More Related Content
Similar to 5. entrepreneurship, new ventures,
Similar to 5. entrepreneurship, new ventures, (20)
Recently uploaded
Recently uploaded (20)
5. entrepreneurship, new ventures,
- 1. Entrepreneurship, New Ventures, and Business Ownership
- 2. What’s in It for Me? ■ By understanding the material discussed in this chapter, you’ll be better prepared to: 1. Understand the keys to entrepreneurial success, including business planning 2. Discuss the reasons for success or failure 3. Evaluate the advantages and disadvantages of different kinds of ownership
- 3. What Is a “Small” Business? ■ Small Business Defined – A business that is independent (not part of a larger business) 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 ■ Suppliers of specialized services and raw materials ■ Sellers of larger firms’ products
- 4. FIGURE 3.2: Small Business by Industry
- 5. 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
- 6. EntrepreneurialCharacteristics ■ Successful Entrepreneurs: – Are resourceful. – Are concerned about good customer relations. – Desire to be their own boss. – Can deal with uncertainty and risk. – Are open-minded. – Rely on networks, business plans, and consensus. – Have different views on how to succeed, to automate a business, and when to rely on experience or business acumen.
- 7. Starting and Operating a New Business ■ Crafting a Business Plan – Conveys a description of the business strategy for the new venture and how it will be implemented – A business plan should address: ■ The entrepreneur’s goals and objectives ■ The strategies that will be used to obtain them ■ The implementation of the chosen strategies ■ Preparing a Business Plan – Setting goals and objectives – Sales forecasting – Financial planning
- 8. Starting the Small Business ■ Buying an Existing Business – Less risk in purchasing ongoing, viable business ■ Franchising – Advantages ■ Proven business opportunity for franchisee ■ Access to management expertise of franchisor – Disadvantages ■ Start-up costs for franchise purchase ■ Ongoing payments to the franchisor ■ Management rules and restrictions on the franchisee
- 9. Starting the Small Business (cont’d) ■ 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 those customers pay for my product? – How much of my product can I expect to sell? – Who are my competitors? – Why will customers buy my product rather than the product of my competitors?
- 10. 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 – Guaranteed loans and immediate loan programs – Management advice (SCORE and SBDCs)
Editor's Notes
- What’s in this for you? By understanding the material discussed in this chapter, you’ll be better prepared to: Understand the keys to entrepreneurial or small business success, including the elements of business planning. Discuss the reasons for the success or failure of a small business. Evaluate the advantages and disadvantages of different kinds of ownership. Teaching Tips: Which of these three points will be most interesting to you and why? Discuss in your teams, and we will share with the class. Answers will vary.
- First, let’s define a small business: A small business is one that is independent or not part of a larger business, and that has relatively little influence in its market. There are a number of reasons why small business is important in the U.S. economy. Let’s see if the points you discussed earlier are among these reasons: Job creation: Did you know that more than half of all new jobs created in the U.S. are by small businesses? Innovation: Most new innovative product or service ideas come from small businesses. Contributions to big business: Small businesses are suppliers of specialized services and raw materials to big business. They are also retailers or distributors of the larger firms’ products or services. Teaching Tips: Please return to your student team and the list you prepared of the types of small businesses you discussed. Please review your response as to why you believe your small business example is important to the U.S. economy. Please provide a connection to the three key reasons from our review of the chapter. We will share the answers with the class. Answers will vary.
- Let’s take a look at the number of small businesses by industry in this graph. Services represent 50.07% of all small businesses. Retail stores represent 13.06%. Construction firms represent 12.70%. Wholesalers represent 6%. Finance and insurance businesses represent 4.11%. Manufacturing represents 4.4%. Transportation represents 2.76%. Other types of small business make up the remaining 6.90%. Teaching Tips: In your student teams, please think of three examples of small businesses that provide services. Answers will vary.
