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McGraw-Hill/Irwin Understanding Business, 8e. © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Nickels McHugh McHugh. *. *. Entrepreneurship and Starting a Small Business. *. CHAPTER. 6. *. *. 1- 1. Guess Which Company?.

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  1. McGraw-Hill/Irwin Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Nickels McHugh McHugh * * Entrepreneurship and Starting a Small Business * CHAPTER 6 * * 1-1

  2. Guess Which Company? • He was selling baking soda & decided to entice customers by putting in two packages of chewing gum with each sale. The excitement over the gum started him thinking. • Two Seattle teenagers pooled their money & came up with $100. They started delivering messages & parcels for local merchants. • Though he didn’t graduate from college, he found out college students eat a lot of pizza. He started his first pizzeria with $900 near a campus with a promise of 3-minute delivery.

  3. Entrepreneurship • Definition • Why take the entrepreneurial challenge? • Opportunity • Profit • Independence • Challenge

  4. Who StartsNew Businesses? 18 - 24 8% 25 - 34 71% 35 - 44 13% 45 - 54 6% 55+ 2% AGE AT START-UP

  5. Entrepreneurial Attributes • Self-Directed & Self-Disciplined • Self-Nurturing • Action-Oriented • Highly Energetic • Tolerant of Uncertainty

  6. Entrepreneurship • Entrepreneurial Teams • Micropreneurs and Home-Based Businesses • Web-Based Businesses • Intrapreneurs

  7. Reasons for Growth ofHome-Based Businesses • Technology • Downsizing • Attitudes • Tax Advantages

  8. Challenges New Customers Time Management Work vs. Family City Ordinances Risk Focus Find Opportunity Results vs. Routine Profit vs. Paycheck New Ideas Long Term vs. Short Term Home-Based Business

  9. Most Common Types ofHome-Based Businesses Source: Independent Insurance Agents of America

  10. Government & Entrepreneurship • Immigration Act of 1990- Investor Visa • Enterprise Zones • Incubators

  11. Utah Nevada Washington Florida Colorado Washington D.C. Maryland Georgia Tennessee Alaska Top Ten States Where Businesses Have Started Source: Investor Business Daily, June 24, 2004

  12. Utah Washington New Mexico Nevada Idaho Missouri Arizona Vermont Georgia California Top Ten States Where Businesses Have Closed Source: Investor Business Daily, June 24, 2004

  13. What is Small Business? • Independently Owned • Not Dominant in Its Field • Meet Certain Standards of Size (Employees, Annual Receipts)

  14. U.S. Small Businesses • 20 Million Full/Part-time Businesses • Account for More Than 50% of Gross Domestic Product (GDP) • Jobs • 80% of Americans 1st job is in small business • 75% of new jobs are created by small businesses • Minority-owned Businesses Growing Rapidly

  15. Business Ownershipby Gender Source: USA Today

  16. Female Owners’ Top Industries SOURCE:USA Today

  17. Plunging in without first testing Under/over pricing Too little capital Little/no experience Borrowing money without planning Trying to do too much with too little Buying too much on credit Expanding credit too freely and rapidly Incomplete and/or inaccurate records Not understanding business cycles Forgetting about taxes, insurances, etc. Owner working or not, according to whim Small Business – Major Causes of Failure

  18. Personal attention Products not easily made by mass production Sales are not large enough for a large firm Unattractive neighborhood Franchising Paying attention to new competitors The business is in a growth industry Small Business – Situations for Success

  19. Learn from Others Get Experience Take Over a Successful Firm Learning about Small Business Operations

  20. Where Did They Start? Source: World Features Syndicate

  21. Early Sales of Well-Known Companies Source: World Features Syndicate

  22. Managing a Small Business • Business Plan • Adequate Funding • Lenders/Investors • “Angels” • Venture Capitalists • Professional Advice/Help • SBA and SBIC Program • Lawyers, Loan Officers, Insurance Agents • SCORE • Local College/universities • Know Your Customer • Manage Human Resources • Keep Good Records

  23. I don’t know enough about you or your business. You haven’t clearly stated why you need the money. Your numbers don’t support the loan request. Your collateral is lacking. Your business does not support the loan on its own merits. Reasons for aBanker To Say “No”

  24. Small Business Collaborators • Small Business Administration (SBA) • Microloan program • SBICs • SBDCs • Service Corps of Retired Executives (SCORE)

  25. Small Business Strategies • Examine Marketing & ID Areas for Growth • Profile Best Customers & Market to Similar Prospects • Invest in Sales Training & Technology • Refresh Business Perspective With Outside Views • Streamline Business & Eliminate Waste

  26. React/Not Overreact Understand Financial Situation Find Professional Help Develop “Recovery Plan” Be a Visible, Confident Leader Remind Employees of Stake in Business Don’t Get Stung By Killer “Bankruptcy” Saving aBusiness In Trouble

  27. Positives World Market Absorb Excess Inventory Soften U.S. Downturns Extend Product Life Negatives Financing Difficult How to Get Started? Lack of Cultural Understanding Paperwork Small Business & International Prospects

  28. Advantages Deal With Individuals Begin Shipping Orders Faster Variety of Suppliers Professional Service with Undivided Attention Information Dept. of Commerce- www.bxa.doc.gov SBA- International- www.sba.gov/hotlist/internat.html International Small Business

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