5-1 Chapter 5: The Challenges of Starting a Business Exploring Business 2.0 © 2012 Flat World Knowledge

5-1Chapter 5: The Challenges Chapter 5: The Challenges of Starting a Businessof Starting a Business

Exploring Business 2.0 © 2012 Flat World Knowledge

5-2Chapter ObjectivesChapter Objectives1.1. Define entrepreneur.Define entrepreneur.2.2. Describe the three characteristics of Describe the three characteristics of

entrepreneurial activity.entrepreneurial activity.3.3. Identify five potential advantages to starting your Identify five potential advantages to starting your

own business.own business.4.4. Explain the differences among three types of start-Explain the differences among three types of start-

up firms.up firms.5.5. Define a small business.Define a small business.6.6. Explain the importance of small businesses to the Explain the importance of small businesses to the

U.S. economy.U.S. economy.


5-3Chapter ObjectivesChapter Objectives7.7. Explain why small businesses tend to foster Explain why small businesses tend to foster

innovation more effectively than large ones.innovation more effectively than large ones.8.8. Describe some of the ways in which small Describe some of the ways in which small

companies work with big onescompanies work with big ones9.9. Describe the goods-producing and service-Describe the goods-producing and service-

producing sectors of an economy.producing sectors of an economy.10.10.Identify the industries in which small businesses Identify the industries in which small businesses

are concentrated.are concentrated.11.11.Summarize the advantages and disadvantages of Summarize the advantages and disadvantages of

business ownership.business ownership.12.12.Explain what it takes to start a business.Explain what it takes to start a business.


5-4Chapter ObjectivesChapter Objectives13.13.Evaluate the advantages and disadvantages of Evaluate the advantages and disadvantages of

several small business ownership options—starting several small business ownership options—starting a business from scratch, buying an existing a business from scratch, buying an existing business, and obtaining a franchise.business, and obtaining a franchise.

14.14.Discuss the importance of planning for your Discuss the importance of planning for your business, and identify the key sections of a business, and identify the key sections of a business plan.business plan.

15.15.Discuss ways to succeed in managing a business, Discuss ways to succeed in managing a business, and explain why some businesses fail.and explain why some businesses fail.

16.16.Identify sources of small business assistance from Identify sources of small business assistance from the Small Business Administration.the Small Business Administration.


5-5EntrepreneurEntrepreneur““……someone who identifies a someone who identifies a

business opportunity and business opportunity and assumes the risk of creating and assumes the risk of creating and

running a business to take running a business to take advantage of it.advantage of it.””


5-6Why Be An Why Be An Entrepreneur?Entrepreneur?

Be Own BossBe Own BossFinancial IndependenceFinancial IndependenceCreative FreedomCreative FreedomUse Own Skills & KnowledgeUse Own Skills & Knowledge


Exploring Business © 2009 FlatWorld Knowledge

5-7Entrepreneurs Vs. Lifestyle Entrepreneurs Vs. Lifestyle Business OwnersBusiness Owners

EntrepreneursEntrepreneursInnovatorsInnovators

New/Improved New/Improved ProductsProductsGrow & ExpandGrow & Expand

Owners of Lifestyle Owners of Lifestyle BusinessesBusinesses

Provide IncomeProvide IncomeNot InnovativeNot Innovative

No Plan For ExpansionNo Plan For Expansion Exploring Business 2.0 © 2012 Flat World Knowledge

5-8Small BusinessSmall BusinessSBA ClassificationSBA Classification

Independent OwnershipIndependent Ownership Little Influence In IndustryLittle Influence In Industry Fewer Than 500 EmployeesFewer Than 500 Employees

Economic ImpactEconomic Impact 25M+ Businesses25M+ Businesses 50% of GDP50% of GDP


5-9

Small Business ImportanceSmall Business Importance

Job CreationJob Creation InnovativeInnovative Opportunities For Women Opportunities For Women

& Minorities& Minorities Helps Big BusinessHelps Big Business


5-10Small Firm Job Gains and Small Firm Job Gains and

Losses, 1993–2008 (in Losses, 1993–2008 (in millions of jobs)millions of jobs)


5-11Businesses Owned by Women Businesses Owned by Women and Minoritiesand Minorities


5-12Small Business Small Business IndustriesIndustries

•80% = Intangible Services80% = Intangible Services•20% = Tangible Goods20% = Tangible Goods


5-13Small Business By IndustrySmall Business By Industry


5-14Small Business OwnershipSmall Business Ownership•AdvantagesAdvantages

IndependenceIndependenceFinancial RewardsFinancial RewardsLifestyleLifestyleLearning Opps.Learning Opps.Creative FreedomCreative FreedomPersonal SatisfactionPersonal Satisfaction

DisadvantagesDisadvantagesFinancial RiskFinancial RiskStressStressTime CommitmentTime CommitmentUndesirable DutiesUndesirable Duties


5-15EntrepreneurEntrepreneur’’s Work s Work WeekWeek


5-16Business PlanBusiness Plan““……a document that identifies the a document that identifies the goals of your proposed company goals of your proposed company

and explains how they will be and explains how they will be achieved...achieved...””


