Place Slide Title Text Here JOHN R SCHERMERHORN

Place Slide Title Text Here JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter 6 Entrepreneurship and New Ventures © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -1

Planning Ahead. Text – Chapter Place Slide Title Here 6 Study Questions 1. What is entrepreneurship and who are entrepreneurs? 2. What is special about small business entrepreneurship? 3. How do entrepreneurs start and finance new ventures? © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -2

Chapter 6 Learning Place Slide Title Text Here Dashboard 1. Nature of Entrepreneurship 1. 2. 3. 4. Who are the entrepreneurs? Characteristics of entrepreneurs Women and minority entrepreneurs Social entrepreneurship 2. Entrepreneurship and Small Business 1. 2. 3. 4. 5. Why and how to get started Web-based business models Family businesses Why small businesses fail Small business development © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -3

Chapter 6 Learning Place Slide Title Text Here Dashboard 3. New Venture Creation 1. 2. 3. 4. Life cycles of entrepreneurial firms Writing the business plan Choosing the form of ownership Financing the new venture © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -4

1: Text Nature of Entrepreneurship Place. Takeaway Slide Title Here Entrepreneurship • Risk-taking behavior that results in new opportunities Classic entrepreneur • Pursues opportunities others view as problems Serial entrepreneur • Starts and runs business and nonprofits over and over again First-mover advantage • First to exploit a niche or enter a market © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -5

1: Text Nature of Entrepreneurship Place. Takeaway Slide Title Here Intrapreneurs – Display entrepreneurial behavior as employees of larger firms © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -6

Takeaway 1: Nature of Entrepreneurship Place Slide Title Text Here © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -7

Takeaway 1: Nature of Entrepreneurship Place Slide Title Text Here • Women and minority entrepreneurs are growing in numbers • Necessity-based entrepreneurship – People start a business because no other employment opportunities exist © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -8

Takeaway 1: Nature of Entrepreneurship Place Slide Title Text Here Social entrepreneurship – Unique form of ethical entrepreneurship that seeks new ways to solve pressing social problems – Social entrepreneurs • Take risks to find new ways to solve pressing social problems such as poverty, literacy, illness, homelessness © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -9

Takeaway Entrepreneurship Place Slide 2: Title Text Here and Small Business Small business statistics • Provide just over 55% of private-sector workers • Create as many as 6 out of 10 new jobs • Employ 40% of high-tech workers • Receive 35% of federal government contract dollars • Export more than $500 billion worth of goods and services annually A small business has fewer than 500 employees © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -10

Takeaway 2: Entrepreneurship Place Slide Title Text Here and Small Business Starting a small business – Franchise • One business owner sells to another the right to operate the same business in another location – Business model • Plan for making a profit by generating revenues that are greater than costs – Startup • New and temporary venture that is trying to establish a profitable business model – Lean startups • Use open source software and free web services to contain costs while staying small and keeping operations simple © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -11

Takeaway Entrepreneurship Place Slide 2: Title Text Here and Small Business Types of web-based business models Freemium model Infomediary model Community model Referral model Merchant model Brokerage model Advertising model Internet Entrepreneurship © 2013 John Wiley & Sons, Inc. All rights reserved. Subscription model 6 -12

Takeaway Entrepreneurship Place Slide 2: Title Text Here and Small Business Family owned businesses – Account for 78% of new jobs created in the U. S. – Provide 60% of the nation’s employment – Feuds result when family members disagree over how the business is run – Possible succession problems • Who will run the business when the current head leaves? • Succession plan outlines leadership transition and financial matters © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -13

Takeaway Entrepreneurship Place Slide 2: Title Text Here and Small Business Why small businesses fail – SBA reports that as many as 60 to 80% of new businesses fail in first five years – Reasons why small businesses fail - Lack of experience - Lack of expertise - Lack of commitment - Lack of strategy - Ethical failure - Growing too fast - Lack of strategic leadership - Poor financial control © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -14

Takeaway Entrepreneurship Place Slide 2: Title Text Here and Small Business Small business development – Business incubator • Offers space, shared services and advice to get small businesses started – Small Business Development Centers • Founded with U. S. Small Business Administration to provide advice to new and existing small businesses © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -15

Takeaway 3: New Venture Creation Place Slide Title Text Here Life cycles of entrepreneurial firms © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -16

Takeaway 3: New Venture Creation Place Slide Title Text Here Business plan – Describes the direction for a new business and the financing needed to operate it – Banks want to see a well-developed business plan before loaning money © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -17

Takeaway 3: New Venture Creation Place Slide Title Text Here Sample Business Plan Outline: – – – Executive Summary Industry Analysis Company description Products and services description Marketing Strategy Operations description Staffing description Financial projections Capital needs Milestones © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -18

Takeaway 3: New Venture Creation Place Slide Title Text Here Forms of ownership – Sole Proprietorship • An individual or married couple pursuing business for a profit. This does not involve incorporation. © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -19

Takeaway 3: New Venture Creation Place Slide Title Text Here Forms of ownership – Partnership • Two or more people agree to contribute resources to start and operate a business together General Partnership • The owners share management responsibilities Limited Partnership • General partner manages the business • Limited partners share profit but losses are limited to the amount of their investment Limited Liability Partnership • Limits the liability of one partner for the negligence of another © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -20

Takeaway 3: New Venture Creation Place Slide Title Text Here Forms of ownership – Corporation • A legal entity that exists separately from its owners – Limited Liability Corporation (LLC) • A combination of sole proprietorship, partnership, and corporation – Protects owners against personal loss other than what is invested in the company – Treated as a proprietorship or partnership for tax purposes © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -21

Takeaway 3: New Venture Creation Place Slide Title Text Here Financing – Debt Financing • involves borrowing money from another person, a bank, or a financial institution – Equity Financing • involves exchanging ownership shares for outside investment monies – Venture Capitalists • Involves making large investments in new ventures in return for an equity stake in the business © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -22

New Venture Creation Place Takeaway Slide Title 3: Text Here Financing – Angel Investor • A wealthy individual willing to invest in return for equity in a new venture – Initial Public Offering (IPO) • An initial selling of shares of stock to the public at large © 2013 John Wiley & Sons, Inc. All rights reserved. 6 -23