Entrepreneurship: A Business of Your Own

1. Entrepreneurship:A Business of Your Own Workforce Essentials Fall2011

2. Do you know any business owners? • Examples: • Florists • Barbers/Hair Dressers • Restaurant Owners • Printing Press Owners

3. Entrepreneur • A person who organizes and manages a business.

4. Entrepreneurship • The organization and management of a business.

5. Importance of Small Business • Helps keep the economy strong by creating JOBS! • Helped the US have a higher standard of living • People working = more $ to spend! • More $ to spend = more demand for goods & services of small businesses • Small businesses hire more people to fill demand • More people working + More $ to spend = increased standard of living • Can do what corporations can’t! • Create competition between each other and corporations to keep prices in line

6. Opportunities for Entrepreneurs • Being an entrepreneur involves: • Organizing a business, • Planning its direction, and • Taking the risks.

7. Advantages • People go into business for themselves because: • Can be exciting/rewarding • Gives a sense of accomplishment • “Be Your Own Boss!” • Freedom to make decisions • In charge of setting own schedule • Opportunity to try out new ideas • If new ideas are accepted – the entrepreneur gets credit! $$$$$$$$$$ Credit=Profit • Profit – the money left from business income after paying all expenses (Entrepreneurs get to keep!!!!)

8. Disadvantages • Must be willing to do EVERYTHING connected with a new business • Must do the jobs of bookkeeper, manager, & salesperson • May have to do the jobs of secretary & janitor • May require lots of work hours (about 60 hours per week) • Emotional strain – decision making, profitability • Pressure of knowing business could fail

9. Types of Business Ventures • Possibilities are almost endless • Examples: • Sell homemade products (clothing, artwork, food) • Offer a service (house-cleaning, child care, car repair) • Build a factory and manufacture items (tools, toys, furniture) • Established business concept or new concept (dry cleaners, restaurants vs. computer software)

10. Franchises • The right to marker another company’s product or service. Purchasing this right usually costs thousands or more! • Examples: fast food restaurants, convenience stores, dry cleaners • Advantages • Proven track record of success • Exclusivity – no one else could buy into the same franchise in the same area • Franchiser support (training, tips, location, etc.)

11. Franchises Continued… • Disadvantages • Large initial investment $$$ • Pay ongoing fees to retain right to use name • May not be free to run as you wish • May be required to follow guidelines • Investigate carefully! • Talk with other franchisees (people who own same franchise) about franchisor (one who sells a franchise) and success

12. Franchises

13. For more info on Franchises… • Contact the Federal Trade Commission at: • http://business.ftc.gov/selected-industries/franchises-and-business-opportunities

14. Buying an Existing Business • Already established • Owners sell because they want to: change careers, move, or retire • Can eliminate much of the work and expense • Location is already chosen • Business already known in community • Already have loyal customers • Investigate first!!!! (Reputation? Equipment? New Laws? New Competition?

15. Business Planning • Ever had a lemonade stand or paper route? • Review Business Planning Checklist • How to Succeed? • Key quality – Optimism (believing in yourself and your business. Positive attitude!) • Self Starter – one who had initiative to see what needs to be done and do it! Time, Energy, & Interest = Success • Innovative – ability to come up with new ideas • Decision-making Skills – must be able to decide on routine issues & major problems • Risk taker (money, self-esteem, respect) • Goal setter

16. Use Resources Wisely • Human Resources – include both employees & customers • Material Resources – include the supplies & other items needed to run a business • Financial Resources – refer to the money needed to start the business and keep it going. Also includes profits.

17. Planning Resources • One textbook chapter is NOT enough! • Community College classes • U.S. Small Business Administration (SBA) – agency providing assistance to small business owners in a number of ways. • Est. in 1953 • Provides financial, technical, & management assistance to help start, run, and enlarge a business • Offers a start-up kit • Can help develop business plan for lending institutes and applying process

18. SBA • Offers workshops, seminars/course on: • Marketing • Purchasing • Planning a small business • Available online at http://www.sbaonline.sba.gov • Another information source is http://www.workingsolo.com • Contains links to important topics such as business planning, management, financial matters, government resources, sales, and marketing.

19. Choosing a Business • What is best for YOU? • Answer this first • Your business should: • Involve your interest and abilities • Relate to your work experience or favorite hobby • Fill needs and wants of consumers in your area • Conduct a survey to determine consumer interests • Investigate

20. Avoiding Fraud • Fraud – the act of deceiving or tricking • Victims are those who rush into a franchise or business opportunity by illegal or unethical marketers • What ads or signs have you seen for business opportunities that seem “to good to be true?” • Contact the BBB (Better Business Bureau) to determine if it is a scam and discover any complaints

21. Location, Location, Location • Is where you are located important? • Keep several factors in mind: • Close to customers • Close to suppliers • Neighboring businesses • Competition • Room Capacity • Parking facilities • Electical and Plumbing Capacity

22. Work from Home • Keeps costs down • Do you know anyone who works from home? • Can move later as they grow • 41+ million people own businesses from home (2004) • 7.6 million are telecommuters • Telecommuter – a person working from home and maintaining contact via computer, fax, & phone. • Close to 2 million people make over $100k a year working from home (2004)

23. Well Suited Home-Based Businesses • Caterers • Garment Makers • Artists • Photographers • Architects • Graphic Designers • Consultants • Computer programmers/repairers/engineers/marketers/technical writers

24. Salary vs. Commission • Salary – the same amount every pay period regardless of hours worked • Commission – a percentage of sales paid to a salesperson • No sales = No pay!

