Busn 101 Chapter 06

1. Busn 101 Chapter 06 Entrepreneurship & Small Business

2. Goals Why do Entrepreneurs take the risk of starting a business? What are the attributes of an entrepreneur? What are the benefits of entrepreneur teams & intrapreneurs? Why is there growth in home-based and web-based businesses? Why are small businesses important? What are the major causes of small business failures? How can you learn about how small businesses operate? What does it take to start and run a small business? What are the advantages and disadvantages of small businesses entering global markets?

3. Guess Which Company? • He was selling baking soda & decided to entice customers by putting in two packages of chewing gum with each sale. The excitement over the gum started him thinking. • Two Seattle teenagers pooled their money & came up with $100. They started delivering messages & parcels for local merchants. • Though he didn’t graduate from college, he found out college students eat a lot of pizza. He started his first pizzeria with $900 near a campus with a promise of 3-minute delivery.

4. Answers • Wrigleys’ chewing Gum ( William Wrigley, Jr.) • United Parcel Service • Domino’s Pizza (Tom Monaghan)

5. Entrepreneur • Someone who accepts the risk of starting and running a business: • Sole proprietorship • Corporation • Nonprofit • Cooperative

6. Why Do Entrepreneurs Take The Risk Of Starting A Business? • Many entrepreneurs are born with a risk taking personality which enables them to engage in risky activities at a higher frequency than people who are not born with a risk taking personality • Nina Vaca-Humrichouse said: “Being an entrepreneur is in my blood” • Because they are passionate about and believe in what they are doing • Peets Coffee, http://en.wikipedia.org/wiki/Peet's_Coffee_&_Tea • Because they want to make a positive difference in the world • PCC, http://www.pccnaturalmarkets.com

7. Why Do Entrepreneurs Take The Risk Of Starting A Business? Because they think that they can make more profits than just being an employee for someone else Because they do not want to work for others Text: Opportunity, Profit, Independence, Challenge

8. What Are The Attributes Of An Entrepreneur? • Problem Solvers • What do people want • What do people not want • Risk takers • Not afraid to fail • Sumner Redstone Said: • Success is not built on success. Success is built on failure • Learn from others • Determined • Hard working

9. What Are The Attributes Of An Entrepreneur? • Inventive • Insightful • Creative • Much of the creative process is unconscious, but that process is fueled by continual search and researching to solve a problem • Flashlight analogy • Organized • Good planners • Good researchers

10. What Are The Attributes Of An Entrepreneur? Empathetic and good with people (Leader) Inspirational Text: Self-directed, Self-nurturing, Action-oriented, Highly-energetic, Tolerant of uncertainty

11. Types Of Entrepreneurs • 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 • Micropreneur • 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 • Intrapreneur • Creative people that work as entrepreneurs within a corporation

12. Home-based Business • Accountants and writers • What has helped home-based businesses grow? • Computers, Internet • Corporate downsizing • New tax laws • Downside: • Hard to separate home and work • Lack of self discipline • Not getting out in the world • Laws and insurance

13. Web-based Businesses • The same hard work and research that goes into starting and running a brick and mortar business must be used when starting and running a web-based business • Advantages of web-based businesses: • Access to world markets • Can work from home • Retailing and services such as web design are well suited for online

14. What Can Governments Do To Help Small Business • Enterprise zones • Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support • Example: • http://www.galvestonislandtx.com/business/buisopp/enterprise.htm

15. Small Business A business that is independently owned and operated, is not dominant in its field of operation, and meet certain standards of size (set by the Small Business Administration) in terms of employees or annual receipts

16. What Is Small Business? • Independently Owned • Not Dominant in Its Field • Meet Certain Standards of Size (Employees, Annual Receipts) • http://www.sba.gov/contractingopportunities/officials/size/summaryofssi/index.html • http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf

17. U.S. Small Businesses • 20 Million Full/Part-time Businesses • Account for More Than 50% of Gross Domestic Product (GDP) • Jobs • 80% of Americans 1st job is in small business • 75% of new jobs are created by small businesses • Minority-owned Businesses Growing Rapidly

18. Where Did They Start? Source: World Features Syndicate

19. Early Sales Of Well-known Companies Source: World Features Syndicate

20. What Are The Major Causes Of Small Business Failures? • Run out of cash • Did not keep good accounting records and as a result was unable to: • Understand how the business was really doing (profitability) • Unable to access resources like debt • Unable to make important internal business decisions like pricing products • Not considering expenses like insurance and tax

21. What Are The Major Causes Of Small Business Failures? Did not do thorough research before starting business Did not have a good business plan Underestimating the amount of time it takes Lack of Capital Poor management