- Let’s define some terms relating to entrepreneurship: Entrepreneurship is the process of seeking business opportunities under conditions of risk. An entrepreneur is someone who accepts the risks and opportunities of creating, operating and growing a new business. A small business owner is a person who independently owns a business that has relatively little impact in its market . Teaching Tips: In your student teams, please give an example of each one of the three definitions we just reviewed. Answers will vary.
- A successful entrepreneur has a number of characteristics that make him or her successful. Let’s review some of these. Successful entrepreneurs: Are resourceful. Are concerned about good customer relationships. Desire to be their own boss. Can deal with uncertainty and risk. Are open-minded. Rely on networks, business plans and consensus. Have different views on how to succeed, to automate a business, and when to rely on experience or business acumen. Teaching Tips: Please join with another class member. In your team please review the list you made earlier of entrepreneurial characteristics, when we were discussing learning objectives for this chapter. First, see how on target you were. Second, prepare a list of the characteristics that apply to you. Let’s share our examples with the class. Answers will vary but can build upon examples presented earlier in the discussion of the chapter learning objectives and from the list on this slide.
- Now we will turn our attention to starting and operating a new business. The first step is to craft a business plan. A business plan conveys a description of the business strategy for the new venture and how it will be implemented. It should also address three key areas: The entrepreneur’s goals and objectives. The strategies that will be used to obtain them. The implementation of the chosen strategies. How do we prepare a business plan? We set goals and objectives. We forecast sales of our products or services. We undertake financial planning. In addition, there are three key questions every business plan should answer. These will be easy for you to remember: Where is the business now? How did it get to this point? Where do we want to go with the business? (This addresses the first item we discussed earlier.) How are we going to get where we want to go? (These address the second and third items we reviewed earlier.) Teaching Tips: In your same team, please think of an idea for a new business. In your team, please answer the three questions—where are we now (or where is the idea now), where do we want to go with this new business (what are our objectives) and how are we going to get there (what strategies will we use). Please share your example with the class. Answers will vary.
- Let’s examine different ways of starting a small business. One way is to buy an existing business. This provides for less risk because it is an ongoing, viable business. Another method is franchising. Franchising involves either buying an existing franchise, such as a fast food restaurant or store, etc., or buying the franchise to start a new branch or site for an existing franchise. Let’s look at the advantages and disadvantages of franchising. Advantages include: A franchise is a proven business opportunity for the franchisee. The franchise provides access to the management expertise of the franchisor. Disadvantages include: Start-up costs for the purchase of the franchise. These can run from $50,000 to the hundreds of thousands of dollars. Ongoing payments must be made to the franchisor. Management of the franchise places rules and restrictions on the franchisee. Teaching Tips: In your student teams, pick a common franchise that you frequent and discuss either advantages or disadvantages of owning that particular franchise. Answers will vary but should reflect on the advantages and disadvantages just discussed.
- Let’s review starting a business from scratch. First, the disadvantage is that there is a higher risk of business failure than if we purchase an existing business or franchise. Second, starting from scratch avoids problems that may be inherent in an existing business that we might purchase. There are a number of questions that need to be answered when starting a business from scratch: 1. Who and where are my customers? 2. How much will those customers pay for my product? 3. How much of my product can I expect to sell? 4. Who are my competitors? 5. Why will customers buy my product rather than the product of my competitors? Teaching Tips: In your same student teams, remember the idea you came up with for a new business a few minutes back. Now please answer the questions we just asked about your new business idea. These of course will only include your own ideas and best estimate. Answers will vary.
- Once we’ve decided to start or buy a small business, we need to determine how we are going to finance the business. Here are some sources from which we can potentially obtain loans: Personal resources (i.e., our own money) Loans from family and friends Bank loans Venture Capital Companies Small Business Investment Companies Minority Enterprise Small-Business Investment Companies The Small Business Administration (SBA) and its financial programs. These include guaranteed loans and immediate loan programs, as well as management advice through its team of retired business executives (called SCORE) and from Small Business Development Corporations (SBDCs). Teaching Tips: What is the first thing you need in order to obtain most of these types of financing? A business plan!