Ch. 6 Entrepreneurship And Starting A New Business (Understanding Business)

small business statistics

- account fot over 50% of GDP -generate 60-80% of new jobs -80% of US workers first jobs

what makes an idea a good opportunity?

-fills customers needs -you have the skills and resources -you can sell at competitive price -you can keep the business going

downsides of home-based business

-getting new customers -self-discipline managing time -keeping work and family separate -gov. ordinances may restrict business -homeowners insurance may not cover business-related claims

learn about small business

-learn from others -get some experience (3 years) -take over a successful firm

getting money to fund small business

-personal savings/relatives (most popular) -finance companies/banks/ gov (hard) -venture capitslists (hard) -future suppliers -not investors at outset -angel investors -SBA, SBIC (reccommended)

for small business to succeed...

-plan and finance your business (most important for starting) -know your customers (marketing) -managing your employees (human resource development) -keeping records (accounting)

small business advantages over large business in global markets

-small companies ship faster, provide a wide variety of suppliers, give customers personal service and attention. -buyers enjoy dealing with individuals rather than corporations

why do small businesses have difficulty going global?

1. financing is often difficult to find 2. would-be exporters dont know how to get started and dont understand cultural differences in markets. 3. the bureaucratic paperwork can threaten to bury a small business

entrepreneurship

accepting the risk of starting and running a business

Service Corps of retired executives SCORE

SBA offers volunteers from industry, trade associations, and education who counsel small businesses for no cost (except for expenses)

Small Business Administration (SBA)

a US givernment agency that advises and assists small businesses by providing management training, financial advice, and microloans administered through a nationwide network of nonprofit organizations that judge worthiness of borrower on integrity and business plan rather than credit.

small business

a business that is independently owned and operated, is not dominant in its field of operation, and meets the certain standards of size( set by the small business association SBA) in terms of employees or annual recepits. small in relation to other businesses in industry

other forms of help

a commercial loan officer can: -set up a business plan, give financial advice and lend money. an insurance agent can help you understand and prevent risks

business plan

a detailed written statement that describes the nature of the business, the target market, the competitive advantages, and the resources and owners qualifications. -forces potential owners to be specific about what they will offer. -mandatory for talking with bankers or investors. -25-50 pages. 6 months to write

writing a business plan

a good executive summary catches interest and tempts potential investors to read on. -most important to get it into the right hands

entrepreneurial team

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

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 "failure"

counts as.. -owner closing a business to start another. -changing forms of ownersip -retirement -they are misinterpretations so over 50% do not fail in first 4 years

immigration act 1990

created category of "invesot visas" that encourage entrepreneurs to come to US

intrapreneurs

creative people who work as entrepreneurs for corporations using existing resources to launch new products

micropreneurs

entrepreneurs willing to accept risk of starting a business that will remain small. offers a balanced lifestyle. 1/2 are home based

9 sections of business plan

executive summary company background management team financial plan capital required marketing plan location analysis manufacturing plan appendix

venture capitalists

individuals or companies that invest a lot in new business in exchange for partial ownership. Usually go for bigger businesses.

advantages of small business over bug business

more personal customer service and the ability to respond quickly to opportunities

online business

online sales reached 7% of all sales. grew 11% when retail sales grew 2.5%

why take the risk to be an entrepreneur?

opportunity profit independence challenge

angel investors

people who invest their own money in potentially hot new companies before they go public. Websites can match them. borrower gets money faster and cheaper than going to the bank.

market

people with unsatisfied wants and needs who have both resources and willingness to buy. knowing your market is the most important element of small business success. next is keeping your market.

Small Business Investment Company SBIC Program

program of private investment companies licensed by the SBA that lend money to small businesses. must have 5 million in capital and borrow $2 for every $1 of capital it has

what attributes does it take to be an entrepreneur?

self directed self nurturing action oriented highly energetic tolerant of uncertainty

enterprise zones (empowerment zones)

specific geographic areas to which governments attrsct provate business anvestment by offering lower taxes and government support.

incubators

state services that offer new businesses low cost offices with basic services like accounting and legal advice to reduce start-up capital needs.

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS

•CDFIs are playing a big role in the economic recovery. •First formed in the early 1980s; by 2009, over $1 billion flowed into CDFIs from investment companies. •Only 1% of loans were not paid back in the last 30 years!

legal help

•Owners need outside consulting advice early in the process. •Small and medium-sized firms cannot afford to hire experts as employees. •A competent lawyer can help with: -Leases -Contracts -Partnership agreements -Protection against liabilities

small business prospects abroad

•Small- and medium-sized businesses accounted for 99% of recent export growth. •Advantages of global trade for small businesses: -Overseas buyers enjoy dealing with individuals. -Small companies can usually begin shipping much faster. -They provide a wide variety of suppliers. -They can give more personal service and attention.