Chapter 6. Entrepreneurship and Starting a Small Business
how did the 1990 immigration act encourage entrepreneurs to relocate to the U.S.
by creating a category of investor visas
how do intraprenuers launch new products and generate new profits?
by using the company's existing resources
which action of the comprehensive business plan indicates the amount of capital needed to commerce or continue operations, and describes how these funds are to be used?
capital required
all organizations demand
capital, good ideas, planning, information management, budgets ( and financial management in general), accounting, marketing, good employee relations, and good overall managerial know-how
why is Resnick's business so successful? -one customer says
exceptional service and quick turnaround time
there are many good reasons for going global. Which of the following are examples of such reasons?
exporting can extend product life and exporting can absorb excess inventory
included in the comprehensive business plan, the _____ plan provides 5 year projections for income, expenses, and funding sources.
financial
working at home has it challenges of course : getting new customers
getting the word out can be difficult because you don't have a retail storefront
gaining financing, knowing how to get started in exporting, and navigating bureaucratic paperwork are major hurdles to consider when getting started in
global business
resale
buying goods and reselling them ( garage sales)
a number of websites match people who want money with those willing to lend it. -they include donation-based services
(such as GoFundMe and Kickstarter where companies accept small donations in exchange for perks like T shirts or other memorabilia) -and debit investment sites ( such as funding circle that offers loans that need to be repaid plus interest. This is called peer to peer ( P2P) lending or crowdfunding. OFten gets money faster and more easily than going to bank, and cost is often less than a bank loan
one of the major issues in the U.S. continue to be the need to create more jobs. The job-creating power of entrepreneurs when you look at some of the great U.S. entrepreneurs from the past and present.
-Avon by David McConnell -Kodak by Geroge Eastman -Ford Motor company by Henry ford -amazon.com by Jeff Bezos
the U.S. has plenty of entrepreneurial talent
-Mark Zuckerberg -FaceBook -Michael Dell ( Dell inc) -Bills Gates ( Microsoft) -Howard Schultz -starbucks -Jack dorsey - Twitter -Chad Hurley and Steve Chen- youtube
make your marketing decisions long before you introduce a product or open a store =an An inexpensive marketing research study can help you determine where to locate, whom to select as your target market, and what is an effective strategy for reaching it.
-a marketing consultant -service corps of retired executives -a business professor from local colleges -peer groups -the counsel of other small business owners. -peer advisory organizations -local chambers of commerce -the commercial loan officer and an insurance agent
small business owners often say the most important assistance they received in starting and managing their business was in accounting.
-accurate recordkeeping enables a small-business owners to follow daily sales, expenses, and profits,, as well as help owners with inventory control, customer records and payroll -most business failures are caused by poor accounting practices that lead to costly mistakes. A good accountant can help you decide whether to buy or lease equipment and forecasting, choosing sources of financing, and writing requests for funds
can get advice for small business: Commerical loan officer and an insurance agent
-commercial loans officer can help you design an acceptable business plan and give you valuable financial advice as well as lend you money when you need it -the insurance agent will explain all the risks associated with a small business and how to cover them most efficiently with insurance and other means like safety devices and sprinkler systems
many home-based businesses are owned by people combining career and family. -some more reasons for growth of home-based businesses:
-computing technology -coperte downsizing -social attitudes -newer tax laws
many people have started online businesses by following these steps:
-find a need and fill it -write copy that sells -design and build an easy-to-use website -use search engines to drive traffic to your site -establish an expert reputation for yourself -follow up with your customers and subscribers with email -increase your income through back end sales and upselling
working at home has it challenges of course :
-getting new customers -managing time -keeping work and family tasks separate -abiding by city ordinances -managing risk
working at home has it challenges of course : keeping work and family tasks separate
-have to keep distractions to a minimum -also takes self discipline to leave your work at the office if the office is at home
keep in mind, however, that not all ideas are opportunities. If your idea doesn't meet anyone's else's needs, the business won't succeed. -you may have a business idea that 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 price customers are willing and able to pay and still make a profit -you can get your product or service to customers before your window of opportunity closes ( before computers with simular solutions beat you to the marketplace) -you can keep the business going
some reasons people are willing to take the entrepreneurial risk : -opporunity
-many people, including those new to this country, may not have the skills for today's complex organizations, but they do have the initiative and drive to work the long hours demanded by entrepreneurship -the same is true of many corporate managers who leave corporate life ( by choice or after downsizing) to run businesses of their own. -others, including an increasing number of Millenials, women, minorities, older people, and people with disabilities, find that starting their own businesses offer them more opportunities than working for others
some reasons people are willing to take the entrepreneurial risk
-opportunity -profit -independence -challenge
most of the world's market lies outside the U.S., there are good reasons in the domestic market and extend product lives. It can also spice up dull routines -small businesses have several advantages over large businesses in international trade:
-oversea buyers often enjoy dealing with individuals rather than with larger corporate bureaucracies -small companies can usually begin shipping much faster -small companies can provide a wide variety of suppliers -small companies can give customers personal service and undivided attention because each overseas account is a major source of business to them
there are many advantages small business have when engaging in international trade. -what are examples of such advantages:
-overseas buyers often enjoy dealing with individuals rather than with large corporate bureaucracies -small companies can give customers personal service and undivided attention
technological advances have helped increase small business exporting.
