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Nickels Nickels McHughMcHughMcHughMcHugh

With help With help fromfrom

TimothyTimothy

Nickels Cover

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Chapter

6666 Entrepreneurship Entrepreneurship and and

Starting a Small Starting a Small Business Business

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Learning GoalsLearning Goals1.1. EntrepreneurshipEntrepreneurship

2.2. Small businesses’ role in the Small businesses’ role in the economyeconomy

3.3. How to learn and avoid early mistakesHow to learn and avoid early mistakes

4.4. What it takes to start a small businessWhat it takes to start a small business

5.5. Small businesses selling outside the Small businesses selling outside the USAUSA

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1. Entrepreneurship1. Entrepreneurship• Entrepreneurship- Accepting the risk of Entrepreneurship- Accepting the risk of

starting and running a business.starting and running a business.• Entrepreneurial teams: group of experienced Entrepreneurial teams: group of experienced

managers from different skills/fieldsmanagers from different skills/fields• Intrapreneurs: working as an entrepreneur Intrapreneurs: working as an entrepreneur

but inside a large companybut inside a large company• Micropreneurs: home-based business, no Micropreneurs: home-based business, no

less job security than working for large firmless job security than working for large firm

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Entrepreneurship• DefinitionDefinition

• Characteristics of Characteristics of Successful Successful EntrepreneursEntrepreneurs

• IntrapreneurIntrapreneur

• Micropreneur vs. Micropreneur vs. Home-BasedHome-Based

CorporatioCorporationn

EntrepreneuEntrepreneurr

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Entrepreneurial AttributesEntrepreneurial Attributes

A.A. Self-Directed & Self-Self-Directed & Self-DisciplinedDisciplined

B.B. Self-NurturingSelf-Nurturing

C.C. Action-OrientedAction-Oriented

D.D. Highly EnergeticHighly Energetic

E.E. Tolerant of Tolerant of UncertaintyUncertainty

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Why People StartWhy People Start Their Own BusinessesTheir Own Businesses

0 10 20 30 40 50 60

Use My Abilities

Control My Life

Build For Family

Like The Challenge

Live Where/How I Like

Source: BFIB/VISA Card Primer

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Reasons Women Leave Jobs in Big Reasons Women Leave Jobs in Big Companies to Start BusinessCompanies to Start Business

0%10%20%30%40%50%60%70%80%90%

Bette

r Ben

efits

More

Fam

ily T

ime

Recogniti

on

Less P

olitic

s

Partn

ers/C

olleagues

Influ

ence S

trate

gy

More

Money

Risk-T

aking

Source: FSB, March 2001

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Who StartsWho Starts New Businesses?New Businesses?

18 - 2418 - 24 8% 8%25 - 3425 - 34 71% 71%35 - 4435 - 44 13% 13%45 - 5445 - 54 6% 6%55+55+ 2% 2%

AGE AT START-AGE AT START-UPUP

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Hours per WeekHours per Week Entrepreneurs Worked 1st YearEntrepreneurs Worked 1st Year

1 - 39 hours1 - 39 hours 8% 8%

40 - 49 hours40 - 49 hours 15%15%

50 - 59 hours50 - 59 hours 23%23%

60 - 69 hours60 - 69 hours 28%28%

70 - 79 hours70 - 79 hours 13%13%

80 + hours80 + hours 12%12%

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Government SupportGovernment Support• Good legal and economic environment Good legal and economic environment

(Ch2)(Ch2)

• SBASBA

• Enterprise zonesEnterprise zones

• IncubatorsIncubators

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Government EffortsGovernment Efforts Immigration Act of Immigration Act of

1990- Investor Visa1990- Investor Visa

Enterprise ZonesEnterprise Zones

IncubatorsIncubators

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2. Small Business’s Role In The 2. Small Business’s Role In The EconomyEconomy

• Create 75% of the new jobs in the USCreate 75% of the new jobs in the US

• Generate 45% of GDP (Ch2)Generate 45% of GDP (Ch2)

• Offer more personalized customer-Offer more personalized customer-service than large companies, so fill service than large companies, so fill niches in marketsniches in markets

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What is Small Business?What is Small Business?

