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6
Chapter
Entrepreneurship and Starting a Small Business
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Entrepreneurship

• Accepting the risk of starting and running
  your own business.

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Who Starts New Businesses?
AGE AT START-UP

• 18 - 24 8
• 25 - 34 71
• 35 - 44 13
• 45 - 54 6
• 55 2

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Why People Take the Entrepreneurial Challenge?

1. OPPORTUNITY to share in the American dream.
2. PROFIT. Entrepreneurs often become wealthy.
3. INDEPENDENCE. Many entrepreneurs do not enjoy
   working for someone else.

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Why People Take the Entrepreneurial Challenge?

• 4. CHALLENGE. Some believe that entrepreneurs
  are excitement junkies who flourish on taking
  risks. Many contend that entrepreneurs take
  MODERATE, CALCULATED RISKS. In general,
  entrepreneurs SEEK ACHIEVEMENT more than power.

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Why People Start Their Own Businesses
Source BFIB/VISA Card Primer
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Reasons Women Leave Jobs in Big Companies to
Start Business
Source FSB, March 2001
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Entrepreneurial Attributes

1. SELF-DIRECTED and self-disciplined.
2. SELF-NURTURING, believing in your own ideas.
3. ACTION-ORIENTED, having a desire to build the
   dream into reality - ambitious.
4. HIGHLY ENERGETIC. Entrepreneurs must work long
   hours to succeed.
5. TOLERANT OF UNCERTAINTY. Entrepreneurs must be
   able to take calculated risks.

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Self- Perception of Small Business Owners
Source USA Today, 5/20/03
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Entrepreneurship

1. Micropreneurs willing and able to manage a
   business that stays small and offers more of a
   balanced lifestyle. Lifestyle Businesses
2. Intrapreneurs work as entrepreneurs within
   established corporations, e.g. 3M post-its.
3. Multipreneurs start and manage more than one
   small business.

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What is Small Business?

• Independent
• Not Dominant
• Meet SBA standards, e.g. Employees Annual
  Receipts per industry.

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Small Business- Advantages

• Personalized Service/ Personal Contact
• Flexibility
• Lower Costs
• Innovation Opportunities

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Small Business-Disadvantages

• Limited Experience
• Long Hours
• Insufficient Capital
• High Failure Rate

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Hours per Week Entrepreneurs Worked 1st Year

• 1 - 39 hours 8
• 40 - 49 hours 15
• 50 - 59 hours 23
• 60 - 69 hours 28
• 70 - 79 hours 13
• 80 hours 12

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Reasons for Growth of Home-Based Businesses

• Technology
• Downsizing
• Attitudes
• Tax Advantages

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Most Common Types ofHome-Based Businesses
Source Independent Insurance Agents of America
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Home Office Owners

• Challenges
• New Customers
• Time Management
• Work vs. Family
• City Ordinances
• Risk

• Focus
• Find Opportunity
• Results vs. Routine
• Profit vs. Paycheck
• New Ideas
• Long Term vs. Short Term

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Government Efforts

• Immigration Act of 1990- Investor Visa
• Allows 10k people into the USA if they
  invest 1M into a business and create 10 jobs.
• Enterprise Zones
• Specific geographic areas offering lower
  taxes and other govt support to attract private
  businesses.
• Incubators
• Centers that offer low-cost offices and
  services (legal, accounting, and secretarial) to
  support new businesses.

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Government Efforts

• Small Business Administration
• US government agency that advises and
  assists small businesses by providing management
  training and financial advice and loans.
• Small Business Investment Company (SBIC) Program
• Private investment companies licensed by
  the SBA lend money to small businesses.
• SCORE
• An SBA office with volunteers from industry
  who counsel small businesses at little to no
  cost.

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U.S. Small Businesses

• 20 Million Full/Part-Time Businesses
• Create 75 of New Jobs
• Account for 45 of Gross Domestic Product
• 80 of Americans 1st Job in Small Business
• Women-Owned Growing Rapidly

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Small Business Success

• Business Plan
• Learn from Others
• Get Experience
• Take Over Successful Firm

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Successful Business Management Requirements

• Business Plan
• Adequate Funding
• Lenders/Investors
• Angels
• Venture Capitalists
• Professional Advice/Help
• Know Your Customer
• Manage Human Resources
• Keep Good Records

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Small Business Strategies

• Examine Marketing ID Areas for Growth
• Profile Best Customers Market to Similar
  Prospects
• Invest in Sales Training Technology
• Refresh Business Perspective With Outside Views
• Streamline Business Eliminate Waste

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Saving A Business In Trouble

• React/Not Overreact
• Understand Financial Situation
• Find Professional Help
• Develop Recovery Plan

• Be Visible Confident Leader
• Remind Employees of Stake in Business
• Dont Get Stung By Killer Bankruptcy

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Capital Sources of Successful Entrepreneurs
SOURCE FSB, March 2001
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Reasons for aBanker To Say No

• I dont know enough about you or your business.
• You havent clearly stated why you need the
  money.

• Your numbers dont support the loan request.
• Your collateral is lacking.
• Your business does not support the loan on its
  own merits.

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Ways to Improve Banking Relationships

1. Provide Bank With Business Plan, Brochures,
   Business Cards, etc.
2. Describe Business, Financial Situation, Plans
3. Ask About Scope of Bank Services
4. Express Interest In Bankers Background- Family,
   Hobbies, etc.
5. Follow Up With Phone Calls, Visits

Source St. Louis Business Monthly, August 2002
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Small Business International Prospects

• Positives
• World Market
• Absorb Excess Inventory
• Soften U.S. Downturns
• Extend Product Life

• Negatives
• Financing Difficult
• How to Get Started?
• Lack of Cultural Understanding
• Paperwork

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International Small Business

• Information
• Dept. of Commerce- www.bxa.doc.gov
• SBA- International- www.sba.gov/hotlist/internat.h
  tml

• Advantages
• Deal With Individuals
• Faster Shipping
• Variety of Suppliers
• Professional Service