-paypal makes it possible for small businesses to get paid automatically when they conduct global businesses online. -the internet also helps small businesses find customers without the expense of international travel -as people acquire more wealth, they often demand specialized products that are not mass produced and are willing to pay more for niche goods that small businesses offer
list of entrepreneurial attributes to look for in yourself include:
-self-directed -self-nurturing -action-oriented -highly energetic -tolerant of uncertainty
interesting statistics about small businesses
-there are 28 million small businesses in the U.S. -of all nonfarm businesses in the U.S., about 97% are considered small by SBA standards -small businesses account for more than 50 percent of the gross domestic product ( GDP) -nearly, 600,000 tax-paying, employee-hiring businesses are started every year -small businesses have generated 65% of the new jobs since 1995 -small businesses employ about half of all private-sector employees -about 80% of U.S. workers find their first jobs in small businesses
an important source of information for small businesses is the service corps of retired executives ( SCORE)
-this SBA resource partner has more than 11,000 volunteers from industry, trade associations, and education who counsel small businesses at no cost ( except for expenses) -you can find a SCORE counselor by logging on to www.score.org -the SBA also offers a free, comprehensive online entrepreneurship course for aspiring entrepreneurs.
according to the SBA half of new businesses dont last 5 years. Some people argue that the failure rate is actually much lower than that statistic suggests.
-when small business owners closed down one business to start another, for instance, they were included in the "failure" category-even though they had not failed at all. -simular, when a business changed its form of ownership or a sole proprietor retired, it was counted as a failure. -the good news for entrepreneurs is that business failures are much lower than traditionally reported
the small business administration ( SBA)
A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans -very small loans ( up to $50,000) and technical assistance -administered through a nationwide network of nonprofit organizations chosen by the SBA -rather than award loans based on collateral, credit history, or previous business success, the program judges worthiness on belief in the borrowers integrity and the soundness of their business ideas
you may be able to connect with potential invests through
AngelList, an online nonprofit service that helps entrepreneurs and venture capitalists get to know each other
community development financial institutions ( CDIs) may be a source for funding for business in lower-income communities
CDFIs played a big role in the economic recovery -CDFIs succeeded even after the credit bubble because they maintained the financial discipline other lenders lacked -they have the incentive to make sure their clients succeed because if borrowers don't repay their loans, the CDFIs take the hit, not investors. -CDFIs laos provide business counseling such as helping owners learn how to develop marketing strategies, manage inventory, and improve cash flow
Avon
David McConnell
starbucks
Howard Schultz
Amazon.com
Jeff Bezos
the program through which private investment companies licensed by the small business administration lend money to small business is called the:
Small Business Investment Company
characteristics of an intrapreneur :
a creative person who works within a corporation, he or she generates profits by levergin a firm's human financial and physical resources, and someone who uses company's resources to launch new products.
what characteristics are needed to be become a successful entrepreneur
action oriented, initiative, and tolerant of uncertainty
entrepreneurial attributes include:
action-orientated, tolerant of uncertainty, and highly energetic
one of the greatest advantages small businesses have is the ability to know their customers better and:
adapt quickly to their needs
consulting
advising businesses in areas in which you have an expertise such as technology, marketing, search engine optimization, or social media management
reasons for small business faulures
among them managerial incompetence and inadequate financial planning
microloans
amounts ranging from $100- 50,000 to people such as single mothers and public housing tenants
becoming an ______one of the best ways to learn about how to run a business
apprentice
a(n) _______ can benefit both the trainee and the business owners by hiring the trainee to learn small-business management while assisting the owner in getting daily work done
apprenticeship -apprentices, assistants, and trainees are hired and paid for their work. Interns are not paid, so they are not hired
high growth businesses
are difficult to start and are extremely difficult to keep going
individual investors are also a frequent source of capital for most entrepreneurs -angel investors
are private individuals who invest their own money in potentially hot new companies before they go public
enterprise zones
are specific geographic areas to which government attract private business investment by offering lower taxes and other government support
personal creations
artwork and handmade items that can be sold on sites such as Etsy, eBay, and Amazon
working in a successful business is a good way to learn the operations and could:
be a step in buying out the owner
some entrepreneurs who have suffered flops are more realistic than novice entrepreneurs
because of the lessons they learned, they may be more successful in their future ventures
executive summary
begin with two page or three page management summary of the proposed venture. Include a short description of the business and discuss major goals and objectives
some reasons people are willing to take the entrepreneurial risk -profit
bill gates who cofounded microsoft, is the richest person in the U.S. and one of the richest in the world
mark recently started a small consulting firm. He is drafting 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) -mark is writing a
business plan
the JOBS act of 2012 allows
businesses to raise up to $1 million a year from private investors without making an initial public offering. -the jobs act allows businesses to use fundraising sites to solicit larger investments in exchange for ownership shares in the business -many prefer the terms crowdinvesting or equity crowdfunding for this form of fundraising
the ________ section of a business plan describes company operations to date ( if any), portentol legal considerations, areas of risk and opportunity. This portion also summarizes the firm's financial condition,, and includes past and current balance sheets, income and cash flow statements
company background
a necessary and invaluable aid to entrepreneurs is a
competent, experienced lawyer who knows and understands small business. -this person can help with leases, contracts, partnership agreements, and protection against liability
the executive summary is the part of business plan that
consists of a two or 3 page management summary of the proposed venture , including a short description of the business, and discusses major goals and objectives
microppuners include
consultants, video producers, architects, and bookkeeper. -many with professional skills such as graphic design, writing, and translating have found that one way of starting a freelance business is through websites. The sites post job openings and client feedback and serve as secure intermediaries for client's payment.
