Chapter 6 ~ Entrepreneurship and Small Business Management

Chapter 6 ~Entrepreneurship and Small Business Management Business Essentials  Mrs. Wilson

Before Activity - Predict • www.juniorbiz.com • Read the ‘Top 25 Young Entrepreneur Success Stories’ • What characteristics do you think entrepreneurs possess?

In this lesson, students will learn about the characteristics of today’s entrepreneurs and what it takes to start their own business. Lesson 6-1

Characteristics of Entrepreneurs • Entrepreneur – someone who takes a risk in starting a business to earn a profit • Entrepreneurship – the process of starting, organizing, managing, and assuming the responsibility for a business • If you desire to become an entrepreneur you can work to develop the common characteristics of successful entrepreneurs

Characteristics of Entrepreneurs Entrepreneurs are more: Entrepreneurs have: Problem-solving skills Strong integrity Personal initiative Ability to secure resources Capability to learn from failure Willingness to work hard • Persistent • Inquisitive • Energetic • Goal oriented • Independent • Self-confident • Creative • Reliable • Competitive

Entrepreneurship & the Economy • Small businesses are responsible for most new employment • Most of the money needed to start a new business comes from the entrepreneur and is or her family and friends • 1 in 5 Americans has invested in a business of someone they know well • Another source of money for some new businesses is venture capital – money provided by large investors to finance new products and new businesses that have a good chance to be very profitable

Opportunities & Risks • Many opportunities are open to prospective entrepreneurs • The opportunities begin with the creation of new or improved products and services • Innovation – an invention or creation that is brand new • Examples on p130 • Improvement – a designed change that increases the usefulness of a product, service, or process

Opportunities & Risks • Developing a successful new business is not easy • Many more new businesses fail than succeed • The time and energy required of new business owners is much higher than most people expect • Over a 10-year period, more than 50% of all new business are discontinued • Entrepreneurs need to be aware of the many risks they face and prepare for them

Opportunities & Risks • The primary reasons that businesses started by entrepreneurs close are: • Lack of adequate capital • Low sales • Higher than expected expenses • Competitive pressure • An owner unprepared to manage a growing business • Operations requiring more time than owner is willing to commit

This lesson presents information on the advantages and disadvantages of small business ownership and resources available to small business owners. Lesson 6-2

Small Business Ownership • By far the greatest % of businesses in the U.S. is small businesses • Small business – an independent business with fewer than 500 employees • Using that standard, 99.9% of the roughly 26 million U.S. businesses are small businesses! • On average, small businesses are responsible for creating 60-80% of all new jobs

Small Business Ownership • A more specific description of a small business includes: • The owner is usually the manager • It operates in 1 or very few locations • It typically serves a small market • It is not dominant in its field

Small Business Ownership • Common types of small businesses: • Construction • Retailing • Professional, scientific, and technical services • Other services • Health care • Hotels and restaurants

Small Business Advantages • Meeting customer needs • It is easier for a small business to meet the precise needs of customers than a large business • Providing unique services • Small businesses are especially suited to provide unique services for customers • Small business gain an advantage when customers have unique needs, want more individual attention, and are willing to pay a bit more for the product or service to obtain what they really want

Small Business Problems • With the right kind of assistance, small businesses can overcome failure • Small business owners can get help from a number of sources • Local groups of businesspeople, such as the Chamber of Commerce, have members who can help others with business problems

Small Business Problems • Small Business Administration (SBA) – a government agency that helps small business owners develop business plans and obtain financing and other support for their companies • The SBA offers information, counseling, and many other forms of supports

This lesson introduces students to the elements of a business plan and the sources of financing for a new business. Lesson 6-3

The Business Decision • Many people think about starting a business – few actually do • The process beings with an idea and concludes with a careful study of information to establish where the idea can be successful • An idea plus experience • Right place and time • Team approach • Preparation and research

Developing a Business Plan • The owners of successful businesses develop and follow a business plan • The owners of businesses that fail often do not have a business plan • Business plan – a written description of the business idea and who it will be carried out, including all major business activities • Key features: • Description of the business • Customer analysis • Operations plan • Marketing plan • Financial plans

Financing the Small Business • Finding adequate financing is a key step in starting and running a business • 3 types of financing must be considered: • Start-up financing – amount of money need to open the business • Short-term financing – the money needed to pay for the current operating activities of a business • Long-term financing – the money needed for the main resources of a business that will last for many years

Financing the Small Business • Start-up financing includes the cost of buildings, equipment, inventory, supplies, licenses • Short-term financing is obtained for a period of less than a year and often for 1 or 2 months • Long-term financing includes land, buildings, equipment

After Activity - Review • Describe an activity or type of information that is important to a small business owner when planning a new business.

Chapter 6 ~ Entrepreneurship and Small Business Management