Business Chapter 5

Businesses fail for the following reasons:

1) Bas business idea 2) Cash problems 3) Managerial inexperience or incompetence 4) Lack of customer focus 5) Inability to handle growth

Small Businesses...

1) Create jobs 2) Spark Innovation 3) Provide opportunities for women & minorities to achieve financial success & independence

Start from Scratch...most common & riskiest option

Advantage: You start with a clean slate & build the business the way you want Disadvantage: It's up to you to develop your customer base & build your reputation

Small Business Administration (SBA):

Govt. agency that provides assistance to small businesses, five advantages are... 1) Be your own boss 2) Accomodate a desired lifestyle 3) Achieve financial independence 4) Enjoy creative freedom 5) Use your skills & knowledge

Industry

Group of companies that compete with one another to sell similar products

Goods- producing sector

Includes all businesses that produce tangible goods

Service- producing sector

Includes all businesses that provide services but don't make tangible goods

Small Business

Independently owned & operated, organized for profit, & not dominate in its field

Small Business Development Centers (SBDC):

Matches businesspeople needing advice with terms of retired executives who work as volunteers through the SCORE program.

Disadvantages of starting a small business:

1) Financial risk. the financial resources needed to start & grow a business can be extensive, and if things don't go well, you may face substantial financial loss. You also won't have no guaranteed income. 2) Stress. You'll have many things to worry about- competition, employees, bills, equipment breakdowns, customer problems. 3) Time commitment. Running a business is extremely time consuming. You'll probably have less free time than you'd have working for someone else. 4) Undesirable duties. You'll be responsible for either doing or overseeing just about everything that needs to be done, and you'll probably have to perform some unpleasant tasks, like firing people.

Advantages to business ownership:

1) Independence. you're your own boss 2) Lifestyle. you decide when & where you want to work 3) Financial rewards. In spite of high financial risk, running your own business gives you a chance to make more money than if you were employed by someone else 4) Learning opportunities. you'll be involved in all aspects of your business 5) Creative freedom & personal satisfaction. you'll be able to work in a field that you really enjoy, and you'll gain personal satisfaction from watching your business succeed.

3 characteristics of entrepreneurial activity:

1) Innovating- an entrepreneur offers a new product, applies a new technique/technology, opens a new market, or develops a new form of organization for the purpose of producing or enhancing a product 2) Running a business- entrepreneurship means setting up a business to make a product from an innovative product or process 3) Risk taking- risk means that an outcome is unknown. Entrepreneurs are always working under a certain degree of uncertainty and they can't know the outcomes of many of the decisions that they have to make

Before starting a business, you need to ask yourself a few basic questions:

1) What, exactly, is my business idea? Is it feasible? 2) What type of business is right for me? What industry do I want to get into? 3) Do I want to run a business that's similar to many existing businesses, or do I want to innovate? 4) Do I want to start a new business, take over an existing one, or buy a franchise? 5) Do I want to start the business by myself, or do I want company? 6) What form of business organization do I want?

Business plans usually include the following sections:

1) execuative summary 1-3 pg overview 2) description of proposed business 3) industry analysis 4) mission statement & core values 5) management plan 6) goods, services, and the production process 7) marketing 8) global issues 9) financial plan 10) appendices

Buy an existing business...not as risky as starting a business from scratch, but has some drawbacks

Advantages: You'll already have a proven product, current customers, a known location, & trained employees Disadvantages: Hard to determine how much to pay for a business; perhaps the current owners have disappointed customers; maybe the location isn't as good as it use to be

Buying a franchise

Advantages: You've bought a prepackaged, ready-to go business that's proven success elsewhere; you also get ongoing support from the franchiser Disadvantages: The cost can be high; you have to play by the franchiser's rules; and franchisers don't always keep their promises

Business Plan

Document that identifies the goals of your proposed business & explains how it will achieve them. -before you start up your business, you must also get financing

Lifestyle Business

Provides income for people & their families

Entrepreneur

Someone who identifies a business opportunity & assumes the risk of creating & running a business