a good business plan takes long time to write but you've only got only 5 minutes in the executive summary, to
convince readers not to throw it away.since bankers receive many businesses plans everyday, the summary has to catch their interest quickly -getting the completed business plan into the right hands is almost as important as getting the right information into the plan. Finding funding requires research
which part of the business plan summarizes the most attractive points your project in as few words as possible?
cover letter
Jason has prepared a comprehensive business plan -which indicates
cover letter, executive summary, company background, management team, financial plan, capital required, marketing plan, location analysis, manufacturing plan, and an appendix.
entrepreneurship in a large organization is often reflected in the efforts and achievements of intrapreneurs, which are
creative people who work as entrepreneurs within corporations. -the idea is to use a company's existing resources - human, finial, and physical-to launch new products and generate new profits
entrepreneurs must recognize that need competent and motivated employees. Since they can't compete with larger firms' pay and benefits, they need to:
delegate more often, be respectful of employees' opinions, and provide more challenging opportunities to learn
company background
describe company operations to date ( if any) , potential legal considerations, and areas of risk and opportunity. -summarize the firm's financial condition, and include past and current balance sheets, income and cash flow statements and other relevant financial records, -it is also wise to include a description of insurance coverage. Investors want to be assured that death or other mishaps do not pose major threats to the company
manufacturing plan
describe minimum plant size, machinery required, production, capacity, inventory, and inventory-control methods, quality control, plant personnel requirements, and so on -estimates of product costs should be based on primary research
the easiest to keep alive are
difficult to get started ( like manufacturing )
among the hurdles small businesses must overcome in starting to operate globally are:
difficulty finding fiancing, bureaucratic paperwork, and understanding cultural differences
marketing plan
don't underestimate competition. Review industry size, trends, and the target market segment. -discuss strengths and weaknesses of the product or service. The most important thing investors want to know are what makes the product more desirable than what's already available and whether the product can be patented -compare pricing to the competition's. -forecast sales in dollars and units. Outline sales, advertising, promotion, and public relations programs. Make sure the costs agree with those projected in the financial statements
entrepreneurs must be
economically, mentally, and physically able to work long and hard.However, they mostly seek achievement rather than power and are self motivated
as a business grows, it becomes impossible for an entrpemuner to oversee every detail, even by putting 60 hrs a week. This means that hiring and motivating employees are critical -that's one reason good employee relations are important for small business management
employees of small companies are often more satisfied with their jobs than are their counterparts in big businesses. -quite often they find their jobs more challenging, there ideas more accepted, and their bosses more respectful
you can find a wealth of online information about starting a home-based business at
entrepreneur's website ( www.entrepreneur.com)
a ____ team is a group of experienced people from different states of businesses who join together to form a manergical team with the skills needed to develop, make, and market a new product
entrepreneurial
many ______ use their time, money, and energy to run their passions into sustainable businesses. they are comfortable being their own bosses and are not afraid of failure.