22. Situations That Small Businesses Can Take Advantage Of (Big Cannot) Requires a lot of personal attention Handmade items Sales not large enough Neighborhoods with crime or poverty or that are in rural areas Buy a franchise Growth industry

23. Plunging in without first testing Under/over pricing Too little capital Little/no experience Borrowing money without planning Trying to do too much with too little Buying too much on credit Expanding credit too freely and rapidly Incomplete and/or inaccurate records Not understanding business cycles Forgetting about taxes, insurances, etc. Owner working or not, according to whim Small Business – Major Causes Of Failure

24. Personal attention Products not easily made by mass production Sales are not large enough for a large firm Unattractive neighborhood Franchising Paying attention to new competitors The business is in a growth industry Small Business – Situations For Success

25. What Does It Take To Start And Run A Small Business? A good idea Determination Time and hard work Good research and planning Resources Find a good accountant and lawyer Empathetic and good with people (Leader)

26. Small Business Administration (SBA) • A US government agency that advises and assists small businesses by providing: • Management training • Financial advice • Loans • Loans less based on collateral and credit history and more on the business plan • Seattle: http://www.sba.gov/localresources/district/wa/index.html

27. How Can You Learn About How Small Businesses Operate? • Look at others • Experience form working as an employee • School • Looking for Help: • www.sba.gov • Corps of Retired Executives • 800-634-0245 • Small Business Development Center (here at HCC): • http://www.wsbdc.org/

28. Succeed As An Entrepreneur Plan your business Finance your business Knowing your customer (Marketing) Managing your employees (Human resource) Keeping records (Accounting)

29. Plan Your Business • A written document that: • Describes the nature of the business • Target Market • Advantages that the business has over competitors • Resources of owner • Qualifications of owner • How much money will be needed to start • Details of operations • Web site: www.sba.gov/starting • Video: http://app1.sba.gov/training/sbabp/index.htm

30. Finance Your Business • Personal funds • Relatives & Friends (90%) • Banks (Must have good accounting records) • Venture capitalists (invest in your good idea for an equity stake) • SBA: http://www.sba.gov/smallbusinessplanner/start/financestartup/index.html • Farmers Home Administration • Economic Development Authority • Minority Business Development Agency

31. Knowing Your Customer (Marketing) • Market • A market consists of people with unsatisfied wants and needs who have both the resources and willingness to buy • A market is filled with potential customers • Entrepreneurs know their market, and deliver a quality product at a fair price or they go out of business • SBA: http://www.sba.gov/smallbusinessplanner/manage/marketandprice/serv_mstrat_mresearch.html

32. Succeed As An Entrepreneur • Managing your employees (Human resource) • Chapters 7-12 • Keeping records (Accounting) • Chapters 17

33. What Are The Advantages And Disadvantages Of Small Businesses Entering Global Markets? Advantages Disadvantages • Overseas buyers enjoy dealing with individuals instead of large bureaucracies • Begin shipping more quickly • Help to provide a wide variety of suppliers • More personal service • Financing can be hard to find • Exporters may not know where to get started • Cultural differences • Bureaucratic paper work

34. Why Do Entrepreneurs Take The Risk Of Starting A Business? Risk taking personality Passionate about and believe in what they are doing Do not want to work for others More profits Make a positive difference in the world

35. What Are The Attributes Of An Entrepreneur? Problem Solvers & Risk takers & Not afraid to fail Determined & Hard working Inventive & Insightful & Creative Organized & Good planners & Good researchers Empathetic and good with people (Leader) Inspirational

36. What Are The Benefits Of Entrepreneur Teams & Intrapreneurs? Synergy  2 + 2 = 5 The more eyes that look at a problem, the more ideas that can be generated

37. Why Is There Growth In Home-based And Web-based Businesses? • Convenience • It is convenient to work from home • Small business web sites may require fewer resources to start and can reach a world audience quickly • Some businesses are well suited for the Web & Home: • Handmade items • Bookkeeping • Retailing

38. Why Are Small Businesses Important? • Small business employ many people around the world • Small businesses are nimble (compared to big businesses) and can: • React quickly to changes in the market • Get started on new innovative ideas quickly

39. What Are The Major Causes Of Small Business Failures? Run out of cash Did not keep good accounting records Did not do thorough research before starting business Did not have a good business plan Underestimating the amount of time it takes Lack of Capital Poor management

40. How Can You Learn About How Small Businesses Operate? • Look at others • School • Experience form working as an employee • Nolo Press • www.sba.com • Corps of Retired Executives • 800-634-0245 • Small Business Development Center (here at HCC): • http://flightline.highline.edu/cel/sbdc.htm

41. What Does It Take To Start And Run A Small Business? Plan your business Finance your business Knowing your customer (Marketing) Managing your employees (Human resource) Keeping records (Accounting)