Entrepreneurship and Small Business

3. Entrepreneurship andSmall Business • Entrepreneurship • The process of creating and managing a business to achieve a desired objective • Small Business • Any independently owned and operated business that is not dominant in its competitive area and employs fewer than 500 people

4. 10 Reasons to Start a Business • You are your own boss. • You get to do what you are interested in. • Your firm = Your deadlines. • You can be creative. • Its not that hard to do. • It can be very profitable. • Its varied. • You can cut the commute. • You can have a second career. • The big dream really can be a reality. Source: “10 Reasons To start a Business in 2006” Startups.co.uk, http://www.startups.co.uk/10_reasons_to_start_a_business_in_2006.YffPoaQ.html (accessed October 31, 2006)

5. What Is a Small Business? • Any independently owned and operated business • Not dominant in its competitive area • Does not employ more than 500 people

6. Facts About Small Businesses

7. The Role of Small Business inthe American Economy • Job creation • Innovation • Exporting • Did You Know? • 9.1 million women-owned businesses employ 27.5 million and contribute 3.6 trillion to the economy. • 3.25 million minority-owned firms employ • 4 million and account for $495 billion in revenues

8. Number of Firms by Employment Size

9. Industries That Attract Small Business • Retailing and Wholesaling • Services • Manufacturing • High Technology Did You Know? 39 percent of high-tech jobs are in small businesses

10. What are the Advantages of Owning a Small Business? • Personal • Independence • Freedom of choice • The option of working at home • Business • Often requires less money to start and maintain • Flexibility • The ability to focus on a few key customers • The chance to develop a reputation for quality and service Did You Know? 12% of Internet start-ups were launched in a garage.

11. Traits Needed to Succeedin Entrepreneurship • Neuroticism • Helps entrepreneurs focus on details • Extroversion • Facilitates network building • Conscientiousness • Facilitates planning • Agreeableness • Facilitates networking • Openness to new ideas Source: Alex de Noble in Joshua Kurlantzick, “About Face,” Entrepreneur, January 2004, www.entrepreneur.com/article/0,4621,312260,00.html.

12. Disadvantages of Small Business Ownership • High stress level • High failure rate • Undercapitalization • Managerial inexperience or incompetence • Inability to cope with growth

13. How Hard Do They Work? Hours worked by small business owners Source: “21st Annual Small Business Survey Summary Report,” Dun & Bradstreet (n.d.), www.sbs.dnb.com/survey/2002survey.pdf (accessed October 30, 2006).

14. Most Common Mistakes Made by Start-up Businesses • Failing to spend enough time researching the business idea to see if it’s viable • Miscalculating market size, timing, ease of entry, and potential market share • Underestimating financial requirements and timing • Overprotecting sales volume and timing • Making cost projections that are too low • Hiring too many people and spending too much on offices and facilities • Lacking a contingency plan for a shortfall in expectations • Bringing in unnecessary partners

15. Most Common Mistakes Made by Start-up Businesses • Focusing too much on sales volume and company size rather than profit • Hiring for convenience rather than skill requirements. • Neglecting to manage the entire company as a whole. • Accepting that it’s “not possible” too easily rather than finding a way. • Seeking confirmation of your actions rather than seeking the truth. • Lacking simplicity in your vision. • Lacking clarity of your long-term aim and business purpose. • Lacking focus and identity. • Lacking an exit strategy.

16. The Keys to Starting a Small Business Success • A comprehensive business plan • The right form of ownership • Adequate financing

17. Equity Financing Owner’s funds Venture capitalists Debt Financing Loans & collateral Lines of credit Trade credits Barter Financial Resources Did You Know? The online lending agency is the latest trend in debt financing. Live Capital connects borrowers to American Express, GC Capital and other lenders.

18. Franchising • Franchise: • A license to sell another’s products or to use another’s name in business or both • Franchiser: • The company that sells a franchise • Franchisee: • The purchaser of a franchise

19. Top Ten Franchises for 2006 Source: “Franchise 500® 2006 Rankings,” Entrepreneur, www.entrepreneur.com/franzone/rank/0,6584,12-12-F5-2006-00,0.html (accessed February 22, 2006)

20. Fastest Growing and HottestNew Franchises

21. Advantages of Franchises • Management training and support • Brand-name appeal • Standardized quality of goods and services • National advertising programs • Financial assistance • Proven products and business formats • Centralized buying power • Site selection and territorial protection • Greater chance for success

22. Disadvantages of Franchises • Franchise fees and profit sharing with the franchiser • Strict adherence to standardized operations • Restrictions on purchasing • Limited product line • Possible market saturation • Less freedom in business decisions

23. The Marketing and Communication Tools for Small Business Success Online features that small and midsize businesses use or are interested in using to have a competitive advantage: Source: “Online tools for small and midsize businesses,” USA Today Snapshots, December 6, 2006, p. 1b.

24. Developing Trends Impacting Small Business • Demographic Trends • Baby boomers & Echo boomers • Technological Trends • Increase in Internet usage • Major breakthroughs in technology • Economic Trends • Economic turbulence creates economic threats and new opportunities

25. Making Big Businesses Act “Small” • More and more firms are emulating small businesses in an effort to improve their own bottom line by • Downsizing • Making their operating units function more like independent small businesses • Intrapreneurs

26. Solve the Dilemma • Evaluate the idea of a low-fat cookie and muffin retail store. • Are there any concerns in connection with starting a small business that Jack and Bruce have not considered? • What advice would you give Jack and Bruce as they start up their business?

27. Explore Your Career Options • What are some of the key qualities required of an individual starting a new small business?

28. Additional Discussion Questions and Exercises • Assume you wanted to go into business for yourself. • What kind of business would you prefer? • What would be the financial requirements for entering the business? • What type of work or managerial experience would you need? • What should be included in a business plan? • What is the importance of a business plan to the small-business entrepreneur?

29. Additional Discussion Questions and Exercises • What are the goals of venture capitalists when they invest in new businesses? • Think of your local community. Can you name five new businesses that have started up recently? • Would you consider these new businesses to be small businesses? • Are these new businesses franchises?

30. Chapter 6 Quiz • A license to sell another’s products or to use another’s name in business, or both, is called • a franchise • a joint venture. • a licensing agreement. • a small business license. • Which of the following industries is least likely to be entered into by small-business entrepreneurs? • Services • high technology • mining and manufacturing • retailing

31. Chapter 6 Quiz • The shortest path to business failure is • undercapitalization. • lack of a business plan. • stress. • employee turnover • The money needed to finance regular business operations is called • a line of credit. • collateral. • undercapitalization. • working capital.

32. Multiple Choice Questions about the Video • America’s women owned businesses employ: • 275,000 employees • 27.5 million employees • 10,000 employees • 15 million employees • JustDogs is: • A gourmet dog treats franchise • A canine salon • A brand of dog food • A veterinary clinic just for dogs