entrepreneurs
some reasons people are willing to take the entrepreneurial risk -challenge
entrepreneurs take moderate, calculated risks; they don't just gamble. -in general, though entrepreneurs seek achievement more than power
often entrepreneurs are reluctant to recognize that to keep growing, they must delegate authority to others
entrepreneurs who have built their companies from scratch often feel compelled to promote employees who have been with them from the start-even when they aren't qualified to serve as managers. -enterpers best serve themselves and the business if they gradually recruit and groom employees for management positions, enhancing trust and support between them
______ refers to accepting the risk of starting and running a business
entrepreneurship
how to open my own busines -take over a succesful firm
find a successful business person who owned a small business.Tell them your eager to learn the business and would like to starve an apprenticeship-a training period. -then ask if you could help the owner of manager by becoming assistant manager. -then work hard and learn all about business-suppliers, inventory, bookkeeping, customers, promotion. Then make offer : owner can retire or work only part time, and you will take over management of the business. You can establish a profit sharing plan with the owner plus pay yourself a salary. -the owner benefits be keeping ownership in the business and making 60 percent of earned before- without having to work.YOu benefit by making 40 percent of the profits of profits of a successful firm. -then propose to buy out business if not, then leave business fully trained
lenders whant to know everything about an aspiring business
first pick a bank that serves businesses the size of yours. -have a good accountant prepare a complete set of financial statements and a personal balance sheets. -make an appointment before going to the bank, and go to the bank with an accountant and all the necessary financial information -demonstrate to the banker that your a person of good character, civic minded, and respected in business and community circles. -finally ask for all the money you need, be specific, and be prepared to personally guarantee the loan
managing a small business become relatively easy with the advent of inexpensive personal computers. Inexpensive computer systems and off the shelf or even free, -open source software make it easy for the small business manager to:
follow the fairly sales and expenses and manage customer records
the most common source of funding after personal savings is
friends and family -you may even want to consider borrow from a potential supplier to your future business. Helping you get started may bien the supplier's interest if there is a chance you will be a big customer later -it's usually not a good idea to ask such an investor for money at the outself. Begin by asking for advice; if the supplier likes your plan, he or she may be willing to help you with funding too
most entrepreneurs get ideas for products and services:
from asking questions and from looking around
list of entrepreneurial attributes to look for in yourself include: -action oriented
great business ideas are not enough -most important is a burning desire to realize, actualize, and build your dream into reality
if you want to both independent and rich, you need to pursue a business with high
growth
and the ones that can make you rich are both
hard to start and hard to keep going ( like automobile assembly )
-some more reasons for growth of home-based businesses: coperorate donwsizing
has led many to venture out on their own. -meanwhile, the work of the downsized employees still needs to be done, and corporations are outsourcing much of it to smaller companies
-some more reasons for the growth of home-based businesses: newer tax laws
have loosened restrictions on deducting expenses for home offices
entrepreneurs do what
help the country prosper, strength the economy, and create thousands of jobs
the U.S. Department of Housing and urban development ( HUD) indeed 20 "promise zones: in
high poverty areas across the country. -the promise zone plan calls on federal agencies to work with local leaders to help businesses owners cut through bureaucracy to win federal grants and bring schools, companies, and nonprofits together to support literacy programs and job training and to reduce crime in order to improve the quality of life
many people today who need to combine work and family and starting
home-based businesses
working at home has it challenges of course : managing risk
home-based entrepreneurs should review their homeowner's insurance policy, since now all policies cover business-related claims. -some even void the coverage if there is a business in the home
john had a good idea for a candy manufacturing business. He decided that he wanted to take the risk, become an entrepreneur, and start his own business. NOw 10 years later, JOhn's candy company has 20 locations all over the united states and employees nearly 1,000 people. -this example illustrates:
how entrepreneurs help the country prosper
Location Analysis
in retailing and certain other industries, the location of the business is one of the most important factors. -provide a comprehensive demographic analysis of consumers in the area of the proposed business as well as a traffic-pattern analysis and vehicular and pedestrian counts
appendix ( business plan)
include all marketing research on the product or service and other information about the product, concept, or market size. -provide a bibliography of all the reference materials you consulted. -this section should demonstrate that the proposed company won't be entering a declining industry or market segment
management team
include an organization chart, job descriptions of listed positions, and details resumes of the current and proposed executives -managers should have expertise in all disciplines necessary to stat and run a business. If not, mention outside consultants who will save in these roles and describe their qualifications
the expansion and development of the internet has sprouted a world of small web-based businesses. -this among other reasons, may explain why onlines sales are pradily
increasing
according to a recent study, offering low-cost offices with basic services to new businesses in the early stages of development results in the 87$ success rate of
incubator graduates
capital required ( in business Plan)
indicate the amount of capital needed to commence or continue operations, and describe how these funds are to be used. -make sure the totals are the same as the ones on the cash flow statement. This area will receive a great deal of review from potential investors, so it must be clear and concise
the SBA determines whether a business is considered "small" only after analyzing how a particular business measures up compared to other businesses in its
indsury
when starting a small business, government agencies such as the small business administration (SBA), the farmers home administration, the economic development authority, and the minority business development agency are possible sources of:
information and capital
for launching and operating a small business, what resources are often available through colleges and universities?
interns, business professors, and masters of business administration students
______ are creative people who work as entrepreneurs within corporations
intrapreneurs
a business plan
is a detailed written statement that describes the nature of the business, the largest market, the advantages the business will have over competition, and the resources and qualifications of the owner(s) -a business plan forces potential small business owners to be quite specific about the products or services they intend to offer.They must analyze the competition , calculate how much money they need to start, and cover other details of operation. -a business plan is also mandatory for talking with bankers or other investors
for those who want more control over destinies working on or starting a small business makes sense -entrepreneurship
is accepting the risk of starting and running a business
the best way to define a market
is all consumers with unsatisfied wants and needs who have both resources and the willingness to buy.
