This document outlines key topics in a chapter on entrepreneurship and small business management including: defining entrepreneurs and their characteristics; the importance of entrepreneurship for economic growth; opportunities and risks of entrepreneurship; defining small businesses; reasons small businesses fail; sources of small business financing; components of an effective business plan; and types of financing needed for small business start-up, short-term, and long-term needs. The chapter provides an overview of concepts important for understanding entrepreneurship and small business ownership.

1. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 1
6-1 Becoming an Entrepreneur
6-2 Small Business Basics
6-3 Starting a Small Business
6
C H A P T E R
Entrepreneurship and
Small Business Management

2. © 2012 Cengage Learning. All Rights Reserved.
SLIDE 2
6-1 Becoming an
Entrepreneur
Goal 1 Identify characteristics of successful
entrepreneurs.
Goal 2 Recognize the importance of
entrepreneurship in the economy.
Goal 3 Describe opportunities and risks of
entrepreneurship.

3. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
KEY TERMS
● Entrepreneur- the individual that is a risk
taker and innovator.
● Entrepreneurship- the business that is
creative and risky.
● Characteristics: Creative, confident, goal-
oriented, motivated, hard-working
● Risks: Unproven idea, little management
experience, long-hours with no guarantee
of a profit

4. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
KEY TERMS
● Venture Capital- Money provided by large
investors to finance new products and new
businesses that have a good chance to be
very profitable
*Innovation- a brand new creation or invention
*Improvements- a significant design change or
addition on an existing product

5. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
Small Business- a business with
less than 500 employees (typically
just a few people)
● Not all business owners and managers are entrepreneurs.
● Entrepreneurs have unique skills and personal characteristics.
● 3 CHARACTERISTICS OF A SMALL BUSINESS:
The owner is usually the manager
Usually only 1 or 2 locations
Typically serves a small market

6. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
3 Reasons most small businesses fail
● Lack of money
● Lack of management experience
● Not keeping adequate records

7. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
Employment Growth by
Business Size, 1990–2005
24.9%
20.1%
18.7%
36.3%
1-9 employees
20-99 employees
100-499 employees
500 or more employees

8. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
Checkpoint 
● What are the sources of financing that
entrepreneurs use for their new
businesses?
● Personal savings
● Friends and family
● Venture capital
● Bank loans

9. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 9
KEY TERMS
● Small Business Administration (SBA)- a
government agency that helps small
business owners develop business plans
and obtain financing

10. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 10
Common Types of Small Businesses
as Percent of All Small Businesses

11. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 11
BUSINESS PLAN
Business Plan- a written description of the
business idea and how it will be carried out.
5 ELEMENTS
1)Description of the business & goals
2)Customer Analysis- knowing your customer
3)Operations Plan- organizing the business
4)Marketing Plan- marketing & advertising
5)Financial Plan- Creating a Budget:
start up, short term & long term

12. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 12
Checkpoint 
● What are the “strategic alternatives” in a
business plan?
● Strategic alternatives are alternative plans for
production, staffing, financing, and so on.
● Even the best business plan cannot predict every
possible circumstance.
● An alternate plan allows a business to be prepared
for the unforeseeable.

13. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 13
FINANCING
THE SMALL BUSINESS
● Types of financing
●Start-up financing- the money and
details of getting the business started:
inventory, supplies
●Short-term financing- the money needed
for the first year of expenses
●Long-term financing- a 3-5 year plan of
success for the business, identify long
term financial needs.

14. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
SLIDE 14
Checkpoint 
● In addition to owner-supplied capital,
what are several other sources of
financing for a small business?
● Borrowed money may come from banks,
finance companies, or other individuals,
such as friends and family.
● Some suppliers may also be willing to
extend credit.

15. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 6
Entrepreneur-
ONLINE RESEARCH
● WHO INSPIRES YOU?
● WHAT IDEAS INSPIRE YOU?