CHAPTER 6. Entrepreneurship and Starting a Small Business
Why are small businesses important to the U.S. economy?
Small business accounts for almost 50 percent of gross domestic product (GDP). Perhaps more important to tomorrow's graduates, 80 percent of U.S. workers' first jobs are in small businesses.
What does the small in small business mean?
The Small Business Administration defines a small business as one that is independently owned and operated and not dominant in its field of operation, and that meets certain standards of size in terms of employees or sales (depending on the size of others in the industry).
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).
entrepreneurial team
A group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product.
affiliate marketing
An Internet-based marketing strategy in which a business rewards individuals or other businesses (affiliates) for each visitor or customer the affiliate sends to its website.
entrepreneurship
Accepting the risk of starting and running a business.
Small Business Administration (SBA)
A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.
What goes into a business plan?
A business plan is a detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and qualifications of the owner(s).
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.
What sources of funds should someone wanting to start a new business consider investigating?
A new entrepreneur has several potential sources of capital: personal savings; family and business associates; banks and finance institutions; angels and venture capitalists; and government agencies and more.
Small Business Investment Company (SBIC) Program
A program through which private investment companies licensed by the Small Business Administration lend money to small businesses.
Service Corps of Retired Executives (SCORE)
An SBA office with volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses).
incubators
Centers that offer new businesses low-cost offices with basic business services.
intrapreneurs
Creative people who work as entrepreneurs within corporations.
micropreneurs
Entrepreneurs willing to 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, and offers them a balanced lifestyle.
What hints would you give someone who wants to learn about starting a small business?
First, learn from others. Take courses and talk with some small-business owners. Second, get some experience working for others. Third, take over a successful firm. Finally, study the latest in small-business management techniques.
What are some advantages small businesses have over large businesses in global markets?
Foreign buyers enjoy dealing with individuals rather than large corporations because (1) small companies provide a wider variety of suppliers and can ship products more quickly and (2) small companies give more personal service.
Where can budding entrepreneurs find help in starting their businesses?
Help can come from many sources: accountants, lawyers, marketing researchers, loan officers, insurance agents, the SBA, SBDCs, SBICs, peer groups, and even college professors.
venture capitalists
Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.
What is intrapreneuring?
Intrapreneuring is the establishment of entrepreneurial centers within a larger firm where people can innovate and develop new product ideas internally.
Why do many small businesses fail?
Many small businesses fail because of managerial incompetence and inadequate financial planning.
What is a micropreneur?
Micropreneurs are people willing to 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, and offers them a balanced lifestyle.
market
People with unsatisfied wants and needs who have both the resources and the willingness to buy.
What are a few of the reasons people start their own businesses?
Reasons include profit, independence, opportunity, and challenge.
What are some of the special problems that small-business owners have in dealing with employees?
Small-business owners often have difficulty finding competent employees and grooming employees for management responsibilities.
enterprise zones
Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support.
What are the attributes of successful entrepreneurs?
Successful entrepreneurs are self-directed, self-nurturing, action-oriented, highly energetic, and tolerant of uncertainty.
Why has there been such an increase in the number of home-based and web-based businesses in the last few years?
The increase in power and decrease in price of computer technology have leveled the field and made it possible for small businesses to compete against larger companies—regardless of location.
Why don't more small businesses start trading globally?
There are several reasons: (1) financing is often difficult to find, (2) many people don't know how to get started and do not understand the cultural differences in foreign markets, and (3) the bureaucratic red tape is often overwhelming.
What have modern entrepreneurs done to ensure longer terms of management?
They have formed entrepreneurial teams with expertise in the many skills needed to start and manage a business.