online business isn't always a fast road to success
it can sometimes be a shortcut to failure. Hundred of high flying dot coms crashed after promising to revolutionize the way we shop. that's the Bad new -THE GOOD NEWS is that you can learn from someone else's failure and spare yourself some pain. And of course you can learn from their successes as well
the government can also join with private entities to promote entrepreneurship -ex/ startup america is a white house initiative to "celebrate, inspire, and accelerate high growth entrepreneurship throughout the nation"
it is a public and private effort to bring together the country's most innovative entrepreneurs, corporations, universities, foundations, and other leaders, to work with federal agencies to increase the number and success of U.S. entrpneuers. -one of the core goals is to empower more Americans not just to get a job, but also to create jobs
list of entrepreneurial attributes to look for in yourself include: -highly energetic
its your business, and you must be emotionally, mentally, and physically able to work long and hard. -employees have weekends and vacations; entrepreneurs often work seven days a week and don't take vacations for years.
chris spent his own money on marketing research, and consulted his sister Kara, how is an accountant. They spent the next few months writing a business plan.. -what are some business functions Christ has addressed?
knowing your customers and planning
obtaining money from banks, venture capitalists, and government sources is very difficult for most small businesses -your success is running a business depends on many factors especially
knowing your customers, managing your employees, and keeping good records
most small and medium-sized firms cannot afford to hire experts as employees ( to advice for thing such as legal, tax, accounting, marketing) -a necessary and invaluable aide is a competent, experienced lawyer who knows and understands small businesses
lawyers can help with leases, contracts, partnerships, agreements, and protection against liabilities .
how to open my own business
learn from others, get some experience, and take over a successful firm
the easiest businesses to start have the
least growth and greatest failure rate ( like resurations)
micropreneurs are willing to accept the risk of starting and managing a business that:
lets them to do the kind of work they want to do, remains small, and offers them a balanced lifestyle
-some more reasons for growth of home-based businesses: computer technology has
leveled the competitive playing field, allowing home-based businesses to look and act as big as their corporate competitors. -broadband internet connections, smartphones, and other technologies are so affordable that setting up a business takes a much smaller initial investment than it once did
504 certified development company ( CDC) loans
loans for purchasing major fixed assets, such as land and buildings for business in eligible communities, typically rural communities or urban areas needing revitalization -the maximum guaranteed loan amount is $5 million for meeting the job creation criteria or a community development goal. -the business must create or retain one job for every $65,000 ( $100,000 for small manufacturers ) provided by he SBA
guaranteed loans
loans made by a financial institution that the government will repay if the borrower stops making payments -maximum individual loan guarantees is capped at $5 million
export express
loans made to small businesses wishing to export. The maximum guaranteed loan amount is $500,000
community adjustment and investment program ( CAIP)
loans to businesses to create new, sustainable jobs or to preserve existing jobs in eligible communities that have lost jobs due to changing trade patterns with mexico and canada following the adoption of NAFTA
pollution control loans
loans to eligible small busses for the financing of the planning, design, or installation of a pollution control facility. -this facility must prevent, reduce, abate, or control any form of pollution, including recycling
CAPLine loans
loans to help small businesses meet their short-term and cyclical working capital needs. -the maximum CAPLine loan is $5 million
which section of a business plan provides a comprehensive demographic analysis of consumers in the area of the proposed business as well as a traffic- pattern analysis and vehicular and pedestrian counts?
location analysis
at point is it most important to make your marketing decisions?
long before you introduce a product or open a store
micropreneurs do not have the goal of growing their businesses into large corporations but rather desire to
maintain a balanced lifestyle while doing the kind of work they want to do. -most commonly these people own home or web based businesses
the part of a business plan that includes an organization chart, job description of limited positions, and details resumes of the current and proposed executives is called
management team
some factors that could be associated with small-business success
managerial competence and adequate financial planning
challenges of running a home-based business?
managing time and keeping work and family tasks separate
the section of a business plan that describes minimum plant size, machinery required, production capacity, inventory and inventory-control methods, quality control, and plant personal requirements is called the
manufacturing plan
chossing the right type of business is criticalm
many businesses with low failure rates require advanced training to start-veterinary services, dental practices, medical practices, and so on.
some reasons people are willing to take the entrepreneurial risk -independence
many entrepreneurs simply do not enjoy working for someone else. They want to be the ones to make the decisions that lead to their success or failure. -they want to be free to roam, create, work, and delegate.
mark zuckerberg
the most important things investors want to know aare what makes the product more desirable than what's already available and whether or not the product can be patented. -in what section of the business plan should inventos look to find this information?
marketing plan
entrepreneurial teams may be better suited to run a business than individual entrepreneurs because
members can combines creative skills from the start and it may ensure cooperation and coordination later among functions in the business
_____ want to maintain a balanced lifestyle while doing the kind of work they want to do
micropreneurs -want to maintain a balanced lifestyle while doing the kind of work they want to do.
