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Characteristics of Entrepreneurs and Small Business Ownership

Learn about the characteristics of successful entrepreneurs and the advantages of owning a small business. Discover the opportunities and risks involved in starting a new business, as well as common problems faced by small business owners. Explore the impact of entrepreneurship on the economy and the role of financing in starting a business.

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Characteristics of Entrepreneurs and Small Business Ownership

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  1. CHAPTER 6 Entrepreneurship & Small Business Management

  2. 6-1 Becoming an Entrepreneur CHARACTERISTICS OF ENTREPRENEURS • Entrepreneur – someone who takes a risk in starting a business to earn a profit. • Entrepreneurship – is the process of starting, organizing, managing, and assuming the responsibility for a business.

  3. 6-1 Becoming an Entrepreneur CHARACTERISTICS OF ENTREPRENEURS • Entrepreneurs in Action • Cameron Johnson • Adam Hilderth • Juliette Brindak • Ashley Qualls • John Magennis • Adam Horwitz • Jon Koon • Tyler Dikman • Michael Dunlop • Maddie Bradshaw

  4. IN-CLASS GROUP ASSIGNMENT • From a group of three • Research your assigned entrepreneur and answer the following questions: • How old were they when they got their start? • What did they do to become an entrepreneur? Were they an improver or an innovator? • What are they worth now?

  5. 6-1 Becoming an Entrepreneur CHARACTERISTICS OF ENTREPRENEURS • What Does it Take?

  6. 6-1 Becoming an Entrepreneur ENTREPRENEURSHIP AND THE ECONOMY • Employment • Small businesses are responsible for most new employment • Between 1990 and 2005 over 60% of new jobs were created by businesses with fewer that 500 employees

  7. 6-1 Becoming an Entrepreneur ENTREPRENEURSHIP AND THE ECONOMY • Financing • Most new businesses start on $10,000 or less • 75% of startup capital comes from owner savings, bank loans & credit card debt • Venture Capital – money provided by large investors to finance new products and new businesses • Late 1990s they supplied more $100 billion each year to new business • By 2009 that dropped to $16 billion per year

  8. 6-1 Becoming an Entrepreneur ENTREPRENEURSHIP AND THE ECONOMY • Productivity • Small businesses are responsible for more than half of the U.S. gross domestic product each year • They account for more than half of all innovative products and services developed

  9. 6-1 Becoming an Entrepreneur OPPORTUNITIES AND RISKS • New Business Opportunities • Innovation – an invention or creation that is brand new • Steven Jobs & Stephen Wozniak • Arthur Fry & Spencer Silver • Improvement – A designed change that increases the usefulness of a product, service or process. • Henry & Richard Bloch

  10. 6-1 Becoming an Entrepreneur OPPORTUNITIES AND RISKS • Recognizing Risks • 1/3 of all new businesses are profitable • 1/3 are not profitable, but continue to operate • 1/3 lose money • Over a 10 year period more than 50% of all new businesses are discontinued

  11. 6-1 Becoming an Entrepreneur OPPORTUNITIES AND RISKS • Recognizing Risks • Primary reasons that businesses fail • Lack of adequate capital • Low sales • Higher than expected expenses • Competitive pressure • An owner unprepared to manage a growing business • Operations requiring more time than the owner is willing to commit

  12. 6-2 Small Business Basics SMALL BUSINESS OWNERSHIP • Small Business– An independent business with fewer than 500 employees • The owner is usually the manager • It operates in one or very few locations • It typically serves a small market • It is not dominate in its field

  13. 6-2 Small Business Basics SMALL BUSINESS OWNERSHIP • Small Business Employment • Small businesses are responsible for 60-80% of all new jobs

  14. 6-2 Small Business Basics SMALL BUSINESS OWNERSHIP • Ownership Diversity • Women own more than 25% • Minorities own 17% • 14% of owners are under 35 • 50% of all businesses are home based

  15. 6-2 Small Business Basics SMALL BUSINESS ADVANTAGES • Meeting Customer Needs • They often serve customers where the number of products and services needed is small or the requirements are too specialized for large businesses to make a profit • They serve fewer customer and have more frequent contact • They get direct information from their customers about likes and dislikes

  16. 6-2 Small Business Basics SMALL BUSINESS ADVANTAGES • Provide Unique Services • Suited to provide unique services for customers • They have the expertise to plan and deliver the services that satisfy the customer

  17. 6-2 Small Business Basics COMMON SMALL BUSINESS PROBLEMS • Reasons for Failure • Not keeping adequate records • Not having enough start-up money • Lack of management experience • Lack of experience with the type of business • Not controlling operating expenses • Poor location for the business • Failure to manage credit offered to customers

  18. 6-2 Small Business Basics COMMON SMALL BUSINESS PROBLEMS • Small Business Assistance • Local colleges and universities have faculty members who can give advise and support • Local Chambers of Commerce have members who can help with business problems • Small Business Administration (SBA) – a government agency that helps small business owners develop business plans and obtain financing and other support for their companies

  19. 6-3 Starting a Small Business THE BUSINESS DECISION • An Idea Plus Experience • Hobbies, interests, experiences • Books, magazines

  20. 6-3 Starting a Small Business THE BUSINESS DECISION • Right Place and Time • Retail business needs good customer traffic • Wholesalers need easy access to manufacturers • Transportation systems must also be easy to reach for distributing finished products

  21. 6-3 Starting a Small Business THE BUSINESS DECISION • Team Approach • Part-time or full-time employees • Bankers • Lawyers • Accountants

  22. 6-3 Starting a Small Business THE BUSINESS DECISION • Preparation & Research • Having enough information to make good decisions • Research customers, competitors, operations, government regulations

  23. 6-3 Starting a Small Business DEVELOPING A BUSINESS PLAN • What is a business plan? • Business Plan – a written description of the business idea and how it will be carried out, including all major business activities.

  24. 6-3 Starting a Small Business DEVELOPING A BUSINESS PLAN • Elements of the Business Plan • Description of the Business • Customer Analysis • Operation Plans • Marketing Plan • Financial Plans

  25. 6-3 Starting a Small Business FINANCING THE SMALL BUSINESS • Types of Financing • Start-up financing – the amount of money needed to open the business. • Cost of buildings • Equipment • Inventory • Supplies • licenses

  26. 6-3 Starting a Small Business FINANCING THE SMALL BUSINESS • Types of Financing • Short-term financing – the amount of money needed to pay for the current operating activities of a business • Obtained for a period of less than one year, usually for one or two months

  27. 6-3 Starting a Small Business FINANCING THE SMALL BUSINESS • Types of Financing • Long-term financing – money needed for the main resources of a business • Land, buildings, equipment • These resources require large amounts of money and will be paid over many years

  28. 6-3 Starting a Small Business FINANCING THE SMALL BUSINESS • Sources of Financing • Personal Savings • Borrowed funds (banks, financials institutions, family or friends) • Credit

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