Ch. 6: Entrepreneurship and Starting a Small Business - Intro. to Business

Tips for Starting Your Business in School

1. Find a problem or need. 2. Find a mentor. 3. Zero in on specifics. 4. Do research on campus, test products with students. 5. Move forward with your ideas. Don't wait! 6. Sacrifice. 7. Embrace failure.

Five Mistakes Business Owners Make

1. They're too afraid to commit! 2. They hire the wrong people. 3. They don't want to give up control. 4. They become complacent. 5. They fail to use new technology.

Five reasons to start your business right away

1. You have potential for long-term returns! 2. You don't have a mortgage or kids to take care of. 3. You can survive on little funds and work long hours. 4. No disruption to your career path. It hasn't started yet! 5. You're more adaptable and have higher risk tolerance at a younger age

Small Business Administration (SBA)

A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans. • Started a microloan program in 1991 providing very small loans to small-business owners. • The program judges worthiness based on the borrowers' integrity and soundness of their business ideas.

Small business

A business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size (set by the Small Business Administration) in terms of employees or annual receipts.

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 owner(s). • Forces potential owners to be specific about what they will offer. • Mandatory for talking with bankers or investors.

Crowdfunding

A large group of individuals provide donations in support of a company or product.

Entrepreneurial Teams

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 (SBIC)

A program through which private investment companies licensed by the SBA lend money to small businesses. • Must have a minimum of $5 million in capital and can borrow up to $2 from the SBA for each $1 of capital it has. • Keeps defaults low by identifying a business's trouble spots early, giving entrepreneurs advice, and rescheduling loan payments.

Small Business Exporting

Accounts for 98 percent of all exporting firms. Technological advances have helped growth. Hurdles include: • Difficulty in finding financing. • Not knowing how to get started. • Not understanding cultural differences. • Too much bureaucratic paperwork.

Small-Business Success and Failure

About half do not last five years. Some reasons for failure are: • Managerial incompetence. • Inadequate financial planning. • Choosing the wrong type of business.

Entrepreneurship

Accepting the risk of starting and running a business.

Incubators

Centers that offer new businesses low-cost offices with basic business services.

Intrapreneurs

Creative people who work as entrepreneurs within corporations; Entrepreneurship within Firms

Micropreneurs

Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the work they want to do, and offers them a balanced lifestyle.

Financing Your Small Business

Family and business associates are the most common source of funding. Banks and finance institutions. • Community development financial institutions (CDFIs) loan money and provide counseling, especially for lower-income communities.

Venture capitalists

Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.

new products for the company

Intrapreneurs use a company's existing resources to launch

Looking for Help

May need outside advice in legal, tax, accounting, marketing, or finance. • An experienced lawyer who knows and understands small businesses can help with leases, contracts, partnership agreements, and protection against liabilities. Consider an independent marketing research study. Commercial loan officers and insurance agents are important resources.

Service Corps of Retired Executives (SCORE)

More than 11,000 volunteers from industry, trade associations, and education who counsel small business at no cost.

Market

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

Angel investors

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

Enterprise zones

Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support.

Small Business Development Centers (SBDC)

funded jointly by the federal government and individual states. • Help evaluate the feasibility of ideas, develop business plans, and complete the funding application—for no charge.

Importance of Small Businesses

• 65 percent of the nation's new jobs are in small businesses. • More personal customer service. • Ability to respond quickly to opportunities

Writing a business plan.

• A good plan takes a long time to prepare. • A good executive summary catches interest and tempts potential investors to read on. • Getting the plan into the right hands is almost as important as getting the right information in it.

Benefits of Home-Based Businesses

• Ability to start your business immediately. • Minimal start-up capital needed. • No rent or excessive set-up charges. • Comfortable working conditions. • Reduced wardrobe expenses. • No commuting. • Tax benefits. • Elimination of office politics. • Low risk for trial and error.

Financing Your Small Business

• Angel investors • Crowdfunding • Venture capitalists

What to Consider Before Starting a Family Business

• Clarify Expectations: What will each person contribute? • Discuss Work/Family Boundaries: What is the line that separates work from personal relationships? • Evolve: Changing with the times is essential for all business. • Develop Good Communication: Agree about types of decisions you'll make jointly and on your own. • Clarify Long-Term Intentions: Discuss how long everyone will work full time and goals for the business. • Have an Escape Hatch: Have a Plan B.

