BADM1103F07Ch06

1/45Entrepreneurship2/45•Entrepreneurship•Accepting the risk of starting and running a business 3/45Entrepreneurship•Why take the risk of business ownership •American dream •Profit•Independence•Challengesense of achievement4/45Entrepreneurship (cont.)•Entrepreneurial attributes•Self-directed and self-disciplined •Self-nurturing, believing in your own ideas •Action-oriented•Highly energetic •Tolerant of uncertainty5/45Entrepreneurship (cont.)•Entrepreneurial teams •A group of experienced people from different areas of business who join together to form a managerial team6/45Micropreneurs And Home-based Businesses •Micropreneurs•Accept the risk of starting and managing the type of business that remains smalllets them do the kind of work they want to dooffers a balanced lifestyle7/45… Home-based Businesses(cont.)•Home-based businesses•~ 50% in service industries8/45… Home-based Businesses(cont.)•Reasons for growth of home-based businesses•Computer technology•Eroded job security!!!•Social attitudes•Tax laws9/45… Home-based Businesses(cont.)•Challenges•Getting new customers •Managing time •Keeping work and family tasks separate •Abiding by city ordinances •Managing risk 10/45… Home-based Businesses(cont.)•Should Focus On:•Finding opportunity vs. accepting security •Getting results vs. following routines •Earning a profit vs. earning a paycheck •Creating a long-term vision vs. seeking a short-term payoff 11/45… Home-based Businesses(cont.)•Web-based businesses•Offer unique products or services •Available technologyHypermart.comEbay.com•Web-based businesses are not failure-proof12/45… Home-based Businesses(cont.)•Entrepreneurship within firms•Intrapreneurscreative people who work as entrepreneurs within corporations 13/45Government Support•Government•Immigration Act of 1990encourage more entrepreneurs to come to the United States •Investor Visasallows 10,000 people to come to the U.S. each year if they invest $1 million in an enterprise that creates or preserves 10 jobs14/45Government Support (contd.)•Enterprise Zones •Specific geographic areas to which government try to attract private business investmentlower taxesother government support •Investment tax credits 15/45Government Support (contd.)•State Commerce Departments•Clearinghouses for programs •Incubators•Centers that offer low-cost offices with basic business services (such as accounting, legal advice, and secretarial help) 16/45Getting Started In Small Business •Small Businesses (SB)•Independently owned and operated •Meets certain standards in terms of employees or annual receipts 17/45Getting Started In SB (cont.)•SB statistics•20 million full-and part-time home-based businesses in the U.S. •Create 75% of the NEW JOBS in the U.S. •Account for over 50% of GDP•First jobs of about 80% of all Americans18/45Getting Started In SB (cont.)•Importance of SB•75% of the new jobs are in small businesses•Give more personal customer service and are able to respond quickly to opportunities 19/45Getting Started In SB (cont.)•SB failure•1/2 of businesses fail in their first five years •SBA study -60% death rate within six years •Kirchhoff’s -failure rate 18% over the first eight years •Almost one out of five businesses that fails is left owing money to creditors 20/45Getting Started In SB (cont.)•Reasons SB fail•Managerial incompetence•Inadequate financial planning 21/45Getting Started In SB (cont.)•The lowest failure rates -require advanced training to start •High-growth businesses are not easy to start and even more difficult to keep going •The easiest businesses to start are the ones that have the least growth and the greatest failure rate 22/45Getting Started In SB (cont.)•Learning SB•From others•Get experienceWork for others (three years at least)Running a small business part-time 23/45Getting Started In SB (cont.)•Take over a businessfind a businessperson running a successful small business apprenticeship, a one-year training program another year or so, working hard to learn all about the business offer to become Assistant manager 24/45Getting Started In SB (cont.)•Buying a business•Pricewhat the business owns what it earns what makes it unique 25/45Managing a SB•SBA•90% of all small business failures are a result of poor management!!! poor planningpoor record keepingpoor inventory controlpoor promotionpoor employee relations 26/45Major Functions of Business •PLANNING your business •FINANCING your business •Knowing your customers (MARKETING) 27/45Major Functions … (cont.)•MANAGING your employees •ACCOUNTING28/45Planning•Business Plan•Detailed written statement that describes nature of the businesstarget marketadvantages the business will have in relation to competitionresources and qualifications of the owner(s) 29/45Planning (cont.)•Business Plan•Forces potential small-business owners to be specific about the products and services they intend to offer•Mandatory for bankers or other investors30/45Writing A Business Plan•A good business plan takes a long time to write •One of the most important parts of the business plan is the Executive Summary•Computer software programs can help you get organized31/45Planning (cont.)•Getting the completed business plan in THE RIGHT HANDS •The time and effort invested before starting a business will pay off later 32/45Planning (cont.)•Financing•90% of all start-ups receive money from friends and family •Suppliers •Individual investors •Angel investors private individuals who invest their own money in new businesses with potential 33/45Planning (cont.)•Venture Capitalistsindividuals or companies that invest in new businesses in exchange for partial ownership of those businessesmay demand a large share (as much as 60%) in the company in exchange for the start-up cash34/45Planning (cont.)Smaller companies have a better chance finding funding through an angel investor Small Business Administration (SBA) publishes a list of venture capitalists 35/45Planning (cont.)•Small Business Administration (SBA) •U.S. government agency that advises and assists small businessesprovides management training and financial advice and loans •Microloan programawards loans based on the borrowers’ integrity and the soundness of their business idea 36/45Planning (cont.)•Small Business Investment Company (SBIC) •A program through which private investment companies licensed by the SBA lend money to small businesses •SBIC loans to or invests in small businesses that meet its criteria 37/45Planning (cont.)•Small Business Development Centers (SBDCs)•Help evaluate the feasibility of an idea, develop business plans, and help with completing the funding application 38/45Planning (cont.)•Knowing your customers •Marketpeople with unsatisfied wants and needs who have both the resources and the willingness to buy•Identify the wants and needs •Keep customers happy 39/45Planning (cont.)•Managing employees •Find, Hire, Train, and Keep Employees SB -less money, fewer benefits, and less room for advancement than larger firms often more satisfied •Delegate authority 40/45Planning (cont.)•Keeping records•Accounting system set up record keeping systems provide tax planning, financial forecasting choosing sources of financing 41/45Planning (cont.)•Service Corps of Retired Executives (SCORE)•SBA office with volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses) •Local college business professors also advise small business owners for a fee 42/45Going International •World Market•Potentially more lucrative for small businesses than the U.S. alone financing is often difficult to find they don’t know how to get started they don’t understand the cultural differences of potential markets the bureaucratic paperwork can be overwhelming 43/45Going International (cont.)•Good reasons for small business •Most of the world’s market lies outside the U.S. •Exporting can absorb excess inventory •Can soften downturns in the U.S. market •Can extend the life of products44/45Going International (cont.)•Advantages of SB•Overseas buyers enjoy dealing with individuals rather than with large corporate bureaucracies •Small companies can usually begin shipping much faster •Small companies provide a wide variety of suppliers 45/45Going International (cont.)•Small companies can give more personal service and more attention