Chapter 6: Entrepreneurship and Starting a Small Business

Angel investors

Private individuals who invest their own money in potentially hot new companies before they go public

Challenges of working at home

Getting new customers, managing time, keeping work and family tasks separate, abiding by city ordinances, managing risks

Small business administration (SBA)

A US government agency that advises and assists small businesses by providing management training and financial advice and loans; started a microloan demonstration program in 1991 The SBA offers a number of programs to help finance small businesses that have difficulty obtaining loans from private sources. Sometimes the SBA will offer direct loans, sometimes it will guarantee private loans, and other times it will combine both of these approaches.

Small business

A business that is independently owned and operated, is not dominant in its field of operation, and meet certain standards of size set by the small business administration in terms of employees or annual receipts; there are 27.8 million small businesses in the US and they generate 60 to 80% of new jobs each year Small businesses have certain advantages over larger rivals in international markets. Overseas buyers often prefer to deal with individuals rather than corporate bureaucracies. Moreover, small businesses can often begin shipping faster and offer more personal service.

Intrapreneurs

Creative people who work as entrepreneurs within corporations

Business plan

A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owners A business plan is mandatory when talking to bankers and investors. A business plan should include information about the resources and qualifications of the owner. An effective business plan must consider all the aspects of operating a new business in detail Developing a business plan forces an entrepreneur to think carefully about all aspects of the business he or she intends to start.

Target marketing

A group of customers a business has decided to aim its marketing efforts and ultimately its merchandise towards

Entrepreneurial team

A group of experienced people from different areas of business who join to form a managerial team with the skills to develop, make, and market a new product

Small business investment company program (SBIC)

A program through which private investment companies licensed by the small business administration lend money to small businesses

Entrepreneurship

Accepting the risk of starting and running a business

Affiliate marketing

An Internet-based marketing strategy in which a business rewards individuals or other businesses for each visitor or customer the affiliate sends to its website

Small business development Center (SBDC)

Are funded jointly by the federal government and individual states, and are usually associated with state and community colleges and universities. Help you evaluate the feasibility of your plan, develop your business plan, and complete your funding application - all for no charge. Perhaps the best place for young entrepreneurs to start shopping for an SBA loan

Incubators

Centers that offer new businesses in the critical stage of early development low cost offices with basic business services such as accounting, legal advice, and secretarial help

Reasons for growth of home-based businesses

Computer technology has doubled the competitive playing field, corporate downsizing and has led many to venture out on their own, social attitudes have changed, new tax laws have loosened regulations on deducting expenses for home offices

Micropreneurs

Entrepreneurs willing to accept the risk of starting and managing the type of business that remain small, lets him do the kind of work they want to do, and offers them a balanced lifestyle. Many are home-based business owners.

Service corpse of retired executives (SCORE)

In SBA office with volunteers from industry, trade associations, and education who counsel small businesses at no cost except for expenses

Venture capitalists

Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses Venture capitalists are individuals or companies that invest in new businesses in exchange for partial ownership of those businesses. However, as a result of the bursting dot-com bubble, many venture capitalists have reduced how much they are willing to invest in a high-tech venture and have increased their required rate of return. Venture capitalists sometimes ask for as much as a 60% stake in a business.

Equity financing

Is the method of raising capital by selling company stock to investors. In return for the investment the shareholders receive ownership interest in the company.

Market

People with unsatisfied wants and needs to have both the resources and the willingness to buy

Home-based entrepreneurs

Should focus on finding opportunity instead of accepting security, getting results instead of following routines, earning a profit instead of earning a paycheck, trying new ideas instead of avoiding mistakes, and creating a long-term vision instead of seeking a short-term payoff

Enterprise zones

Specific geographic areas to which governments try to attract private business investments by offering lower taxes and other government support Also known as empowerment zones or enterprise communities, enterprise zones are specific geographic areas where state governments try to attract private investment by offering lower taxes for locating your business there.

Example of entrepreneurial team

The key to Apple's early success was that it was built around a team of entrepreneurs

Debt financing

When a firm raises money for working capital or capital expenditures by selling bonds, bills, and notes individual or institutional investors

Small business failures

When small business owners close down one business to start another they are included in the failure category-even if they haven't felt it all. Similarly one of business changed its form of ownership or a sole proprietor retired is counted as a failure Many of the businesses with the lowest failure rates require advanced degrees to start. This would include veterinary services and dentists' offices. However, while training and degrees may buy security, they do not tend to produce high growth rates.