CHAPTER 5CHAPTER 5

ENTREPRENEURSHIPENTREPRENEURSHIP

Rewards and Challenges of Rewards and Challenges of EntrepreneurshipEntrepreneurship

An entrepreneur is a person who recognizes a An entrepreneur is a person who recognizes a business opportunity and organizes, manages, business opportunity and organizes, manages, and assumes the risks of starting and operating and assumes the risks of starting and operating a business. Entrepreneurship is the process of a business. Entrepreneurship is the process of recognizing an opportunity, testing it in the recognizing an opportunity, testing it in the market, and gathering the resources necessary market, and gathering the resources necessary to go into business.to go into business.

A venture is a new business undertaking that A venture is a new business undertaking that involves risks.involves risks.

12 Characteristics of Entrepreneurs12 Characteristics of Entrepreneurs

PersistentPersistent Risk-takingRisk-taking Self-confidentSelf-confident RestlessRestless Goal-orientedGoal-oriented Action-orientedAction-oriented ResponsibleResponsible Self-demandingSelf-demanding CreativeCreative IndependentIndependent InquisitiveInquisitive EnthusiasticEnthusiastic

Small BusinessesSmall Businesses

Small business is an independently owned Small business is an independently owned business that usually has the owner as its business that usually has the owner as its manager.manager.

A small business serves a limited A small business serves a limited geographic area and employs fewer than geographic area and employs fewer than 500 people.500 people.

Internet BusinessesInternet Businesses

Virtual BusinessVirtual BusinessDot-com company is a business that Dot-com company is a business that

operates on the internet.operates on the internet.According to According to American City Business American City Business

Journals, Journals, small businesses that use the small businesses that use the internet have grown more than 45 percent internet have grown more than 45 percent faster than those that do not.faster than those that do not.

Rewards of EntrepreneurshipRewards of Entrepreneurship Being the BossBeing the Boss

Ability to be in charge (Main Reason)Ability to be in charge (Main Reason) Entrepreneurs do not have to consult with others before making Entrepreneurs do not have to consult with others before making

a decision.a decision. Doing what you EnjoyDoing what you Enjoy Having the opportunity to be CreativeHaving the opportunity to be Creative

Entrepreneurs make the procedure that everyone else follows. Entrepreneurs make the procedure that everyone else follows. Daring or creative ideas.Daring or creative ideas.

Building an EnterpriseBuilding an Enterprise Many successful entrepreneurs work in a related business Many successful entrepreneurs work in a related business

before starting their own business.before starting their own business. They must research before starting.They must research before starting.

Other ReasonsOther Reasons Make their own schedule.Make their own schedule.

Sole proprietorship vs. Partnership Sole proprietorship vs. Partnership vs. Corporationvs. Corporation

Sole proprietorships are owned and Sole proprietorships are owned and operated by one person.operated by one person.Do not share their company’s income and Do not share their company’s income and

expenses, profits or loses.expenses, profits or loses.All responsibilities and profits and benefits.All responsibilities and profits and benefits.

Partnerships are owned and ran by two or Partnerships are owned and ran by two or more people. more people.

Corporations are run by a chief executive Corporations are run by a chief executive officer, who answers to a board.officer, who answers to a board.

Challenges of EntrepreneurshipChallenges of Entrepreneurship Getting Funds to Start the BusinessGetting Funds to Start the Business

Most people must borrow money or finance the money to get started. Most people must borrow money or finance the money to get started. (Go in debt).(Go in debt).

Difficult to get loans-fear of business succeeding or not, and ability to Difficult to get loans-fear of business succeeding or not, and ability to repay the loan.repay the loan.

Being Fully Responsible for the BusinessBeing Fully Responsible for the Business Must make sure that:Must make sure that:

Floors swept, bills paid, employees hired, make repairs, handle financial Floors swept, bills paid, employees hired, make repairs, handle financial records, train employees, etc.records, train employees, etc.

Other ChallengesOther Challenges Feeling aloneFeeling alone Making right decisionsMaking right decisions Work long hoursWork long hours Uncertain level of incomeUncertain level of income 4 out of 5 small businesses fail in the first five years of existence. 4 out of 5 small businesses fail in the first five years of existence.

Mostly due to poor financial planning and management, and not being Mostly due to poor financial planning and management, and not being able to adapt to change.able to adapt to change.

Small Businesses FactsSmall Businesses Facts

More than 99% of the US firms are small More than 99% of the US firms are small businesses.businesses.

Small businesses employ more than 50% Small businesses employ more than 50% of the workforce in the US.of the workforce in the US.

Majority are one person operations.Majority are one person operations.Estimate: 2/3 of all new jobs are generated Estimate: 2/3 of all new jobs are generated

by small businesses.by small businesses.Virtual businesses continues to increase.Virtual businesses continues to increase.

5.2 The Business Plan5.2 The Business Plan

Business Plan is a written description of a Business Plan is a written description of a new business venture that describes ALL new business venture that describes ALL aspects of the business. It is used by aspects of the business. It is used by potential investors and financing agencies potential investors and financing agencies that new entrepreneurs go to for start-up that new entrepreneurs go to for start-up funds.funds.