25. Advantages of Working from Home • Not committed to pay rent or a lease • No travel time • No parking expense or problems • Can handle home responsibilities too • Tax advantages

26. Disadvantages of Working from Home • Family concerns may disrupt your business • Neighbors may object • Traffic concerns • Clients may not take your business seriously • Clients may feel your worksite is unprofessional • Check with any zoning ordinances • Loneliness from working alone

27. Setting Up a Home Office • More than a desk and chair • Involves very organized & detailed recordkeeping • Tax Accountant or Attorney can assist in recordkeeping information for: • Business-related receipts, bank statements, charge account statements, mileage logs, and cash receipts • Keep personal and business finances separate • All records should be kept in locked file cabinet • Have electrician check wiring as large equipment can exceed capacity of regular home wiring. • Have good lighting inside & out • Light colored walls

28. Pricing Your Product/Service • Are you charging enough or too much? • Tips: • Survey others working in same area. Determine highest and lowest acceptable rates. • If your field isn’t crowded, you can charge more • In busy season, you may consider raising rates • You can charge more for the “can’t live without it!” items • Overhead expenses – any expenses beyond materials and labor (i.e., rent, utilities, supplies, postage, advertising)

29. Legal & Financial Issues • Choose business structure • Meet zoning & licensing requirements • Obtain financing • Maintain accurate financial records • Check on insurance policy

30. Business Structure • How to set up your business • 3 basic business structures – • Proprietorships, Partnerships, & Corporations • Each has advantages and disadvantages

31. Proprietorship • Simplest type of business • Least costly structure to form • You – sole owner • Gives freedom to run any way you want • Makes you entirely responsible

32. Partnership • Has the advantage of giving you someone to share business responsibilities • May be able to borrow more money • Must reach agreement(s) • Your responsible if something happens to the partner

33. Corporation • Easier to raise money • Less risk to personal assets • Costs more to set up • Subject to more taxes • Less freedom of action for entrepreneur

34. Zoning, Licensing, & Permits • Zoning Laws – regulate what types of business activities can be performed in certain areas. • License – a certificate showing that you have been granted permission to practice your occupation. • Alabama Department of Commerce can tell how to register a business

35. Financing • Sources of Financing • Savings • Avoid Interest Costs • Shows Confidence • Family/Friends • Agree to repay principal plus interest on when • Bank Lending • Usually difficult • Outside Investors

36. Applying for a Loan • Provide detailed business information • Outline product type or service • List location(s) • Identify Competitors • Who your customers are • Promotional Plan • Specify needs for space, equipment, & employees • List of Financial Needs • Future Growth • Ability to Repay Loan

37. Expenses • Capital expenses – one-time costs needed to get started • Example: Machine • Fixed Expenses – those that must be paid regularly in set amounts • Example: Rent payments, Insurance • Flexible Expenses – those that vary from month to month. • Example: Utility bills, repairs, advertising costs

38. Statement of Assets & Liabilities • Assets – items you own. • Examples – cash, stocks, bonds, property • Liabilities – all the debts you owe. • Examples – car payments, home loan

39. Did you get the loan? • Good Credit Rating • Experience and Knowledge to run business • A complete, organized proposal will affect the loan officer’s decision!

40. Small Business Failure • 50 % fail within 5 years • Lack of Financial Planning – often • Record Keeping – it’s the law!

41. Recordkeeping • Bookkeeping – involves the recording of income and expenses. • Accounting – involves an analysis of the data you’ve recorded. • Type of recordkeeping depends on the business • Store – tracks products • Employees – track hours (taxes and expenses) • Service – tracks time performing tasks • Receipts – (aka: revenues) include all money you receive from customers for cash and credit sales

42. Sales Slip • Way to track receipts • Include date, customer’s name, address, items sold, quantity, price per item, sales tax, and sales total • Subtract expenses from receipts to determine profit • To determine success compare years • Profit Ratio – the percentage of receipts that are profit (by dividing total profit from total receipts) • Main Goal is to PROFIT! • Break-Even Point – when income = expenses • Ex. 1styr with 20% profit ratio, break-even = September

43. Professional Assistance • Lawyer – can set up your business structure, verify zoning laws and licensing requirements; legal issues • Discuss fees up front • Accountant – helps you choose a record keeping system to meet your needs; help with loan applications; handle taxes; analyze books; advise on how to increase profits • Other business owners • Local Chamber of Commerce – give references • Insurance Agent – protect in event of fire or theft; liability; disability coverage • Look for Small Business Experience

44. Turn to pg. 462 • Answer “Facts in Review” on pg. 420 #1-14 (all) • When finished, turn in your answers! • Raise your hand if you have a question. • Good Luck!