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Entrepreneurship

Entrepreneurship. Chapter 4. What is an entrepreneur?. A person who runs and organizes their own business. Must make good decisions Find inventive solutions Lives a challenging life. Risks are high but the reward can be great. Advantages. You are in charge!!!—no boss to answer to

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Entrepreneurship

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  1. Entrepreneurship Chapter 4

  2. What is an entrepreneur? • A person who runs and organizes their own business. • Must make good decisions • Find inventive solutions • Lives a challenging life. • Risks are high but the reward can be great.

  3. Advantages • You are in charge!!!—no boss to answer to • Great job satisfaction • Can lead to great income.

  4. Disadvantages • Financial Risk- you may loose your investment and more. • Work long hours • May have high competition • No guarantee of success. ½ of all business fail in the first 4 years.

  5. Traits • Highly Motivated- they know what they want and believe in their ability. They plan how to achieve their goals. • Foresight- they are very perceptive. They see opportunities where others may not. • Decisive- they make many decisions every day which must be good for their business to success.

  6. 4 Ways of going into Business • Starting a New Business Advantages • Don’t have to inherit a previous owners mistakes or bad reputation • Personal satisfaction of knowing you built that business. Disadvantages • Requires more time and effort • Start up costs (the expenses involved with going into business) are high • Have to convince a lender that your business is a good idea for them to lend you the $ • It is risky. There are no guarantees your business will be a success.

  7. 2. Buying an Existing Business • A business may be for sale because: • The owner is retiring • It is losing $ Advantages • No start up costs • You take on the previous owners agreements ex: a lease- is a contract to use something for a specified period of time • The goodwill- loyalty of the customers you will get. • A positive reputation • Trained Staff

  8. Disadvantage • The location may be poor • Competition • Market outlook-potential for future sales may be poor • Building or equipment may be expensive to repair. • The business may have a poor reputation. “Under new management” signs

  9. 3. Buying a Franchise A franchise is a legal right to sell a company’s goods and services in a particular area. Ex: Panera, Mc Donalds, 7-11 Advantages • Name recognition • Established procedures and management • Business reputation • Training and staff support • Advertising • Financing.

  10. Disadvantages • You must pay a portion of your profits to the parent company • You must follow the parent company guidelines • There may be less job satisfaction • Very expensive to buy. http://www.panerabread.com/about/franchise/

  11. 4. Joining a Family Business Advantages • Your relatives might help you finance the business • Family members tend to be loyal and trust each other. • Relatives can teach you the business • Customer are likely to give the same trust and goodwill to a new owner who is part of the same family. Disadvantages • Some family do not work well together • Difficulties at work can affect your family relationship

  12. 3 Legal Forms of Business 1. Sole Proprietorship-a business owned by only 1 person. • The proprietor (owner)- own all the companies assets and is responsible for all the debts. • Partnership- is a legal arrangement when 2 or more people share ownership. • All partners are responsible for debts. • Corporation- a business where it runs separate from the owners. (they are not responsible for debts) • Owners by shares or parts of the company and earn $ based on profit.

  13. Sole Proprietorship • Adv • Owner makes all the decisions • Easiest form of business to set up • Least regulated by government • Disadv • Difficult to finance the business • Owners personal assets may be at risk if the business fails • Owner may not know everything there is to run a business

  14. Partnership • Adv • Easier to raise funds to open a business • You can draw on the skills and abilities of the other partners. • Share the responsibility & work • Disadv • Disagreements among partners in decisions • Its more complicated than a sole proprietorship • All owners are liable for all business losses and personal property may be at risk

  15. Operating Your Business • Financing • Where will you get money from? Mom, a friend, a loan? • To apply for a loan you will need a Business & Financial Plan. • A business Plan describes: • your business & its location • How many employees you will hire and their salary • your competitors • Marketing Plan • Timeline for starting your business.

  16. Financial Plan • This spells out your: • Start up costs • Operating expenses- the costs of doing business • Financial Records • You must keep track of your money so you can tell how well your business is doing. • Income Statement- is a summary of a business income and expenses during a specific time period. • Revenue- Income from sales • Gross profit- the difference between the cost of goods and their selling price • Net profit- the amount left after all operating expenses are subtracted from the gross profit.

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