IndependentIndependent

Not DominantNot Dominant( Except in ( Except in small niche market)small niche market)

< 500 Employees< 500 Employees

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U.S. Small BusinessesU.S. Small Businesses

20 Million Full/Part-Time Businesses20 Million Full/Part-Time Businesses

75% of New Jobs75% of New Jobs

45% of Gross Domestic Product45% of Gross Domestic Product

JobsJobs 80% of Americans = 180% of Americans = 1stst Job in Small Business Job in Small Business

75% of New Jobs = Small Business75% of New Jobs = Small Business

Women-Owned Growing RapidlyWomen-Owned Growing Rapidly

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Small Business-Small Business- AdvantagesAdvantages

Personalized Service/ Personalized Service/ Personal ContactPersonal Contact

FlexibilityFlexibilityLower CostsLower Costs Innovation OpportunitiesInnovation Opportunities

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Small Business-Small Business-DisadvantagesDisadvantages

- Limited ExperienceLimited Experience

- Long HoursLong Hours

- Insufficient CapitalInsufficient Capital

- High Failure RateHigh Failure Rate

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3. How to learn and avoid early 3. How to learn and avoid early mistakesmistakes

• Classes like this one and those more Classes like this one and those more oriented to small business oriented to small business practicalitiespracticalities

• Talk to experienced small business Talk to experienced small business owners and gain from their experiencesowners and gain from their experiences

• Gain experience in same field working Gain experience in same field working fro someone elsefro someone else

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Small Business SuccessSmall Business Success

Learn from OthersLearn from Others

Get ExperienceGet Experience

Take Over Successful FirmTake Over Successful Firm

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4. What it Takes to Start a Small 4. What it Takes to Start a Small BusinessBusiness

• Business Plan (see page 191):Business Plan (see page 191):– Nature of business: what good or service Nature of business: what good or service

you will provideyou will provide– Target market: what need you will fillTarget market: what need you will fill– Advantages over competitionAdvantages over competition– Resources available: money, capital, Resources available: money, capital,

peoplepeople– Skills availableSkills available

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What it takes (part 2)What it takes (part 2)• Financing:Financing:

– Bank loanBank loan– Venture Capitalist: part-ownership as Venture Capitalist: part-ownership as

condition of financingcondition of financing

• Venture Capitalists: Individuals or Venture Capitalists: Individuals or companies that invest in new business companies that invest in new business in exchange for partial ownership of in exchange for partial ownership of those businesses.those businesses.

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Capital Sources ofCapital Sources of Successful EntrepreneursSuccessful Entrepreneurs

0%

20%

40%

60%

80%

100%

VentureCapital

Family BankLoan

CreditCards

PersonalFunds

By Company Age

< 3 Years6+ YearsSOURCE: FSB, March 2001

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What it takes (part 3)What it takes (part 3)• Define Your Market: People with Define Your Market: People with

unsatisfied needs who have both the unsatisfied needs who have both the resources and willingness to buy.resources and willingness to buy.

• Keep track of how you are Keep track of how you are doing(profit/loss): record keeping and doing(profit/loss): record keeping and accountingaccounting

• Staff: pick people you can trust and Staff: pick people you can trust and make it worth their whilemake it worth their while

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Successful BusinessSuccessful Business Management RequirementsManagement Requirements

Business PlanBusiness Plan Adequate FundingAdequate Funding

Lenders/InvestorsLenders/Investors ““Angels”Angels”Venture CapitalistsVenture Capitalists

Professional Advice/HelpProfessional Advice/Help Know Your CustomerKnow Your Customer Manage Human ResourcesManage Human Resources Keep Keep GoodGood Records Records

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Advantages of Working for a Advantages of Working for a Small FirmSmall Firm

• More empowerment to use own ideas More empowerment to use own ideas and take initiative, as boss has to rely and take initiative, as boss has to rely on you for more tasks and a more on you for more tasks and a more important proportion of all work done important proportion of all work done (than in a large company)-> boss (than in a large company)-> boss shows more respect and job is more shows more respect and job is more challengingchallenging

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Help From:Help From:• Small Business AdministrationSmall Business Administration

• SCORE: Service Corps of Retired SCORE: Service Corps of Retired Executives Executives

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Small Business CollaboratorsSmall Business Collaborators

Small Business Administration (SBA)Small Business Administration (SBA) Microloan programMicroloan program SBICsSBICs SBDCsSBDCs

Service Corps of Retired Executives Service Corps of Retired Executives (SCORE)(SCORE)

Active Corps of Executives (ACE)Active Corps of Executives (ACE)

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Small Business Administration Small Business Administration (SBA):(SBA):

• A U.S. government agency that advises A U.S. government agency that advises and assist small businesses by and assist small businesses by providing management training and providing management training and financial advice and loans.financial advice and loans.

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5) Small Businesses Selling 5) Small Businesses Selling Outside the USAOutside the USA

• World market is many times larger than World market is many times larger than USUS

• Internet allows small businesses to Internet allows small businesses to reach potential customers all over the reach potential customers all over the globeglobe