise capital
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