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TRANSCRIPT
Business
Copyright 2005 Prentice- Hall, Inc.
4-1
Chapter
4Understanding Entrepreneurship & New Ventures4-2
Chapter OutlineWhat Is A Small Business? Entrepreneurship Starting/Operating A New Business Franchising Success/Failure In A Small Business Noncorporate Business Ownership CorporationsCopyright 2005 Prentice- Hall, Inc.
Business
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Small Business Small Business Administration
Business
Number of Employees Total Annual Sales
Independently Owned/Managed & Does Not Dominate Its MarketCopyright 2005 Prentice- Hall, Inc.
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Small Business Importance
Business
Copyright 2005 Prentice- Hall, Inc.
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Need For Small Businesses Job Creation
Business
Innovation Products/Services Processes
Important To Big BusinessCopyright 2005 Prentice- Hall, Inc.
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Small Business Industries Services Construction Finance & Insurance Wholesaling Transportation & ManufacturingCopyright 2005 Prentice- Hall, Inc.
Business
4-7
Small Business Impact By Industry
Business
Copyright 2005 Prentice- Hall, Inc.
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Entrepreneur
Business
Accepts Risks & Opportunities In Creating/Operating A New Business Characteristics
Resourceful Good Customer Relations Desire To Be Own Boss- Gain BossControl Of Life Build For Family Tolerance For Uncertainty/RiskCopyright 2005 Prentice- Hall, Inc.
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EntrepreneursYesterday TodayOpen-Minded OpenMale or Female Relies On Others4-10
Business
SelfSelf-Reliant Male Quick DecisionsCopyright 2005 Prentice- Hall, Inc.
NonNon-Financial Reasons To Start A Business
Business
9% 7% 9% 41%
Do Something I Love More Flexibility Be Key Decision Maker Change Lifestyle Spend More Time With Family Don't Know or Not Stated
13% 21%
Source: CIBC World Markets, Economics & Strategy, Secrets to Small Business Success, research.cibcwm.com/economic_public/ download/sb-ssbs-10192004.pdf Copyright 2005 Prentice- Hall, Inc.
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Financial Reasons To Start A BusinessLoss of Job Or Change Of Employment
Business
27% 39%
More Income For Necessities Second Income Bridge A Gap Till Retirement Forced Into Early Retirement
13%
3% 6%
12%
Don't Know Or Not Stated4-12
Source: CIBC World Markets, Economics & Strategy, Secrets to Small Business Success, research.cibcwm.com/economic_public/ download/sb-ssbs-10192004.pdf Copyright 2005 Prentice- Hall, Inc.
Start/Operate Small BusinessBusiness Plan
Business
Buying Existing?
Start From Scratch?
FinancingCopyright 2005 Prentice- Hall, Inc.
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Business Plan Summarizes Strategy
Business
Identifies Implementation Includes: Goals and Objectives Sales ForecastCopyright 2005 Prentice- Hall, Inc.
4-14
Business Plan- Projected PlanFinancial Statements Cash Budget- Most BudgetImportant Income Statement Balance Sheets BreakevenCopyright 2005 Prentice- Hall, Inc.
Business
4-15
Startup BusinessMy Customers? Where? Price? Quantities Will Be Bought? Competitors? Product Differentiation?Copyright 2005 Prentice- Hall, Inc.
Business
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Financing Small BusinessBusiness- Traditional Family/Friends Personal Savings Lenders Investors GovernmentCopyright 2005 Prentice- Hall, Inc.
Business
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Credit Usage By Small Business Firms- 1998 FirmsCredit Union
Percentage of Small Firms Using Credit By Suppliers
Business
Thrift Comm. Bank Finance Co. Brokerage Leasing Family & Friends Other Businesses Gov't Owner Loan Personal Credit Card Business Credit Card 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Source: Small Business Administration- Office of Advocacy, Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance Sept. 2003. www.sba.gov/advo/stats/ssbf_98.pdf Copyright 2005 Prentice- Hall, Inc.
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Share of Outstanding Debt for Small Firms By Supplier of Credit 1998Owner Loan 10% Unknown 2% Family & Friends 3% Other 8% Thrift 3%
Business
Commerical Bank 48%
Leasing 17% Fin. Co. 9%Source: Small Business Administration- Office of Advocacy, Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance Sept. 2003. www.sba.gov/advo/stats/ssbf_98.pdf Copyright 2005 Prentice- Hall, Inc.