not everyone who starts a business wants to grow a mammoth corporation. some are interested in maintaining a balanced lifestyle while doing the kind of work they want to do. -such business owners are called
micropreneurs -while other entrepreneurs are committed to the quest for growth, micropreneurs knew they can be happy even if their companies never appear on a list of top-ranked businesses.
in addition to providing employment opportunities, small firms believe they offer other advantages over larger companies
more personal customer service and the ability to respond quickly to opportunities
many micropreneurs are home-based business owners.
more than half of all small businesses are run from owners' home.
states are becoming strong supports of entrepreneurs, and are creating programs that invest directly in new businesses. Often, state commerce department serves clearinghouses for such programs. -states are also creating incubators and technology centers do reduce start up capital needs. incubators offer
new businesses in the critical stage of early development low-cost offices with basic services such as accounting, legal advice, and secretarial help
an entrepreneurial team is a group
of experienced people from different areas of business who join to form a mangerical team with the skills to develop, make, and market a new product.
once you have identified your market and its needs, you must set out to fill those needs
offer top quality at a fair price with great service -it is not enough to get customer but you have to keep them. -your product meet those needs needs. But if customers tell you they've discovered something they don't like in your product, call them back when you fix it and tell them.
if you want to be both independent and rich, you need to go after growth
often high-growth businessses, such as technology firms, are not easy to start and even more difficult to keep going
-Avon by David McConnell -Kodak by Geroge Eastman -Ford Motor company by Henry ford -amazon.com by Jeff Bezos these stories have mcuh in common
one or a couple of entrepreneurs had a good idea, borrowed some money from friends and family, and started a business. -that business now employs thousands of people and helps the country prosper
the samll business administration ( SBA) defines a small business as
one that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size in terms of employees or annual receipts ( such as under $2.5 million a year for service businesses)
a small business is defined as:
one that meets certain standards of size in terms of employees or receipts, one that is not dominant in its field, and one that is independently owned and operated
a small business is considered "small" only in relationship to
other businesses in its industry -a wholesaler may sell up to $22 million and still be considered a small business by the SBA
a self employment assistance program (SEA) offered by some states is to designed to:
pay unemployment benefits while building a business and provide training and counseling to the new business owner
an entrepreneur has several potential sources of capital:
personal savings; family and business associates; banks and finance institutions; angles, crowedgudning, and venture capitalists; and government agencies such as the Small business administration.
managers address many activities including planning, fiancing, marketing, human resource development, and record keeping. Of these functions, which two are of a primary concern when starting a business?
planning and fiancing
to help succeed as a business owners: functions of a business in a small business setting
planning your business, financing your business, knowing your customers ( marketing) , managing your employees ( human resource development) and keeping records ( accounting) -the start up plan and management phases of the business, the first to planning and financing are primary concerns when your start the business
what does it take to start and run a small business
planning, financing, keeping good business records, knowing your customers, and managing employees are what it takes to start and run a small business
the phrase poor management covers a number of faults -those faults include:
poor employee relations and poor planning
small business administration, one of the major causes of small business failures is poor mangament.
poor management covers a number of faults -poor planning, cash flow management, recordkeeping, inventory control , promotion, or employee relations, poor captilization.
many businesses have difficulty getting started in global business -what are reasons
primarily because the voyage includes a few global hurdles: fiancing is often difficult to find, would be exporters don't know how to get started and do not understand the cultural differences between markets and the bureaucratic paperwork can threaten to bury a small business
small buisness investment company ( SBIC) are
private investment companies licensed by the SBA to lend money to small businesses. -an SBIC 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. It lends to or invests in small businesses that meet its criteria. -often SBICs are able to keep defaults to a minimum by identifying a business's trouble spots early, giving entrepreneurs advice, and in some cases rescheduling loan payments
financial plan
provide five year projections for income, expenses, and funding sources. -don't assume the business will grow in a string line -adjust your planning to allow for funding at various stages of the company's growth. -explain the rationale and assumptions used to determine the estimates -assumptions should be reasonable and based on industry/historical trends. -make sure all tootals add up and are consistent throughout the plan. -if necessary hire a professional accountant or financial analyst to prepare these statements -stay clear of excellvily ambitous sales projections; ratherm offer best case, expected, and worst case scenarios.these not only reveal how sensitive the bottom line is to sales fluctuations but also serve as good management guides
started by the small business administration in 1991 , the microloan program
provides very small loans ( up to $50,000) and technical assistance to small business owners
community development financial institutions ( CDR) has been successful because they
providing counseling on improving cash flow, maintain financial discipline offer lenders lack, and offer counseling on marketing strategies
the Small Business Administration (SBA) in the U.S., government agency that advises and assists small businesses by:
providing loans, providing financial advice, and providing management training
within the comprehensive plan, the marketing plan outlines
sales, advertising, promotion, and public relations programs. -this section also compares prices to competitors and forecasts sales in dollars and units
online businesses have to offer more than the
same merchandise customers can buy at store-they must offer unique products or services
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 pay off
the personal qualities needed to be an entrepreneur include being
self directed, tolerant of uncertainty, and very energetic
bigger is not always better -big businesses dont
serve all the needs of the market. -there is plenty of room for small companies to amke a profit filling those niches.
