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CHAPTER 5

CHAPTER 5. ENTREPRENEURSHIP. Rewards and Challenges of Entrepreneurship.

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CHAPTER 5

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  1. CHAPTER 5 ENTREPRENEURSHIP

  2. Rewards and Challenges of Entrepreneurship • An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of starting and operating a business. Entrepreneurship is the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business. • A venture is a new business undertaking that involves risks.

  3. 12 Characteristics of Entrepreneurs • Persistent • Risk-taking • Self-confident • Restless • Goal-oriented • Action-oriented • Responsible • Self-demanding • Creative • Independent • Inquisitive • Enthusiastic

  4. Small Businesses • Small business is an independently owned business that usually has the owner as its manager. • A small business serves a limited geographic area and employs fewer than 500 people.

  5. Internet Businesses • Virtual Business • Dot-com company is a business that operates on the internet. • According to American City Business Journals, small businesses that use the internet have grown more than 45 percent faster than those that do not.

  6. Rewards of Entrepreneurship • Being the Boss • Ability to be in charge (Main Reason) • Entrepreneurs do not have to consult with others before making a decision. • Doing what you Enjoy • Having the opportunity to be Creative • Entrepreneurs make the procedure that everyone else follows. Daring or creative ideas. • Building an Enterprise • Many successful entrepreneurs work in a related business before starting their own business. • They must research before starting. • Other Reasons • Make their own schedule.

  7. Sole proprietorship vs. Partnership vs. Corporation • Sole proprietorships are owned and operated by one person. • Do not share their company’s income and expenses, profits or loses. • All responsibilities and profits and benefits. • Partnerships are owned and ran by two or more people. • Corporations are run by a chief executive officer, who answers to a board.

  8. Challenges of Entrepreneurship • Getting Funds to Start the Business • Most people must borrow money or finance the money to get started. (Go in debt). • Difficult to get loans-fear of business succeeding or not, and ability to repay the loan. • Being Fully Responsible for the Business • Must make sure that: • Floors swept, bills paid, employees hired, make repairs, handle financial records, train employees, etc. • Other Challenges • Feeling alone • Making right decisions • Work long hours • Uncertain level of income • 4 out of 5 small businesses fail in the first five years of existence. Mostly due to poor financial planning and management, and not being able to adapt to change.

  9. Small Businesses Facts • More than 99% of the US firms are small businesses. • Small businesses employ more than 50% of the workforce in the US. • Majority are one person operations. • Estimate: 2/3 of all new jobs are generated by small businesses. • Virtual businesses continues to increase.

  10. 5.2 The Business Plan • Business Plan is a written description of a new business venture that describes ALL aspects of the business. It is used by potential investors and financing agencies that new entrepreneurs go to for start-up funds.

  11. Checklist for Starting a Business • What will I produce? • Who are my main competitors? • Why is my product or service needed? • How much will my product or service cost to produce? • How many people will I need to run the business? • What physical facilities will I need? • What licenses, permits, or other legal documents do I need? • How much money will I need to get started?

  12. 16 Essential Parts of a Business Plan • Executive Summary • Management Team Plan • Company Description • Product and Service Plan • Vision and Mission Statements • Industry Overview • Market Analysis • Competitive Analysis • Marketing Plan • Operational Plan • Organizational Plan • Financial Plan • Growth Plan • Contingency Plan • Cover Page, Title Page, Table of Contents, and Supporting Documents

  13. Executive Summary • Brief account of key points. • Not more than 2 pages. • Most important information from each section. • Should persuade the reader that the business will succeed. • Evidence gathered through market research.

  14. Management Team Plan • Your qualifications. • Description of team capabilities. • How you will fill gaps in expertise. • Hire consultants • Form partnerships • Advisory Boards

  15. Company Description • Outline of the business. • Size, scope, and type of business. • Why the business will succeed??

  16. Product and Service Plan • Description of the product or service you want to offer. • Nature of the business should be clear. • Unique features of the product. • Spin-offs are additional products that may be offered when the business gets established.

  17. Vision and Mission Statements • Guiding principles by which a business functions. • Vision Statement-the scope and purpose of a company, and it beliefs and values. • Mission Statement-specific aspirations of a company, the major goals.

  18. Industry Overview • Present your research. • Discuss trends and growth within the industry. • (Industry is the companies that provide similar, complimentary, or different products)

  19. Market Analysis • Research about your customer profile. • Overall marketing and sales strategies. • Analyze your customers and the competition. • Target market information-geographics, economics, and demographics.

  20. Competitive Analysis • How the business has an advantage over its competitors.

  21. Marketing Plan • How a company makes its customers aware of it products or services. • Market niche, pricing, company image, marketing tactics, media plan, and marketing budget.

  22. Operational Plan • Production and delivery of the product or service.

  23. Organizational Plan • People who will run the firm as well as management’s philosophy. • Form of business organization-proprietorship or corporation, etc.

  24. Financial Plan • Forecast for the business. • Data • Proof that the business will be financially healthy.

  25. Growth Plan • How the business will expand in the future.

  26. Contingency Plan • Likely risks to the business. • Lower than expected sales. • Emergencies. • Ways to minimize risks.

  27. Cover Page, Title Page, Table of Contents, and Supporting Documents • Company’s Name • Address • Phone Number • Website • Email • Logo • The date the plan was submitted • Name of the preparer

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