Essential Skills for Business Owners and Operators

1. Chapter 2 $ The World of Business and Accounting $ Making Accounting Relevant Owning and operating a business takes special skills and traits. $ What skills do you think are important for the person who owns and operates a business? $

2. Chapter 2 $ Section 1 Exploring the World of Business • What You’ll Learn • Profit and risk-taking. • The free enterprise system. • Starting and running your own business. • Three types of business operations. • Three forms of business organization. $ $ $

3. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Why It’s Important In order to participate in the world of business, you’ll want to understand how businesses are formed, organized, and operated. $ $ $

4. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ • Key Terms • free enterprise system • profit • loss • entrepreneur • capital • service business • merchandising business • manufacturing business • sole proprietorship • partnership • corporation • charter $ $ $

5. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ The Environment of Business In a free enterprise system people are free to produce the goods and services they choose. $ • Nike • IBM • local video rental store • clothing boutiques • local grocers • Tower Records $ $

6. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ The Need for Profit The amount of money earned over and above the amount spent to keep the business operating is called profit. Businesses that spend more money than they earn operate at a loss. $ $ The Need for a Risk-Taker Entrepreneurs transform ideas for products or services into real-world businesses. $

7. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Entrepreneurship: Who Me? Have you ever considered owning a business? $ • Cons • You probably need to work long hours. • You lose the security of steady wages and medical benefits an employer provides. • You market your own services or products. • You pay for your own operating expenses. • You must be motivated and energetic each day. • You face the possibility of losing money. • Pros • You are your own boss • You create opportunities for earning money. • You create and control your work schedule. • You choose the people you serve. • You select the people who work with you. • You benefit from the rewards of your own hard work. • You choose your own work hours. $ $

8. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ • Types of Business Operations • Service Businesses • Merchandising Businesses • Manufacturing Businesses $ $ $

9. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Forms of Business Organizations $ • Sole proprietorship • Partnership • Corporation $ $

10. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Sole Proprietorship A business owned by one person. $ Disadvantages: • Limited expertise • Hard to raise money • Owner has all the risks • Hard to attract talented employees Advantages: • Easy to set up • All profits go to owner • Owner has total control • Few regulations to follow $ $

11. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Partnership A business owned by two or more persons, who agree to operate the business as co-owners. $ Advantages: • Easy to start • Skills and talents are pooled • More money available Disadvantages: • Conflicts between partners • Profits must be shared • Owners share all risks $ $

12. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Corporation A business organization that is recognized by law to have a life of its own. $ Disadvantages: • Costs more to start up • Complex to organize • More regulations • Higher taxes Advantages: • Easier to raise money • Easy to expand • Easy to transfer ownership • Losses limited to investment $ $

13. Section 1 Exploring the World of Business(cont'd.) Chapter 2 $ Check Your Understanding $ Would you say that the advantages of being an entrepreneur outweigh the disadvantages or vice versa? Why? $ $