lawyers don't have to be expensive
several prepaid legal plans offer services such as drafting legal documents for a low annual rate- you can find plenty online -the SBA offers plain english guides and mini tutorials that will help you gain a basic understanding of the laws that affect each phase of the life of a small business -findforms.com offers a search tool that helps you find free legal forms from all over the web as web as well as advice, links, books, and more. -"free" isn't a bargain if the information isn't correct, so check so check the sources carefully and double check any legal actions with an attorney
Kayla wanted to open her own dress design business. She spent a few hours putting together a marketing plan, then selected an award-winning dress she designed and wore it to the meeting with the bank. -the most likely reason she did not receive a loan was:
she did not develop a thorough business plan
many found that smaller community banks were more likely to grant loans than larger regional banks.
since small banks do business in a single town or cluster of towns, they know their customers better. -they have more flexibility to make lending decisions based on everything they know about their customers, rather than on a more automated basis as larger banks must
there are 27.8 million _______ _____ in the U.S., accounting for more than 50 % of the GDP
small businesses
managerial incompetence and inadequate financial planning are 2 common reasons for
small-business
another way to encourage entrepreneurship is enterprise zones
specific geographic areas to which governments attract private business investment by offering lower taxes and other government support -these are sometimes called empowerment zones or enterprise communities
there is a multitude of small businesses selling everything online from
staples to refrigerator magnets to wedding dresses
list of entrepreneurial attributes to look for in yourself include: -tolerant of uncertainty
successful entrepreneurs take only calculated risk ( if they can help it ) -still they must be able to take some risks. -you can't be afraid to fail. May well known entrepreneurs failed several times before achieving success. -new entrepreneurs must be prepared to run out of time a few times before they succeed
repair of skill based services
tailoring, plumbing, home repairs, painting, ect.
a good business plan
takes a lot of time to write, but you have only a few minutes to convince readers not to throw it away. -this is why your executive summary is very important
a team may be better than an individual entrepreneur because
team members can combine creative skills with production and marketing skills right from the start. -having a team also can ensure more cooperation and coordination later maong functions in the business.
learning from others is a useful way to avoid pitfalls when starting a small business. -some thing you may be told would include:
that finding and retaining good workers is hard, to hire a good lawyer and accountant, and starting with enough money
an important quality for entrepreneurs is:
the ability to tolerate uncertainty
it may be easier to identify with a small neighborhood business than with a giant global firm, yet the principles of mangament are similar for each.
the management of charities, government agencies, churches, schools, and unions is much the same as the management of small and large businesses
a few states offer assistance to qualified candidates under the self -employment assistance (SEA) program
the program allows participants to collect unemployment checks while they build their businesses -participants often get training and consulting as well -unemployment checks may not seem as much, but many business owners say they are enough to help them launch their companies without depleting savings to pay for living expenses until their businesses are strong enough to support them
the SBA's export express loan program provides export financing opportunities for small businesses
the program is designed to finance a variety of needs of small business exporters, including participation in foreign trade shows, catalog translations for use in foreign markets, lines of credit for export purposes ,and real estate and equipment for the production of goods or services to be exported
the SBA microloans program awards loans on belief in the borrowers'' integrity and:
the soundness of their business idea
how to open my own business -get some experience
there is no better way to learn small business management than by becoming an apprentice or working for a successful entrepreneur. -many small-business owners got the idea for their businesses from their prior jobs. -the ride of thumb is have 3 years experience in a comparable business first. -if you say money ( working part time in a small business) too, because you're less than less likely to make mistakes
the best place for young entrepreneurs to start shopping for an SBA loan is a Small business development Center ( SBDC)
they are funded jointly by the federal government and individual states and are usually associated with state and community colleges and universities. -SBDCs can help you evaluate the feasibility of your idea, develop your business plan, and complete your funding application-all for no change
some people are promoting the idea of increasing the allowed number of such immigrants
they believe the more entrepreneurs that can be drawn to the U.S. the more jobs will be created and the more the economy will grow
businesses with low failure rates, such a veterinary services, dental practices, and medical practices:
they do not tend to produce much growth and they often require advanced training to start
what is true regarding low failure rates, such as veterinary services, dental practices, and medical practices?
