Business Copyright 2005 Prentice Hall Inc 1 Chapter
Business Copyright 2005 Prentice- Hall, Inc. 1
Chapter 4 Understanding Entrepreneurship & New Ventures 4 -2
Business Chapter Outline üWhat Is A “Small” Business? üEntrepreneurship üStarting/Operating A New Business üFranchising üSuccess/Failure In A Small Business üNoncorporate Business Ownership Copyright 2005 Prentice- Hall, Inc. 3
Business “Small” Business • Small Business Administration – Number of – Total Annual Sales Employees • Independently Owned/Managed & Does Not Dominate Its Market Copyright 2005 Prentice- Hall, Inc. 4
Business Small Business Importance Copyright 2005 Prentice- Hall, Inc. 5
Business Need For Small Businesses • Job Creation • Innovation – Products/Services – Processes • Important To Big Business Copyright 2005 Prentice- Hall, Inc. 6
Business Small Business Industries • Services • Construction • Finance & Insurance • Wholesaling • Transportation & Manufacturing Copyright 2005 Prentice- Hall, Inc. 7
Business Small Business Impact By Industry Copyright 2005 Prentice- Hall, Inc. 8
Business Entrepreneur • Accepts Risks & Opportunities In Creating/Operating A New Business • Characteristics – Resourceful – Good Customer Relations – Desire To Be Own Boss- Gain Control Of Life – Build For Family – Tolerance For Uncertainty/Risk Copyright 2005 Prentice- Hall, Inc. 9
Business Entrepreneurs Yesterday Today Self-Reliant Open-Minded Male or Female Quick Decisions Relies On Others Copyright 2005 Prentice- Hall, Inc. 10
Business Non-Financial Reasons To Start A Business Source: CIBC World Markets, Economics & Strategy, “Secrets to Small Business Success”, research. cibcwm. com/economic_public/ download/sb-ssbs-10192004. pdf Copyright 2005 Prentice- Hall, Inc. 11
Business Financial Reasons To Start A Business Source: CIBC World Markets, Economics & Strategy, “Secrets to Small Business Success”, research. cibcwm. com/economic_public/ download/sb-ssbs-10192004. pdf Copyright 2005 Prentice- Hall, Inc. 12
Business Start/Operate Small Business Plan Buying Existing? Start From Scratch? Financing Copyright 2005 Prentice- Hall, Inc. 13
Business Plan • Summarizes Strategy • Identifies Implementation • Includes: – Goals and Objectives – Sales Forecast Copyright 2005 Prentice- Hall, Inc. 14
Business Plan- Projected Financial Statements • Cash Budget- Most Important • Income Statement • Balance Sheets • Breakeven Copyright 2005 Prentice- Hall, Inc. 15
Business Startup Business üMy Customers? üWhere? üPrice? üQuantities Will Be Bought? üCompetitors? üProduct Differentiation? Copyright 2005 Prentice- Hall, Inc. 16
Business Financing Small Business- Traditional • Family/Friends • Personal Savings • Lenders • Investors • Government Copyright 2005 Prentice- Hall, Inc. 17
Business Credit Usage By Small Business Firms- 1998 Percentage of Small Firms Using Credit By Suppliers Source: Small Business Administration- Office of Advocacy, “Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance” Sept. 2003. www. sba. gov/advo/stats/ssbf_98. pdf Copyright 2005 Prentice- Hall, Inc. 18
Business Share of Outstanding Debt for Small Firms By Supplier of Credit 1998 Source: Small Business Administration- Office of Advocacy, “Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance” Sept. 2003. www. sba. gov/advo/stats/ssbf_98. pdf Copyright 2005 Prentice- Hall, Inc. 19
Business Percentage of Small Business Loans From Commercial Banks- 1998 Source: Small Business Administration- Office of Advocacy, “Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance” Sept. 2003. www. sba. gov/advo/stats/ssbf_98. pdf Copyright 2005 Prentice- Hall, Inc. 20
Business Other Sources Of Financing • • • Venture Capital Companies Small-Business Investment Companies Small Business Administration – – – Guaranteed Loans Immediate Participation Local Development Loans Companies • Other SBA Programs – SCORE – SBDCs Copyright 2005 Prentice- Hall, Inc. 21
Business Franchise System ØFranchise Agreement ØFranchisor ØFranchisee Copyright 2005 Prentice- Hall, Inc. 22
Business Franchise Contract Franchisor, Inc. Branded Product/Service Performance Monitoring $$$$$ Franchisee Copyright 2005 Prentice- Hall, Inc. 23
Business Franchising Advantages To Franchisee + Business Disadvantages To Franchisee Ownership + Access To Mgmt. Skills + Low Failure Rate - High start-up costs - % Of Sales To Franchiser + Rapid Growth Using Other People’s Money Copyright 2005 Prentice- Hall, Inc. 24
Business Trends In Small Business • E-Commerce • Big Business Crossovers • Minorities & Women • Global Trade/Suppliers • Better Survival Rates Copyright 2005 Prentice- Hall, Inc. 25
Business Startups: Success & Failure Copyright 2005 Prentice- Hall, Inc. 26
Business Growth of E-Commerce Copyright 2005 Prentice- Hall, Inc. 27
Business Women Entrepreneurs Copyright 2005 Prentice- Hall, Inc. 28
Business Startups: Success vs. Failure Copyright 2005 Prentice- Hall, Inc. 29
Business Reasons For Failure Source: The Coleman Chronicles, Vol. 1 Issue 20, “The Most Common Reasons for Small Business Failure… http: //www. coleman. bc. ca/publications/chronicles/vol 1 issue 20. htm Copyright 2005 Prentice- Hall, Inc. 30
Business Reasons For Success • Hard Work, Drive, & Dedication • Demand For Product/Service • Managerial Competence • Luck Copyright 2005 Prentice- Hall, Inc. 31
Business Legal Entities of Business Ownership • Sole Proprietorship • Partnerships • Corporations – General – Limited – Master Limited • Cooperatives Copyright 2005 Prentice- Hall, Inc. – Closely-Held vs. Publicly- Held – S Corporation – Limited Liability – Professional – Multinational (Transnational) 32
Business Sole Proprietorship Disadvantages Advantages C Freedom C Easy To Form C Low Start-up Costs C Tax Benefits D Unlimited Liability D Lack Of Continuity D Resources of One Person Copyright 2005 Prentice- Hall, Inc. 33
Business General Partnership Advantages Disadvantages D Unlimited Liability D Lack Of Continuity C Easily Created D Difficult To C Partners Taxed Transfer As Individuals Ownership C More Talent & Money Copyright 2005 Prentice- Hall, Inc. 34
Business Corporation Advantages Disadvantages C Limited Liability C Continuity C Access To More Capital C Ease Of Ownership Transfer D Startup Cost. Legal Requirements D Double Taxation Copyright 2005 Prentice- Hall, Inc. 35
Business Proportions of Legal Business Entities Copyright 2005 Prentice- Hall, Inc. 36
Business Corporate Governance Shareholders Board Of Directors Officers Business Employees Copyright 2005 Prentice- Hall, Inc. 37
Business Stock Ownership • Preferred – Fixed Dividend – Priority • Common – Dividend If Profitable – Last Claim – Voting Rights Copyright 2005 Prentice- Hall, Inc. 38
Business Corporate Ownership. Special Issues • Joint Ventures & Strategic Alliances • Employee Stock Ownership • Institutional Ownership • Mergers & Acquisitions • Divestitures & Spin-Offs Copyright 2005 Prentice- Hall, Inc. 39
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