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Entrepreneurship and Small Business: Planning for Success

Learn about the nature of entrepreneurship, the characteristics of entrepreneurs, and how to start and finance new ventures. Explore the different forms of ownership, the importance of writing a business plan, and the challenges faced by small businesses. Discover strategies for success and how to avoid common pitfalls.

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Entrepreneurship and Small Business: Planning for Success

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  1. Chapter 6 Entrepreneurship and New Ventures

  2. Planning Ahead – Chapter 6 Study Questions • What is entrepreneurship and who are entrepreneurs? • What is special about small business entrepreneurship? • How do entrepreneurs start and finance new ventures?

  3. Chapter 6 Learning Dashboard • Nature of Entrepreneurship • Who are the entrepreneurs? • Characteristics of entrepreneurs • Women and minority entrepreneurs • Social entrepreneurship • Entrepreneurship and Small Business • Why and how to get started • Web-based business models • Family businesses • Why small businesses fail • Small business development

  4. Chapter 6 Learning Dashboard • New Venture Creation • Life cycles of entrepreneurial firms • Writing the business plan • Choosing the form of ownership • Financing the new venture

  5. Takeaway 1: Nature of Entrepreneurship Entrepreneurship • Risk-taking behavior that results in new opportunities Classic entrepreneur • Pursues opportunities others view as problems Serial entrepreneur • Starts and runs business and nonprofits over and over again First-mover advantage • First to exploit a niche or enter a market

  6. Takeaway 1: Nature of Entrepreneurship Intrapreneurs • Display entrepreneurial behavior as employees of larger firms

  7. Takeaway 1: Nature of Entrepreneurship

  8. Takeaway 1: Nature of Entrepreneurship • Women and minority entrepreneurs are growing in numbers • Necessity-based entrepreneurship • People start a business because no other employment opportunities exist

  9. Takeaway 1: Nature of Entrepreneurship Social entrepreneurship • Unique form of ethical entrepreneurship that seeks new ways to solve pressing social problems • Social entrepreneurs • Take risks to find new ways to solve pressing social problems such as poverty, literacy, illness,homelessness

  10. Takeaway 2: Entrepreneurship and Small Business A small business has fewer than 500 employees

  11. Takeaway 2: Entrepreneurship and Small Business Starting a small business • Franchise • One business owner sells to another the right to operate the same business in another location • Business model • Plan for making a profit by generating revenues that are greater than costs • Startup • New and temporary venture that is trying to establish a profitable business model • Lean startups • Use open source software and free web services to contain costs while staying small and keeping operations simple

  12. Takeaway 2: Entrepreneurship and Small Business Types of web-based business models

  13. Takeaway 2: Entrepreneurship and Small Business Family owned businesses • Account for 78% of new jobs created in the U.S. • Provide 60% of the nation’s employment • Feuds result when family members disagree over how the business is run • Possible succession problems • Who will run the business when the current head leaves? • Succession plan outlines leadership transition and financial matters

  14. Takeaway 2: Entrepreneurship and Small Business Why small businesses fail • SBA reports that as many as 60 to 80% of new businesses fail in first five years • Reasons why small businesses fail - Lack of experience - Lack of expertise - Lack of commitment - Growing too fast - Lack of strategy - Lack of strategic leadership - Ethical failure - Poor financial control

  15. Takeaway 2: Entrepreneurship and Small Business Small business development • Business incubator • Offers space, shared services and advice to get small businesses started • Small Business Development Centers • Founded with U.S. Small Business Administration to provide advice to new and existing small businesses

  16. Takeaway 3: New Venture Creation Life cycles of entrepreneurial firms

  17. Takeaway 3: New Venture Creation Business plan • Describes the direction for a new business and the financing needed to operate it • Banks want to see a well-developed business plan before loaning money

  18. Takeaway 3: New Venture Creation Sample Business Plan Outline: • Executive Summary • Industry Analysis • Company description • Products and services description • Market description • Marketing Strategy • Operations description • Staffing description • Financial projections • Capital needs • Milestones

  19. Takeaway 3: New Venture Creation Forms of ownership • Sole Proprietorship • An individual or married couple pursuing business for a profit. This does not involve incorporation.

  20. Takeaway 3: New Venture Creation Forms of ownership • Partnership • Two or more people agree to contribute resources to start and operate a business together

  21. Takeaway 3: New Venture Creation Forms of ownership • Corporation • A legal entity that exists separately from its owners • Limited Liability Corporation (LLC) • A combination of sole proprietorship, partnership, and corporation • Protects owners against personal loss other than what is invested in the company • Treated as a proprietorship or partnership for tax purposes

  22. Takeaway 3: New Venture Creation Financing • Debt Financing • involves borrowing money from another person, a bank, or a financial institution • Equity Financing • involves exchanging ownership shares for outside investment monies • Venture Capitalists • Involves making large investments in new ventures in return for an equity stake in the business

  23. Takeaway 3: New Venture Creation Financing • Angel Investor • A wealthy individual willing to invest in return for equity in a new venture • Initial Public Offering (IPO) • An initial selling of shares of stock to the public at large

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