Checklist for Starting a BusinessChecklist for Starting a Business

What will I produce?What will I produce? Who are my main competitors?Who are my main competitors? Why is my product or service needed?Why is my product or service needed? How much will my product or service cost to How much will my product or service cost to

produce?produce? How many people will I need to run the How many people will I need to run the

business?business? What physical facilities will I need?What physical facilities will I need? What licenses, permits, or other legal documents What licenses, permits, or other legal documents

do I need?do I need? How much money will I need to get started?How much money will I need to get started?

16 Essential Parts of a Business 16 Essential Parts of a Business PlanPlan

Executive SummaryExecutive Summary Management Team PlanManagement Team Plan Company DescriptionCompany Description Product and Service PlanProduct and Service Plan Vision and Mission StatementsVision and Mission Statements Industry OverviewIndustry Overview Market AnalysisMarket Analysis Competitive AnalysisCompetitive Analysis Marketing PlanMarketing Plan Operational PlanOperational Plan Organizational PlanOrganizational Plan Financial PlanFinancial Plan Growth PlanGrowth Plan Contingency PlanContingency Plan Cover Page, Title Page, Table of Contents, and Supporting DocumentsCover Page, Title Page, Table of Contents, and Supporting Documents

Executive SummaryExecutive Summary

Brief account of key points.Brief account of key points.Not more than 2 pages.Not more than 2 pages.Most important information from each Most important information from each

section.section.Should persuade the reader that the Should persuade the reader that the

business will succeed.business will succeed.Evidence gathered through market Evidence gathered through market

research.research.

Management Team PlanManagement Team Plan

Your qualifications.Your qualifications.Description of team capabilities.Description of team capabilities.How you will fill gaps in expertise.How you will fill gaps in expertise.

Hire consultantsHire consultantsForm partnershipsForm partnershipsAdvisory BoardsAdvisory Boards

Company DescriptionCompany Description

Outline of the business.Outline of the business.Size, scope, and type of business.Size, scope, and type of business.Why the business will succeed??Why the business will succeed??

Product and Service PlanProduct and Service Plan

Description of the product or service you Description of the product or service you want to offer.want to offer.

Nature of the business should be clear.Nature of the business should be clear.Unique features of the product.Unique features of the product.Spin-offs are additional products that may Spin-offs are additional products that may

be offered when the business gets be offered when the business gets established.established.

Vision and Mission StatementsVision and Mission Statements

Guiding principles by which a business Guiding principles by which a business functions.functions.

Vision Statement-the scope and purpose Vision Statement-the scope and purpose of a company, and it beliefs and values.of a company, and it beliefs and values.

Mission Statement-specific aspirations of a Mission Statement-specific aspirations of a company, the major goals.company, the major goals.

Industry OverviewIndustry Overview

Present your research.Present your research.Discuss trends and growth within the Discuss trends and growth within the

industry.industry. (Industry is the companies that provide (Industry is the companies that provide

similar, complimentary, or different similar, complimentary, or different products)products)

Market AnalysisMarket Analysis

Research about your customer profile.Research about your customer profile.Overall marketing and sales strategies.Overall marketing and sales strategies.Analyze your customers and the Analyze your customers and the

competition.competition.Target market information-geographics, Target market information-geographics,

economics, and demographics.economics, and demographics.

Competitive AnalysisCompetitive Analysis

How the business has an advantage over How the business has an advantage over its competitors.its competitors.

Marketing PlanMarketing Plan

How a company makes its customers How a company makes its customers aware of it products or services.aware of it products or services.

Market niche, pricing, company image, Market niche, pricing, company image, marketing tactics, media plan, and marketing tactics, media plan, and marketing budget.marketing budget.

Operational PlanOperational Plan

Production and delivery of the product or Production and delivery of the product or service.service.

Organizational PlanOrganizational Plan

People who will run the firm as well as People who will run the firm as well as management’s philosophy. management’s philosophy.

Form of business organization-Form of business organization-proprietorship or corporation, etc.proprietorship or corporation, etc.

Financial PlanFinancial Plan

Forecast for the business.Forecast for the business.DataDataProof that the business will be financially Proof that the business will be financially

healthy.healthy.

Growth PlanGrowth Plan

How the business will expand in the future.How the business will expand in the future.

Contingency PlanContingency Plan

Likely risks to the business.Likely risks to the business.Lower than expected sales.Lower than expected sales.Emergencies.Emergencies.Ways to minimize risks.Ways to minimize risks.

Cover Page, Title Page, Table of Cover Page, Title Page, Table of Contents, and Supporting Contents, and Supporting

DocumentsDocuments Company’s NameCompany’s Name AddressAddress Phone NumberPhone Number WebsiteWebsite EmailEmail LogoLogo The date the plan was submittedThe date the plan was submitted Name of the preparerName of the preparer