Entrepreneurship: A business of your own

Vocabulary

Entrepreneur: a person who organizes and manages a business

Entrepreneurship: the organization and management of a business

Franchise: the right to market another company’s product or service

Small Business Administration (SBA): the prime source of information for would-be entrepreneurs

Vocabulary

Fraud: the act of deceiving or tricking

Commission: a percentage of sales paid to a salesperson

Zoning laws: regulate what types of business activities can be performed in certain areas

License: a certificate showing that you have permission to practice your occupation

Vocabulary

Fixed expenses: Bills that must be paid regularly in set amounts

Flexible expenses: vary from month to month

Assets: items you own

Liabilities: debts you owe

Vocabulary

Bookkeeping: Recording of income and expenses

Accounting: Analysis of the data you’ve recorded Receipts: record of all money collected

Profit ratio: percentage of receipts that are profit

Break-even point: when income equals expenses

Entrepreneurship

Advantages You are your own

boss Freedom to make

your own decisions You get to keep all

profits your company earns

Disadvantages As a business owner,

you take on all responsibilities

Many extra hours of work (at least 60 hrs per week)

Emotional strain

Franchise

Purchasing a franchise has several advantages. It allows the entrepreneur to buy a business with a proven track record of success.

As a franchise owner, you would also receive support from the franchiser

Franchise

Buying a franchise also has some disadvantages.

You need a lot of money for the initial investment. You also may have to pay ongoing fees to retain the right to use the company’s name

You may be required to follow company guidelines instead of your own.

Franchise

Some popular franchises are: Subway McDonalds Taco Bell KFC Jackson-Hewitt Tax Service TCBY treats Wendy’s

Buying an existing business

Another opportunity open to some entrepreneurs is buying a business that is already existing

Buying an established business can eliminate much of the work and expense of starting a business.

US Small Business Administration (SBA) Established 1953 Provides financial, technical, and

management assistance to help start, run, and enlarge a business

www.sbaonline.sba.gov

Planning your own business

What does it take to succeed?

Optimism – you must believe in yourself & your business.

Self-starter – you must have initiative

Planning your business

Choosing a business – what is the best business for you?

Choosing a location – the importance fo location depends on the kind of business you have

Pricing your product or service – are you charging enough for your products or services?

Legal and Financial Issues

A number of legal and financial issues will affect you if you become an entrepreneur.

Zoning and licensing requirements must be met

Choose your business structure

Business Structure

The three basic business structures-

1. Proprietorships

2. Partnerships

3. Corporations

Proprietorship

Simplest type & most costly ($$$$) You will be the sole owner Gives you total freedom Gives you total responsibility

Partnership

Share the business responsibility You can borrow more money with two

people It can be difficult if you don’t get along with

partner The business could be jeopardized

Corporation

Easier time raising money Have less risk to your personal assets Costs more to set up Higher taxes

Obtaining Financing

Use saved money (seed $) to finance your business

Apply for a loan Use outside investors

Applying for a loan

Business plan Record of fixed and

flexible expenses Record of assets and

liabilities

Comparing Annual Profits

Year 1

Income - $100,000

Expense - $80,000

Profit $20,000

Profit ratio = 20,000/100,000 = 20%

Year 2

Income - $120,000

Expense - $98,000

Profit $22,000

Profit ratio = 22,000/120,000 = 22%

Professional Assistance

A lawyer can be one of your most valuable resources when starting a business

An accountant can help analyze his books and give advice about increasing profits

An insurance agent is another professional whose advice you should seek, protect your business against theft, fire, etc.

Working from home

Advantages

Don’t have to pay rent Can handle home

responsibilities during the day

Certain tax advantages

Disadvantages Family concerns may

disrupt your business Neighbors may object

about a business next to their home

Clients may feel its unprofessional

Loneliness & isolation can be a possible hazard

FACTS IN REVIEW

Name 3 sources of information about entrepreneurship.

What advantages does purchasing a franchise offer an entrepreneur?

List 4 personal factors an entrepreneur should possess to succeed.

FACTS IN REVIEW

What services are provided by the Small Business Administration (SBA)?

Name 2 advantages and disadvantages of working from home.

Which business structure is most costly for an entrepreneur to establish?

FACTS IN REVIEW

What is the purpose of a business license? Name 3 sources from which an entrepreneur

might obtain financing to start a business How is profit ratio figured? Name 3 professionals that can assist an

entrepreneur with the details fo starting and operating a business.