Chapter 6 Entrepreneurship and Small Business Management

1
Chapter 6 Entrepreneurship and Small Business
Management

• Describe the role that small business plays in
  the U.S. economy and how to start and manage a
  small business

2
Section 6-1Becoming an Entrepreneur

• Identify characteristics of successful
  entrepreneur
• Recognize the importance of entrepreneurship in
  the economy
• Describe opportunities and risks of
  entrepreneurship

3
Characteristics of Entrepreneurs

• Entrepreneur someone who takes a risk in
  starting a business to earn a profit
• Key factors in starting a business
• Having a real desire to be your own boss
• Developing a good initial plan
• Having special skills and abilities
• Coming up with innovative ideas
• There are good opportunities for entrepreneurship
  through small business ownership
• Entrepreneurship the process of starting,
  organizing, managing, and assuming the
  responsibility for a business

4
Characteristics ofEntrepreneurs

• Entrepreneurs in Action
• Pankaj Arora, a high school student
• Rich Stachowski, an avid scuba diver
• Jeffery Rodriquez and John Serrano, artists
• Abbey Fleck, inventor
• Not all ideas lead to successful businesses, but
  each provides evidence of opportunities that
  exist for people who believe they can turn their
  idea into a profitable business

5
Characteristics ofEntrepreneurs

• What Does It Take?
• Not all people who own or manage a business are
  entrepreneurs
• It takes unique skills and personal
  characteristics
• Must have confidence and capability to turn it
  into a business
• Entrepreneurs come from all age categories and
  racial and ethnic groups
• Both genders and varied amounts and types of
  education

6
Characteristics ofEntrepreneurs

• What Does It Take? cont
• Important to have an understanding of business
  operations and management
• People learn how to run a business in many ways
• Work in a business
• Ask for help and advice from an experienced
  business owner
• May read and study on own or in school
• Personal traits that are common to successful
  entrepreneurs
• Look at figure 6-1

7
Entrepreneurship and the Economy

• Key part of the U.S. economy
• 1 in 10 18-64 year olds involved in some type
  of entrepreneurship activity
• 500,000 new businesses created annually
• Also risky
• Nearly as many small businesses close as begin
  each year

8
Entrepreneurship and the Economy

• Employment
• 40 of new business owners run their businesses
  with no help
• Other 60 have one or more employees
• Financing
• Most of the money comes from the entrepreneur and
  family and friends
• Family and friends invest over 100 billion in
  new businesses each year

9
Entrepreneurship and the Economy

• Financing cont
• Source of money for some new businesses is
  venture capital
• Venture capital money provided by large
  investors to finance new products and new
  businesses that have a good chance to be very
  profitable
• The other sources of financing for new businesses
  are loans from banks and financial institutions
  and credit given by businesses that sell products
  and services to the new business

10
Entrepreneurship and the Economy

• Productivity
• New and small businesses produce a large volume
  of goods and services for the economy
• Businesses with no employees account for over
  600 billion in sales annually
• Small businesses are responsible for nearly half
  of the U.S. GDP each year

11
Opportunities and Risks

• Think of the opportunities and the risks
• Giving up a regular job and stable income is a
  difficult choice
• New Business Opportunities
• Opportunities begin with the creation of new or
  improved products and services
• Innovation an invention or creation that is
  brand new
• Improvement a designed change that increases
  the usefulness of a product, service, or process

12
Opportunities and Risks

• New Business Opportunities cont
• Inventions may become the basis for a new
  business
• Inventor may sell them to another company for
  development and sale
• Example Apple personal computer and Post-it
  Notes
• Innovators also create new services that become
  the basis for a business
• Example Frederick Smiths economical worldwide
  system for quickly and effectively shipping
  packages - FedEx

13
Opportunities and Risks

• New Business Opportunities cont
• Some opportunities come from an improved design
  more effective procedures, or greater attention
  to quality
• Entrepreneurs are creative problem-solvers
• Recognizing Risks
• Many successful entrepreneurs and their
  businesses are well known
• Developing a successful new business is not easy
• More businesses fail than succeed

14
Opportunities and Risks

• Recognizing Risks cont
• Primary reasons that businesses fail
• Lack of adequate capital
• Low sales
• Higher than expected expenses
• Competitive pressure
• An owner unprepared to manage a growing business
• Operations requiring more time than the owner is
  willing to commit