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Chapter 5 Entrepreneurship andSmall Business

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Introduction to Business, Entrepreneurship and Small Business

Why It’s ImportantWhy It’s Important

Entrepreneurs and small businesses bring vital energy and innovation to the economy.

The risks involved energize entrepreneurs and small business owners to become successful.

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Key WordsKey Words

entrepreneurshipvirtual business or dot-com companysmall businessentrepreneurrisk takerprofit

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The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

Entrepreneurships and small businesses are the majority of business firms.

An entrepreneurship is a business started by someone who notices a need for a product or service.

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A virtual business or a dot-com company is a business that operates on the Internet.

The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

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Figure5.1 ARE YOU ORIGINAL?

Take this quiz and see if you would be a good entrepreneur.

Below are traits of an entrepreneur. Rate yourself by choosing a number that best describes you. At the end you’ll add up your points to see how you fared (1 is the lowest, 5 is the highest).

Rate your score:35-40 points = true entrepreneur30-34 = willing to take risks and try something new25 and under = you take fewer risks

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The Ins and Outs of The Ins and Outs of EntrepreneurshipEntrepreneurship

An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of a business enterprise (risk taker), with the intent of increasing the market value of the business.

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Want tocontroldestiny

Want tocontroldestiny

Desire toearn profitDesire to

earn profit

Areenthusiastic

Areenthusiastic Have self-

confidenceHave self-confidence

Aredetermined

Aredetermined

Recognizeopportunities

Recognizeopportunities

Desireachievement

Desireachievement

TakerisksTakerisks

Have highenergy

Have highenergy

SuccessfulSuccessful EntrepreneursEntrepreneurs

SuccessfulSuccessful EntrepreneursEntrepreneurs

Successful EntrepreneursSuccessful Entrepreneurs

Graphic OrganizerGraphic Organizer

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• Satisfaction from taking a risk and becoming a success

• Showing expertise and skills• Working from home• Gaining profit

Advantages of EntrepreneurshipAdvantages of Entrepreneurship

continued

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DisadvantagesDisadvantagesof Entrepreneurshipof Entrepreneurship

• Total responsibility for the business• Long hours• Financial risks. Main reason why

entrepreneurs fail: they run out of money.

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Small Business:Small Business:What You Need to KnowWhat You Need to Know

The Small Business Administration (SBA) defines a small business as an independently owned business that usually has the owner as its manager.

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Characteristics of Small BusinessCharacteristics of Small Business

• serve a limited geographic area

• employ fewer than 500 people

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Small Business:Small Business:Interesting numbersInteresting numbers

• employ more than 50 percent of the total workforce in the United States.

• generate more than half the nation’s income.

• principal source of new jobs.

• supply about 38 percent of jobs in high technology.

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Figure5.2 SMALL BUSINESS EMPLOYMENT IN THE UNITED STATES

There are 25 million small businesses in the United States.

Which three types of small businesses provide the most jobs?

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Advantages of Small Business Advantages of Small Business

Some of the advantages of owning a small business are:

• Being the boss• Offering services large companies

cannot offer• Ease of formation

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General Disadvantages of Small General Disadvantages of Small Business Business

• you’re responsible for decisions• you often work long hours and have great financial responsibility• four out of five small businesses fail in the first 5 years• a small business may underprice or overprice• going into business with little or no experience may result in the business closing

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Why a small business might not work:1. Effect of Change

Consumers’ tastes change. If flexibility and change are not part of the business, then it’s likely to fail.

Disadvantages of Small Business Disadvantages of Small Business (3 slides)(3 slides)

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2. Managerial Skills Needed• Financing• Employee Relations• Production• Customer Relations

Disadvantages of Small Business Disadvantages of Small Business

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Starting with little money, spending carelessly, borrowing money without planning, and forgetting about taxes and insurance may result in a failure.

3. Inadequate Financial Planning

Disadvantages of Small Business Disadvantages of Small Business

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Preparing for Your Own BusinessPreparing for Your Own Business

A business plan is a written description of a new business venture that describes all aspects of the business.

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Checklist for Starting a VentureChecklist for Starting a Venture• What will I produce?• Who are my main competitors?• Why is my product needed?• How much will my product cost to produce?• How many people will I need to run the business?• What physical facilities will I need?• Do I need licenses, permits, or other legal

documents?• How much money will I need to get started?

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Parts of a Business PlanParts of a Business Plan

• Summary• Company description• Products and services• Marketing plan

• Legal plan• Management and operating plan• Financial plan

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continued

What makes a person an entrepreneur?

What makes a company successful?

continued

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Identify some reasons why a small business might be hard to manage.

What are some benefits of selling online?