BA 101 Introduction to Business6. Entrepreneurs and Small Business

Owners

The World of Small Business

Not DominantNot DominantIn Its FieldIn Its Field

Not DominantNot DominantIn Its FieldIn Its Field

Fewer ThanFewer Than500 Employees500 Employees

Fewer ThanFewer Than500 Employees500 Employees

IndependentlyIndependentlyOwned and OperatedOwned and Operated

IndependentlyIndependentlyOwned and OperatedOwned and Operated

Relatively SmallRelatively SmallAnnual SalesAnnual Sales

Relatively SmallRelatively SmallAnnual SalesAnnual Sales

Roles of Small Business

Provide New Jobs

Introduce New Products

ServiceLarge Corporations

Inject Money IntoThe Economy

Take Business Risks

Provide SpecialtyGoods and Services

Types 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 Business

Narrow FocusNarrow Focus

Limited ResourcesLimited Resources

InnovationInnovation

How Entrepreneurs Spend Their TimeHow Entrepreneurs Spend Their Time

0% 5% 10% 15% 20% 25% 30%

Other Services

Plan for Growth

Arrange Finances

Deal with Suppliers

Maintenance

Production

Direct Selling

Keep Records

Deal with Employees

Factors Contributing to Small Business Growth

E-Commerce and Technology

Growing Diversity

Downsizingand Outsourcing

Highly DisciplinedHighly Disciplined

Energy and StaminaEnergy and Stamina

Relate Well to OthersRelate Well to Others

Self-ConfidentSelf-Confident

Control Their DestinyControl Their Destiny

Seek New SkillsSeek New Skills

Characteristicsof Entrepreneurs

Learn From MistakesLearn From Mistakes

Exploit OpportunitiesExploit Opportunities

Positive and TenaciousPositive and Tenacious

Monitor MarketsMonitor Markets

Success DrivenSuccess Driven

Take Moderate RisksTake Moderate Risks

Characteristicsof Entrepreneurs

Develop a Business Plan

Summarize the Business

Communicate Goals

Highlight Plans

Show Customer Benefits

Importance of a Business Plan

Guide OperationsGuide Operations

Outline StrategyOutline Strategy

Attract CapitalAttract Capital

Starting a New Business

+ Control your destinyControl your destiny

+ Reach your potentialReach your potential

+ Unlimited profitsUnlimited profits

+ RecognitionRecognition

+ Doing what you enjoyDoing what you enjoy

– Uncertainty of incomeUncertainty of income

– Risk of lossRisk of loss

– Long hours & hard workLong hours & hard work

– Complete responsibilityComplete responsibility

– High stress levelsHigh stress levels

AdvantagesAdvantages DisadvantagesDisadvantages

Buying an Existing Business

+ Customer base

+ Business systems

+ Product or service

+ Location

+ Financing

– Alienated customers

– Obsolescence

– Bad location

– Personality clashes

– Outstanding bills

Advantages Disadvantages

The Franchise Alternative

FranchiseeFranchisee FranchisorFranchisor

TypesTypes

ProductProduct ManufacturingManufacturing Business-Business-FormatFormat

Evaluating a Franchise

Initial franchise

Periodic royalties

Trademarks and names

Advertising and promotion

Business location

Evaluating a Franchise

Exclusive territory

Right of first refusal

Equipment and supplies

Agreement termination

Franchise assignment

The Pros and Cons of Franchising

Advantages

Get a viable business

Name recognition

Network of support

Blueprint for success

Disadvantages

No guarantee of wealth

High monthly royalties

Limited independence

Limited flexibility

Why Businesses Fail

Management IncompetenceManagement Incompetence

Lack of ExperienceLack of Experience

Insufficient FinancingInsufficient Financing

Poor Cash ManagementPoor Cash Management

No Strategic PlanningNo Strategic Planning

Ineffective MarketingIneffective Marketing

Uncontrolled GrowthUncontrolled Growth

Untenable LocationUntenable Location

Poor Inventory ControlPoor Inventory Control

Poor Entrepreneurial SkillsPoor Entrepreneurial Skills

Financing A New Business

Avoid CommonAvoid CommonMistakesMistakes

Overestimating SalesOverestimating SalesOverestimating SalesOverestimating Sales

Overestimating Cash FlowOverestimating Cash FlowOverestimating Cash FlowOverestimating Cash Flow

Underestimating ExpensesUnderestimating ExpensesUnderestimating ExpensesUnderestimating Expenses

Private Financing Sources

Venture CapitalistsVenture Capitalists

Angel InvestorsAngel Investors

Credit CardsCredit Cards

Banks and MicrolendersBanks and Microlenders

Going PublicGoing Public

Initial Public Offering (IPO)Initial Public Offering (IPO)Initial Public Offering (IPO)Initial Public Offering (IPO)

AdvantagesAdvantagesAdvantagesAdvantages

Raising NeededRaising NeededCapitalCapital

Raising NeededRaising NeededCapitalCapital

DisadvantagesDisadvantagesDisadvantagesDisadvantages

Expensive andExpensive andTime ConsumingTime Consuming

Expensive andExpensive andTime ConsumingTime Consuming