Entrepreneurship and small business

1. *
*Chapter Six
Entrepreneurship
and Starting a
Small Business
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin

2. *
*The Job-Creating
Power of
Entrepreneurship
in the U.S.
• Entrepreneurship -- Accepting the risk of starting
and running a business.
WHAT is ENTREPRENEURSHIP?
6-2

3. *
*Why People
Take the
Entrepreneurial
Challenge
• Opportunity
• Profit
• Independence
• Challenge
LG1
WHY TAKE the RISK?
6-3

4. *
*Why People
Take the
Entrepreneurial
Challenge
• Self-directed
• Self-nurturing
• Action-oriented
• Highly energetic
• Tolerant of uncertainty
LG1
WHAT DOES IT TAKE to be an
ENTREPRENEUR?
6-4

5. *
*
Small Versus
Big Business
• There are 26.8 million small businesses in the
U.S.
• Of all nonfarm business in the U.S., almost 97%
are considered small.
• Small businesses account for over 50% of the
GDP.
• Small businesses generate 60-80% of new jobs.
• About 80% of U.S. workers first jobs were in
small business.
LG2
SMALL BUSINESS STATISTICS
6-5

6. *
*Small Business
Success &
Failure
• Owner closing a business to
start another is reported as a
“failure.”
• Changing forms of ownership
is reported as a “failure.”
• Retirement is reported as a
“failure.”
LG2
BUSINESS FAILURES are LOWER
THAN the REPORTS BECAUSE…
6-6

7. *
*Learning About
Small Business
Operations
• Learn from Others – Investigate your local
colleges for classes on small business and
entrepreneurship; talk to and work for successful
local entrepreneurs.
• Get Some Experience – Gain three years
experience in the field; then start a part-time small
business.
• Take Over a Successful Firm – Serve as an
apprentice and eventually take over once the owner
steps down.
LG3
LEARNING ABOUT
SMALL BUSINESS
6-7

8. *
*
Begin with
Planning
• 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.
• A business plan forces potential owners to be
specific about what they will offer.
• A business plan is mandatory for talking with
bankers or investors.
LG4
BUSINESS PLANS
6-8

9. *
*Getting Money
to Fund a Small
Business
• Personal savings
• Relatives
• Former employers
• Banks & finance companies
• Government agencies
• Angel investors
• Venture capitalists -- Individuals or companies
that invest in new businesses in exchange for
partial ownership.
LG4
SOURCES of CAPITAL
6-9

10. *
*The Small
Business
Administration
• Small Business Development Centers (SBDC)
are funded jointly by the federal government and
individual states.
• SBDCs are able to evaluate the feasibility of
your idea, develop your business plan and
complete your funding application – for no
charge.
LG4
SMALL BUSINESS
DEVELOPMENT CENTERS
6-10

11. *
*
Knowing Your
Customers
• Market -- Consumers with unsatisfied wants and
needs who have both resources and willingness to
buy.
• Set out to fill the market’s needs by offering top
quality and great service at a fair price.
• One of the great advantages of small
businesses is the ability to know the market and
quickly adapt to market needs.
LG4
The MARKET
6-11