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Percentage of Small Business Loans From Commercial Banks- 1998 Banks$100$249K 7%
Business
Under $100K 87%
$250K$1M 6%
Source: Small Business Administration- Office of Advocacy, Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance Sept. 2003. www.sba.gov/advo/stats/ssbf_98.pdf Copyright 2005 Prentice- Hall, Inc.
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Other Sources Of Financing
Business
Venture Capital Companies Small-Business Investment Companies Small Small Business Administration Guaranteed Loans Immediate Participation Local Development Companies Loans
Other SBA Programs SCORE SBDCs
Copyright 2005 Prentice- Hall, Inc.
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Franchise SystemFranchise Agreement
Business
Franchisor FranchiseeCopyright 2005 Prentice- Hall, Inc.
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Franchise ContractFranchisor, Inc.
Business
Branded Product/Service Performance Monitoring
$$$$$FranchiseeCopyright 2005 Prentice- Hall, Inc.
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FranchisingAdvantagesTo Franchisee
DisadvantagesTo Franchisee
Business
+ Business
Ownership + Access To Mgmt. Skills + Low Failure RateTo Franchiser
- High start-up startcosts % Of Sales To Franchiser
+ Rapid GrowthUsing Other Peoples MoneyCopyright 2005 Prentice- Hall, Inc.
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Trends In Small Business E-Commerce Big Business Crossovers Minorities & Women Global Trade/Suppliers Better Survival RatesCopyright 2005 Prentice- Hall, Inc.
Business
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Startups: Success & Failure
Business
Copyright 2005 Prentice- Hall, Inc.
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Growth of E-Commerce E-
Business
Copyright 2005 Prentice- Hall, Inc.
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Women Entrepreneurs
Business
Copyright 2005 Prentice- Hall, Inc.
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Startups: Success vs. Failure
Business
Copyright 2005 Prentice- Hall, Inc.
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Reasons For Failure3% 15% 32% 11%
12% 12%
15%
Poor Financial Management Incompetence or Inexperience Bad Economic Conditions Poor Books or Records Marketing Problems Staff or Union Problems Did Not Use External Advice4-30
Business
Source: The Coleman Chronicles, Vol. 1 Issue 20, The Most Common Reasons for Small Business Failure http://www.coleman.bc.ca/publications/chronicles/vol1issue20.htm Copyright 2005 Prentice- Hall, Inc.
Reasons For Success
Business
Hard Work, Drive, & Dedication Demand For Product/Service Managerial Competence LuckCopyright 2005 Prentice- Hall, Inc.
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Legal Entities of Business Ownership
Business
Sole Proprietorship Partnerships General Limited Master Limited
Corporations Closely-Held vs. CloselyPubliclyPublicly- Held S Corporation Limited Liability Professional Multinational (Transnational)
CooperativesCopyright 2005 Prentice- Hall, Inc.
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Sole ProprietorshipAdvantages DisadvantagesUnlimited Liability Lack Of Continuity Resources of One Person4-33
Business
Freedom Easy To Form Low Start-up StartCosts Tax BenefitsCopyright 2005 Prentice- Hall, Inc.
General PartnershipAdvantages DisadvantagesUnlimited Liability Lack Of Continuity Difficult To Transfer Ownership4-34
Business
More Talent & Money Easily Created Partners Taxed As IndividualsCopyright 2005 Prentice- Hall, Inc.
CorporationAdvantagesLimited Liability Continuity Access To More Capital Ease Of Ownership TransferCopyright 2005 Prentice- Hall, Inc.
DisadvantagesEase Of Ownership Transfer Startup CostCostLegal Requirements Double Taxation4-35
Business
Proportions of Legal Business Entities
Business
Copyright 2005 Prentice- Hall, Inc.
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Corporate GovernanceShareholders
Business
Board Of Directors Officers
Business EmployeesCopyright 2005 Prentice- Hall, Inc.
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Stock Ownership Preferred
Business
Fixed Dividend Priority
Common Dividend If Profitable Last Claim Voting RightsCopyright 2005 Prentice- Hall, Inc.
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Corporate OwnershipOwnershipSpecial Issues Joint Ventures & Strategic Alliances Employee Stock Ownership Institutional Ownership Mergers & Acquisitions Divestitures & Spin-Offs SpinCopyright 2005 Prentice- Hall, Inc.
Business
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