they often require advanced training to start and they do not tend to produce much growth
how to open my own business -learn from others
they'll tell you that location is critical and caution you not to be undercapitalized; that is not to start without enough money. -they'll warn you about the problems of finding and retaining good workers. -and most of all, they'll tell you to keep good records and hire a good accountant and lawyer before you start. -free advice like this is invaluable
part of the immigration act passed by congress in 1990 was intended
to encourage more netpreneurs to come to the U.S. -the act created a category of "investor visa" that allows 10,000 people to come to the U.S. each year if they invest at least $500,000 in an enterprise that creates or preserves 10 jobs
one of the greatest advantages small businesses have is the ability
to know their customers better and adapt quickly to their ever-changing needs -the only way to know your customers needs are to listen. -dont let your passion/ego get in the way of changing your products or services to fit what customers really want
one of the most difficult task is raising money for a startup
to raise money, entrepreneurs talk with bankers and other potential investors, and try to sell their ideas. -in order to have a chance, most of the time, entrepreneurs have to present a business plan
in home services
tutoring, landscaping, snow shoveling, house cleaning, pet sitting, babysitting, web designing, personal training, home organizing ect.
shared economy opportunities
uber driver
Daniel wanted to start his own small business. After spending his own money on marketing research, Daniel asked his friend Chose to be his accountant. -they spent a few months writing a business plan, which then they presented to a bank, Daniel:
understands the steps needed to start a small business
how do you determine a fair price for a business
value is based on what the business wons, what it abrsm and what makes it unique. -an accountant will need to help you determine the business's value
________ are individuals or companies that invest in new businesses in exchange for partial ownership in those businesses.
venture capitalists
Venture Capitalists may finance your project- for a rise.
venture capitalists may ask for a hefty stake in your company ( as much as 60%) in exchange for the cash to start your business. -if a venture capitalist takes too large a stakem you could lose control of the business -since the widespread failure of early web start-ups, venture capitalists have been willing to invest less and expect more return on their investment if the new company is sold. -therefore, if your a very small company you don't have to a very good chance of getting venture capital
the government could have a significant effect on entrepreneurship by offering tax breaks to businesses that make the investment to create jobs -the jump start over business startups ( JOBS) act of 2012
was enacted in an effort to make it easier for small businesses to raise funds and hopefully create new jobs
most entrepreneurs don't get ideas for products and services from some flash of inspiration. The source of innovation is more like a flashlight. -to look at problems and or passion and see opportunities in them, ask yourself these questions:
what do I want but can never find? What product or service would improve my life? What really irritates me and what product or service would help?
an inexpensive marketing research study may help you determine which of the following
what is an effective strategy for reaching your target market, where to locate, and whom to select as your target market
-some more reasons for the growth of home-based businesses: social attitudes have changed
whereas home-based entrepreneurs used to be asked when they were going to get a "real" job, they are now likely to be asked for how to do it advise.
one of the most important elements of small-business success is knowing the market -market
which consists of consumers with unsatisfied wants and needs who have been both resources and willingness to buy
entrepreneurs often come up with an idea for a new business and need fiancing. At this stage it is important to develop a business plan
which force proteinol small business owners to be quite specific about the products or services they intend to offer.
while many entrepreneurs' business ideas are inspired by their passions, many see business Opportunites where others see only problems. ex/
while Celtel founder Mo Ibrahim saw the opportunity to bring mobile phones to the over 1 billion people in africa who had never even used a phone much less owned one, large telecommunication companies saw only poor peasants and logistical hurdles -celtel soon became africa's largest cell phone provider -ibrahim sold the company for$3.4 billion
ahmad is the owner of a small U.S> shoe manufacturing business. He knows he could export some of his shores, but he doesn't know if they fit other markets. Also he cannot afford to hire an international trade export -what does this situation demonstrate:
why many small businesses have difficulty engaging in global business
after working for a large auto manufacturing company for over 20 years. Saliva decided to start her own auto accessory store. While facing new challenges every day. Silvia is free to manage her company as she desires -this example illustrates:
why people take the risks of entrepreneurship
what are indicating a business idea is a good opportunity?
you can sell the product at a price customers will pay and still make a profit
venture capitalist try to safeguard their investment by taking some control over the business. -what could happen if a venture capitalist takes too large a stake in your company
you could lose control of the business
what does it take to be an entrepreneur ? You can learn about the managerial and leadership skills needed to run a firm. -however
you may not have the personality to assume the risks, take the initiave, create the vision, and rally others to follow your lead. -such personality traits are harder to learn or acquire than academic skills are
since government regulations are constantly changing
you may want to go to onto the SBA's website ( www.sba.gov) for the latest information about SBA programs and other business services
kodak
georgie eastman
working at home has it challenges of course : abiding by city ordainces
government ordinances restrict the types of businesses allowed in certain parts of the community and how much traffic a home-based business can attract to the neighborhood
list of entrepreneurial attributes to look for in yourself include: -self nurturing
you must believe in your idea even when no one else dones and be able to replenish your own enthusiasm
list of entrepreneurial attributes to look for in yourself include: -self directed
you should be self disciplined and thoroughly comfortable being your own boss. -You alone will be responsible for your success and failure.
cover letter
your cover letter should summarize the most attractive points of your project in as few words as possible. -be sure to address the letter to the potential investor by names.
working at home has it challenges of course : managing tiem
you save time by bot commuting, but it takes self-discipline to use that time wisely
