© Prentice Hall, 2007Excellence in Business, 3eChapter 6 - 1 Putting Yourself in Charge: Entrepreneurs and Small Business Owners

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 1

Putting YourselfPutting Yourselfin Charge:in Charge:

Entrepreneurs and Entrepreneurs and Small Business OwnersSmall Business Owners


The World of Small The World of Small BusinessBusiness

• Independently owned and operated

• Not dominant in its field

• Relatively small annual sales

• Fewer than 500 employees


Roles of Small BusinessRoles of Small Business

• Provide new jobs

• Introduce new products

• Service large corporations

• Inject money into the economy

• Take business risks

• Provide specialty goods and services


Types of Small BusinessTypes of Small Business

LifestyleLifestyle High-GrowthHigh-Growth

Run by IndividualsRun by Individuals

Limited Products/ServicesLimited Products/Services

Limited ResourcesLimited Resources

Limited MarketplaceLimited Marketplace

Run by TeamsRun by Teams

Multiple Products/ServicesMultiple Products/Services

Investment CapitalInvestment Capital

Large MarketplaceLarge Marketplace


The Typical Small The Typical Small BusinessBusiness

• Few products or services

• Narrow customer base

• Close market contact

• Limited resources

• Increased innovation


How Entrepreneurs Spend Their How Entrepreneurs Spend Their TimeTime

• Dealing with employees

• Keeping records

• Direct selling

• Production

• Maintenance

• Dealing with suppliers

• Arranging financial matters

• Planning growth and change

• Other services


Factors Contributing to Factors Contributing to Small Business GrowthSmall Business Growth

• E-commerce and technology

• Growing diversity

• Downsizing and outsourcing


Characteristics of Characteristics of EntrepreneursEntrepreneurs

• Highly disciplined

• Self confident

• Energy and stamina

• Control their destiny

• Relate well to others

• Learn new skills


Characteristics of Characteristics of EntrepreneursEntrepreneurs

• Learn from mistakes

• Monitor market changes

• Exploit new opportunities

• Driven to succeed

• Think positively

• Take moderate risks


Develop a Business PlanDevelop a Business Plan

• Summarize the business

• Communicate goals

• Highlight plans

• Show customer benefits


Importance Importance of a Business Planof a Business Plan

• Guide company operations

• Outline a strategy

• Attract lenders and investors


Starting a New BusinessStarting a New Business

+ Control your destiny

+ Reach your potential

+ Unlimited profits

+ Recognition

+ Doing what you enjoy

– Uncertainty of income

– Risk of loss

– Long hours & hard work

– Complete responsibility

– High stress levels

Advantages Disadvantages


Buying an Existing Buying an Existing BusinessBusiness

+ Customer base

+ Business systems

+ Product or service

+ Location

+ Financing

– Alienated customers

– Obsolescence

– Location

– Personality clashes

– Outstanding receivables

Advantages Disadvantages


The Franchise The Franchise AlternativeAlternative

• Franchisee

• Franchisor

• Types of franchises

–Product

–Manufacturing

–Business-format


How to Evaluate a How to Evaluate a FranchiseFranchise

• Initial franchise

• Periodic royalties

• Trademarks and names

• Advertising and promotion

• Business location


How to Evaluate a How to Evaluate a FranchiseFranchise

• Exclusive territory

• Right of first refusal

• Equipment and supplies

• Agreement and termination

• Franchise assignment


The Pros and Cons of The Pros and Cons of FranchisingFranchising

Advantages

Get a viable business

Name recognition

Network of support

Blueprint for success

Disadvantages

No guarantee of success

High monthly royalties

Limited independence

Limited flexibility


Why New Businesses FailWhy New Businesses Fail

•Management IncompetenceManagement Incompetence

•Lack of ExperienceLack of Experience

•Insufficient FinancingInsufficient Financing

•Poor Business PlanningPoor Business Planning

•Unworkable GoalsUnworkable Goals

•Diminished Customer BaseDiminished Customer Base

•Uncontrolled GrowthUncontrolled Growth

•Inappropriate LocationInappropriate Location

•Poor System of ControlsPoor System of Controls

•Poor Entrepreneurial SkillsPoor Entrepreneurial Skills


Sources of Small Sources of Small Business AssistanceBusiness Assistance

• SCORE

• Incubators

• The Internet


Financing A New Financing A New BusinessBusiness

• Avoid common mistakes

–Overestimating sales

–Overestimating cash flow

–Underestimating expenses


Sources of Private Sources of Private FinancingFinancing

• Banks and microlenders

• Venture capitalists

• Angel investors

• Credit cards


Small Business Small Business AdministrationAdministration

• SBA-backed loans

• SBA-microloans

• Small business investment companies (SBICs)


Going PublicGoing Public

• Initial public offering (IPO)

–Advantages

•Raising capital

–Disadvantages

• Expensive and time consuming

Documents

© Prentice Hall, 2007Excellence in Business, 3eChapter 6 - 1 Putting Yourself in Charge: Entrepreneurs and Small Business Owners