Entrepreneurial Teams can

• Combine their creative skills with production and marketing skills from the start. • Ensure more cooperation and coordination among functions.

Reasons for growth of home-based businesses

• Computer technology has leveled the playing field. • Corporate downsizing has led many to venture on their own. • Social attitudes have changed. • New tax laws have loosened restrictions on deducting expenses for home offices.

Outline of a Comprehensive Business Plan

• Cover Letter. • Section 1—Executive Summary. • Section 2—Company Background. • Section 3—Management Team. • Section 4—Financial Plan. • Section 5—Capital Required. • Section 6—Marketing Plan. • Section 7—Location Analysis. • Section 8—Manufacturing Plan. • Section 9—Appendix.

Downsides of Home-Based Businesses

• Difficult to establish work habits. • Limited support system. • Isolation. • Workspace may be limited. • Clients may be uncomfortable coming to your home. • Zoning restrictions. • Success is based 100 percent on your efforts.

Boosting Your Business's Online Presence

• Establish an identity. • Be easy to find. • Go beyond blogging and create content. • Look out for opportunities. • Remember other forms of marketing. • Make sure your website has a mobile option. • Be friendly!

Get Some Experience

• Gain three years experience in the field. • Start a part-time small business.

Challenges of home-based businesses

• Getting new customers is difficult. • Managing your time requires self-discipline. • Work and family tasks are sometimes not separated. • Government ordinances may restrict your business. • Homeowner's insurance may not cover business-related claims.

Managing Your Employees

• Hiring, training, and motivating employees is critical. • Employees of small companies are often more satisfied with their jobs because they feel challenged and respected. • Entrepreneurs best serve themselves and the business if they recruit and groom employees for management positions.

Encouraging Entrepreneurship: What Government Can Do

• Immigration Act passed in 1990 created a category of "investor visas" that encourage entrepreneurs to come to the U.S. • Enterprise zones. • Jump start Our Business Startups (JOBS) Act of 2012 offers tax breaks in order to raise funds and create jobs.

Online Businesses

• In 2019, online retail sales in the U.S. reached over $365 billion, or approximately 12 percent of all retail sales. • They must offer unique products or services. • It is easy for copycats to copy your successful products and sell imitations on other sites

Encouraging Entrepreneurship: What Government Can Do

• Incubators • The Self-Employment Assistance (SEA) program allows participants to collect self-employment payments instead of regular unemployment checks. • Combination of private and public sectors.

An idea is a good opportunity if

• It fills customers' needs. • You have the skills and resources to start a business. • You can sell the product or service at a reasonable price and profit. • You can get your product or service to customers before the window of opportunity closes. • You can keep the business going.

Knowing Your Customers

• Market • Set out to fill the market's needs by offering top quality and great service at a fair price. • One of the great advantages of small businesses is the ability to know the market and quickly adapt to market needs.

Keeping Records

• Need accurate accounting and recordkeeping. • Many business failures are caused by poor accounting practices that lead to costly mistakes.

Four Major Reasons

• Opportunity. • Profit. • Independence. • Challenge.

Advantages of global trade for small businesses

• Overseas buyers enjoy dealing with individuals. • They can usually begin shipping much faster. • They provide a wide variety of suppliers. • They can give more personal service and attention.

What it Takes to be an Entrepreneur

• Self-directed. • Self-nurturing. • Action-oriented. • Highly energetic. • Tolerant of uncertainty.

Take Over a Successful Firm

• Serve as an apprentice and eventually take over once the owner steps down.

Looking for Help

• Service Corps of Retired Executives (SCORE) • Business professors from local colleges or college clubs may provide advice and counseling. • Other small-business owners can give insights into the challenges and solutions encountered within the industry.

Small versus Big Business

• Small business • Businesses are "small" in relation to other businesses in their industries. • There are over 30 million small businesses in the United States.

The SBA may provide the following types of financial assistance

• Standard (7a) loans. • Microloans • SBA Express. • Export Express. • International trade loans. • Community Adjustment and Investment Program (CAIP). • 504 certified development company (CDC) loans. • CAP Line loans.

Learn from Others

• Take classes on small business and entrepreneurship. • Talk to and work for successful local entrepreneurs.