The Basics of Entrepreneurship

Entrepreneurship is the process of starting a business, typically a company offering an innovative product, process, or service.

Entrepreneurship can be exciting and rewarding.

Entrepreneurship allows you to

Be your own boss.

Set your own schedule.

Make a living doing something you enjoy.

Use your God-given talents and creativity.

Requires thorough planning, creativity, and

hard work.

Requires special characteristics and skills: Risk-taking ability Independence Persuasiveness Ability to negotiate Ingenuity Support

Why am I starting a business?

What kind of business do I want?

Who is my ideal customer?

What products or services will my business provide?

Am I prepared to spend the time and money needed to start my business?

What differentiates my business idea from others in the market?

Where will my business be located?

How many employees do I need?

What types of suppliers do I need?

How much money do I need to get started?

Will I need to get a loan?

How soon will it take before my products/services are ready?

How long do I have to wait to start making a profit?

Who is my competition?

How will I price my product?

How will I set up the legal structure of my business?

What taxes do I need to pay?

What kind of insurance do I need?

How will I manage my business?

How will I advertise?

1. Survey your consumers/customers.

Find out what people want or need.

Why waste time on something no one wants or

needs.

2. Survey your suppliers.

Find out what goods are available to offer to

your customers or to use in your service.

You cannot provided a good/service that is not

available or is not affordable.

3. Determine the cost, selling price, and profit for

each item sold or service provided.

COST—how much you must pay for an item or

how much it costs you to provide a service

You buy a box of 24 pencils for $1.00 to sell

individually. What is your cost?

number of items total cost

24

$1.00

SELLING PRICE—how much your customer will

pay for an item/service

You must determine how much someone would be

willing to pay, but your selling price must

always be greater than your cost.

If it costs you $0.04 per pencil to buy them, what

would be a reasonable selling price?

PROFIT—the amount of money you earn by selling

an item

PROFIT = SELLING PRICE — COST

If you sell the pencil for $0.10 which you bought for $0.04,

your profit would be how much?

You must decide if the profit you make selling something is worth the time, energy, and money that it costs you.

You must increase the cost of an item

to cover added (hidden) costs.

Example: If you are selling hot chocolate, you must buy the hot chocolate packet, the water, a cup, and a spoon.

If you are selling coffee, you must buy the coffee, the water, cream, sugar, the cup, and the stirrer.

Not only are their hidden costs, but there are also

overhead costs. Overhead is also known as the

business’s operating expenses.

Overhead costs may include…

building/rent employee salaries/benefits

insurance utilities

advertising travel expense

taxes repairs

supplies legal/financial services

Assets are money or property that has any worth to your business

Assets include

Property

Equipment

Cash

Accounts receivable—what customers owe your business

Liabilities are debts or amounts that your business owes to others

What you owe to others is called your accounts payable. Those you owe debts to are your creditors.

Remember that we are responsible to pay our debts. Psalm 37:21 says, “The wicked borrow and do not repay.”

Your business’s capital is also called its net worth or your owner’s equity.

You can determine your business’s capital by

subtracting liabilities from assets.

Capital = Assets — Liabilities

A balance sheet is a statement of the financial

condition which shows the business’s assets, liabilities, and capital.

The total on the left = the total on the right

Inventory is a listing of the value and quantity of all of the items you have in stock.

Most business’s keep track of their inventory and check its accuracy at least once a month.

That way, you are away of how much of your assets are in inventory, when you may need to reorder items, and that you have accounted for all of the items that you should have.

To calculate your inventory, multiply how many of

each item you have by that item’s worth.