Entrepreneurship, New Ventures, and Business Ownership

1. Entrepreneurship,New Ventures, andBusiness Ownership 3

2. Define small business, discuss its importance, and explain popular areas of small business. • Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities • Describe the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. • Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. • Explain sole proprietorships, partnerships, and Corporations and discuss the advantages and disadvantages of each.

3. What Is a “Small” Business? Small business one that is independent (not part of a larger business) and that has relatively little influence in its market. Examples: Locally owned and operated restaurants, dry cleaners, car repair shops, and hair salons. The U.S. Department of Commerce considers a business “small” if it has fewer than 500 employees.

4. The Importance of Small Business

5. Job Creation Small businesses have accounted for about 40 percent of all new jobs in high-technology sectors of the economy.

6. Innovation Major inventions are likely to come from small businesses. People worked in small businesses invented the personal computers, the stainless razor blade, the photocopier, the jet engine …. etc

7. Contributions to big businesses Small business provide big businesses with product and services as raw materials and insurance services. On the other side, most of the products made by big businesses are sold to small businesses as dealers or manufacturers.

8. Popular Areas of Small-Business Enterprise

9. Entrepreneurship Entrepreneur businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture. Entrepreneurship the process of seeking business opportunities under conditions of risk.

10. Entrepreneurial Characteristics Resourcefulness. Concern for good, personal customer relations. Strong desire to be their own bosses. Deal with uncertainty and risk.

11. Starting the Small Business

12. Buying an existing business Many experts recommend buying an existing business as it – if successful- has already proven its ability to attract customers and generate profits and has established relationships with stakeholders.

13. Franchising arrangement in which a buyer (franchisee) purchases the right to sell the good or service of the seller (franchiser). Most McDonald’s, Subway, 7 Eleven, RE/Max, Ramada, and Dunkin’ Donuts outlets are franchises operating under licenses issued by parent companies to local owners. A franchise agreement involves two parties, a franchisee (the local owner) and a franchiser (the parent company).

14. Franchising Advantages Proven business opportunity Access to management expertise Disadvantages Start-up costs Ongoing payments ( a percent of sales to parent corporations ). Management rules and restrictions

15. Starting from Scratch Who and where are my customers? How much will those customers pay for my product? How much of my product can I expect to sell? Who are my competitors? Why will customers buy my product rather than the product of my competitors? Dell, Wal-Mart, Southwest airlines, and Microsoft are among today’ most successful businesses that were started from scratch by entrepreneurs.

16. Financing a Small Business Personal resources Loans from family and friends Bank loans Venture capital companies (invest) Small-Business Investment Companies (invest) Minority Enterprise Small-Business Investment Companies (invest) others

17. Trends in Small-Business Start-Ups Emergence of E-Commerce The Internet provides fundamentally new ways of doing business. Crossovers from Big Business More businesses are being started by people who have opted to leave big corporations and put their experience to work for themselves. Opportunities for Minorities and Women More small businesses are also being started by minorities and women.

18. Emergence of E-commerce

19. Reasons WomenGive for Starting Businesses

20. Trends in Small-Business Start-Ups Global Opportunities Many entrepreneurs are also finding new opportunities in foreign markets Better Survival Rates Today, 44 percent of new start-ups can expect to survive for at least four years. Small business failure rate has declined.

21. Reasons of Success of small businesses 1. Hard work, drive, and dedication: Small-business owners must be committed and willing to spend the time and effort to make it happen. 2. Market demand for the products or services being provided: Careful analysis of market conditions can help assessment. 3 Managerial competence. Successful owners may acquire competence through training or experience or by drawing on the expertise of others. 4 Luck.

22. Reasons of Failure of small businesses 1. Managerial incompetence or inexperience: Some entrepreneurs put too much faith in common sense, overestimate their own managerial skills, or believe that hard work alone ensures success. 2. Neglect: Some entrepreneurs try to launch ventures in their spare time, and others devote only limited time to new businesses.

23. 3. Weak control systems: Effective control systems keep a business on track and alert managers to potential trouble. 4. Insufficient capital: Some entrepreneurs are overly optimistic about how soon they’ll start earning profits. In most cases, it takes months or even years. Reasons of Failure of small businesses

24. Business Ownership Sole Proprietorship business owned and usually operated by one person who is responsible for all of its debts. General Partnership business with two or more owners who share in both the operation of the firm and the financial responsibility for its debts. Corporation business that is legally considered an entity separate from its owners. is liable for its own debts; owners’ liability extends to the limits of their investments.

25. Proportions of U.S. Firms in Terms ofOrganization Type and Sales Revenue

26. Sole Proprietorship Advantages Freedom Simple to form Low start-up costs Tax benefits • Disadvantage • Unlimited liability • Limited resources • Limited fundraising capability • Lack of continuity

27. Partnerships Advantages More talent and money More fundraising capability Relatively easy to form Limited liability for limited partners Tax benefits • Disadvantages • Unlimited liability for general partners • Disagreements among partners • Lack of continuity

28. Corporations Advantages Limited liability Continuity Stronger fundraising capability • Disadvantages • Can be taken over against the will of its management • Double taxation of profits • Complicated and expensive to form

29. Types of Corporations