Business Ch 6 Entrepreneurship

Business Plan

A written description of the business idea and how it will be carried out, including all major business activities. -Description of the business -Description of the competition -Customer Analysis -Operations Plan -Marketing Plan -Finantial Plan

Sources of Financing

Owner-supplied: -Proprietorship=owner -Partnership=partners -Corporation= shareholders Borrowed funds: -Loans! -Credit

Facts and Figures of Small Businesses

Small business employ 50% of all U.S. workers Small businesses create 60-80% of all new jobs

Entrepreneur

Someone who takes a risk in starting a business to earn a profit -Desire to be your own boss -Develop an initial plan -Have special skills and abilities -Have creative/innovative ideas

Entrepreneurship

The process of starting, organizing, managing, and assuming the responsibility for a business.

Facts About Entrepreneurs

-Come from different backgrounds -All ages and ethnicities -Most have family and companions -Most have worked prior in other companies -Most come from middle class

Reasons for closing

-Lack of adequate capital -Low sales -Higher than expected expenses -Competitive pressure -An owner unprepared to manage a growing business -Operations requiring more time than the owner is willing to commit Proper Planning Prevents Poor Performance

Recognizing Risks

-More new businesses fail than succeed - Over a 10yr period, 50% are discontinued -One third are profitable -One third do not make a profit, but continue to operate -One third loses money

Entrepreneurship and the economy

-Nearly 1 in 10 of all Americans 18-64 years old is involved in some type of entrepreneurship activity -Over 500,000 new businesses are created annually -Sadly, nearly as many close as begin each year

Common Small Business Problems- Reasons for Failure

-Not keeping adequate records -Not having enough start-up money -Lack of management experience -Lack of experience with the type of business -Not controlling operating expenses -Poor location for business -Failure to manage credit offered to customers

Characteristics of Entrepreneurs

-Persistent -Inquisitive -Energetic -Goal Oriented -Independent -Self Confident -Creative -Reliable -Competitive

Steps in Developing a Business Plan

-Why develop one? Typically, to persuade investors to finance the venture. -The SBA is a great resource for assistance in developing a business plan. 1. Gather and review information 2. Develop a "game plan" (including alternatives) 3. Each section should be written out 4. Business experts/advisors should review the plan *SCORE*= Service corps of retired executives

Ownership Diversity

-Women own over 25% of all small businesses (6 million!) -Over 16% of small businesses have African-American, Asian-American, or Hispanic-American ownership -The majority of small business owners are over 40yrs old -Nearly 20% are under 25yrs old! -Nearly all people who start a small business have AT LEAST a high school diploma -Nearly 30% have college degrees -Half of small businesses are home-based (less start up!)

The Business Decision

1. An idea PLUS experience -Ideas can come from anywhere: a hobby, interest, business experience, research BUT you also need experience! You need to know how to run a business before you start your own! 2. Right place and time -LOCATION! Customers and distributors 3. Team approach -Hiring the right employees and working with the right business personnel (lawyers, bankers, accountants, etc.) 4. Preparation and research -Having the right business plan!

Small Business Advantages

1. Meeting Customer Needs -Serve customers where the number of products and -services needed is small or the requirements are too specialized for large businesses -Satisfies unique needs of customers (instead of marketing to the masses) -More frequent and personalized contact with customer base -Don't have to depend on research because they KNOW their customers 2. Providing unique services -Plan/create unique and individualized plans E.g. Wedding/party planning, customizing sound/entertainment systems -Employees are more educated about the services they provide (higher level of expertise)

Types of Financing

1. Start up financing- money needed to open the business 2. Short-term financing- money needed to fund current operating activities (less than a year) 4. Long-term financing- money needed for the main resources of a business

Entrepreneurship and the economy

Employment -40% of new business owners run their own businesses with no help Financing -Start up funds generally come from family and friends -One in five Americans has invested in a business of someone they know well -Venture capital=money provided by large investors to finance new products and new businesses that have a good chance to be very profitable. Productivity -Businesses with a single owner account for over $600 billion in sales annually -Small businesses are responsible for nearly half of the U.S. GDP each year -Small businesses account for 55% of all innovative products and services developed

New Business Opportunities

Innovation- an invention or creation that is BRAND NEW Ex: Computers, Post-It Notes, Ballpoint Pen, Nylon (Goods), FedEx, Kinko's, H&R Block (services) Improvement- a design change that increases the usefulness of a product, service, or process Ex: Adding a grip to a ballpoint pen, LED light bulbs, wind-proof umbrellas

Small Business

Is an independent business with fewer than 500 employees. That means that 99.7% of U.S businesses are considered small businesses (according to the SBA) In small business: -The owner is usually the manager -It operates in one ore very few locations -It typically serves a small market -It is not dominant in its field

Number of Employees in new businesses

Zero- 40% 1 to 5- 41% 6 to 9- 11% 20+- 8%