5-17Blueprint for Blueprint for CompanyCompany

•How Business Will be BuiltHow Business Will be Built•How Intend To Make It SturdyHow Intend To Make It Sturdy•Get FinancingGet Financing


5-18Sources For Business Sources For Business IdeaIdea

IndustryIndustryExperienceExperience

HobbiesHobbies


5-19Ownership Ownership OptionsOptions

Start From ScratchStart From Scratch

Buy ExistingBuy Existing

Buy A FranchiseBuy A Franchise


5-20The Growth of Franchising, The Growth of Franchising, 1980–20071980–2007


5-21 FranchiseFranchiseAdvantagesAdvantages

Recognized NameRecognized Name ProductProductHelp In Start-upHelp In Start-upAdvertisingAdvertisingOngoing SupportOngoing Support

DisadvantagesDisadvantagesExpensiveExpensive

• Franchise FeeFranchise Fee• Royalty FeeRoyalty Fee

FranchiserFranchiser’’s Ruless RulesFranchiser May Not Franchiser May Not FollowFollow ThroughThrough


5-22Benefits Of Business PlanBenefits Of Business Plan

Forces You To ThinkForces You To Think CriticallyCriticallyReduces RiskReduces RiskAnalyze Concept/Analyze Concept/ IndustryIndustry


5-23Audiences of PlanAudiences of Plan InvestorsInvestors

•Quality of ConceptQuality of Concept•Ability to ManageAbility to Manage

Bankers- Ability To Bankers- Ability To Repay LoanRepay Loan


5-24Business PlanBusiness Plan1)1) Executive SummaryExecutive Summary2)2) Description of BusinessDescription of Business3)3) Industry AnalysisIndustry Analysis4)4) Mission Statement/Core ValuesMission Statement/Core Values5)5) Management PlanManagement Plan6)6) Goods/ServicesGoods/Services7)7) Development & ProductionDevelopment & Production8)8) MarketingMarketing9)9) Global IssuesGlobal Issues10)10) Financial PlanFinancial Plan11)11) AppendicesAppendices


5-25Executive Executive SummarySummary

1-3 Page Overview1-3 Page OverviewMost Important PartMost Important PartWritten After Plan CompletedWritten After Plan Completed


5-26Description Of BusinessDescription Of Business What Will Do?What Will Do? Goods/Services Provided?Goods/Services Provided? Unique?Unique? Customers?Customers? How Sold?How Sold? Location?Location?


5-27Industry Industry AnalysisAnalysis

Players?Players?Outlook?Outlook?Total Projected Sales?Total Projected Sales?Factors of Expansion/Contraction?Factors of Expansion/Contraction?Future Economic Conditions?Future Economic Conditions?


5-28Mission Statement & Core Mission Statement & Core ValuesValues

Mission Statement- Purpose or Mission Statement- Purpose or mission of companymission of company

Core Values- Fundamental Core Values- Fundamental beliefs...what is/is not beliefs...what is/is not appropriate in business activities, appropriate in business activities, idealsideals


5-29Management PlanManagement PlanoMember QualificationsMember Qualifications

•EducationEducation•ExperienceExperience•ExpertiseExpertise

oLegal FormLegal Form•Sole ProprietorshipSole Proprietorship•PartnershipPartnership•CorporationCorporation


5-30Goods & ServicesGoods & Services

DescriptionDescription Better Than CompetitorsBetter Than Competitors Market NeedsMarket Needs Competitive AdvantageCompetitive Advantage


5-31Development & Development & ProductionProduction

Product DesignProduct DesignTechnologyTechnologyOwn Or Contract For FacilitiesOwn Or Contract For FacilitiesWhere?Where?EquipmentEquipmentDesign/Layout Of FacilitiesDesign/Layout Of FacilitiesNumber of EmployeesNumber of EmployeesUnits ProducedUnits ProducedEnsure High Quality?Ensure High Quality?


5-32MarketingMarketing Target MarketTarget Market PricingPricing DistributionDistribution PromotionPromotion


5-33Global IssuesGlobal Issues Buying/Selling In Other CountriesBuying/Selling In Other Countries Identify Cross Border ChallengesIdentify Cross Border Challenges How Overcome ChallengesHow Overcome Challenges Strategies For FutureStrategies For Future


5-34Financial PlanFinancial Plan Cash NeedsCash Needs

• Start-upStart-up• OperationsOperations• Funding SourcesFunding Sources

Repay DebtRepay Debt ProjectionsProjections

• Expected SalesExpected Sales• CostsCosts• Profits (Losses)Profits (Losses)


5-35AppendicesAppendicesResumesResumesFinancial StatementsFinancial Statements


5-36Succeeding In Succeeding In BusinessBusiness Know BusinessKnow Business

Know ManagementKnow Management Proper AttitudeProper Attitude Get Adequate FundingGet Adequate Funding Manage MoneyManage Money Manage TimeManage Time Know PeopleKnow People Satisfy CustomerSatisfy Customer Know How To CompeteKnow How To Compete


5-37SBA AssistanceSBA AssistanceAssistance In:Assistance In:

– Business PlanBusiness Plan– StartingStarting– ManagingManaging

FinancingFinancingManagement/Technical Management/Technical Services/TrainingServices/Training


5-38SBA ProgramsSBA ProgramsSBDCs Assist withSBDCs Assist with

Business ProblemsBusiness Problems Free Training & Technical Info.Free Training & Technical Info.

Service Corps of Retired Service Corps of Retired ExecutivesExecutives


5-39Why Businesses Why Businesses FailFail

Bad Business IdeaBad Business IdeaCash ProblemsCash ProblemsInexperience or IncompetenceInexperience or IncompetenceLack Of Customer FocusLack Of Customer FocusInability To Handle GrowthInability To Handle Growth


Documents

5-1 Chapter 5: The Challenges of Starting a Business Exploring Business 2.0 © 2012 Flat World Knowledge