Entrepreneurship and Small Business Chapter 5 Entrepreneurship A

Entrepreneurship and Small Business Chapter 5

Entrepreneurship • A business started by someone who satisfies a need for a good/service. • 1990’s online businesses soared • Virtual business or dot-com company operates online – 1995 Amazon. com started as online book store…now a leader as an online e-tailer

Entrepreneur • A person who recognizes a business opportunity and organizes, manages, and assumes the risks of a business enterprise with the intent of increasing the market value of the business. • Take-charge, self-directed people • Risk taker

Entrepreneur • Every year thousands of entrepreneurs start businesses • Many are successful but remain small • Many of these businesses will fail within a few years • Others will go on to become large corporations

Advantages of an Entrepreneurship • Satisfaction from taking a risk and becoming a success • Showing expertise and skills • Working from home • Gaining Profit

Disadvantages of an Entrepreneurship • Risk that they may fail • Total responsibility for the business • Long hours • Financial risk

Small Business • Defines Small Business – an independently owned business that usually has the owner as its manager – – – – Serves a limited geographic area Employees fewer than 500 people Not dominate in its industry Most business in USA are small business – 25 million Employee 50% of total workforce Generates more than half the nation’s income Principle source of new jobs Account for 38% of jobs in high technology

Advantages of Small Business • Easier to form than large businesses – Require licenses for operation – Buildings meet zoning requirements • Being the Boss – Make your own decisions • Opportunity to offer services large companies cannot offer – Respond quickly to customer’s needs

Disadvantages of Small Business • Your responsible for decisions made • Create a feeling of loneliness • Long hours • About 4 out of 5 fail in their first five years – – – Don’t work enough hours Overprice or underprice products Little or no experience Trends and styles change Lack managerial skills needed Inadequate financial planning

Preparing for your Own Business • Analyze what you want to do and find a way to do it…. Ask yourself questions What will I produce? Who are my main competitors? Why is my product needed? How much will product cost to produce? How many people will I need to run the business? – What facilities will I need? – What licenses, permits, or other legal documents do I need? – How much money do I need to get started? – – –

Preparing for your Own Business • Careful planning from the beginning – Develop a BUSINESS PLAN –a written description of a new business venture that describes all aspects of the business – Essential for potential investors and banks for start-up funds

1. Summary Business Plan 1 -3 pages overview of the BP 2. Company Description Type of business (manufacturing, retail or service and product provided) 3. Product –Service section – describe types 4. Marketing Plan Likely customers and details of competition, marketing strategies, types and location of advertising 5. Legal Plan –how you will organize business 6. Management plan/Operation plan Key personnel and their expertise/experience Specify the company’s daily operations, facilities, overall personnel, materials, and processing requirements 7. Financial plan Company’s needs and projected revenues, costs, and profits