Chapter 6Chapter 6

6-2 Small Business Basics6-2 Small Business Basics

Small Business OwnershipSmall Business Ownership

►Small Business-is an independent Small Business-is an independent business with fewer than 500 business with fewer than 500 employeesemployees

►The owner is usually the managerThe owner is usually the manager►Operates in one or very few locationsOperates in one or very few locations►Serves a small marketServes a small market►Not dominate in its fieldNot dominate in its field

Small Business Ownership Small Business Ownership (cont.)(cont.)

►Small business employment Small business employment §50% of all workers50% of all workers§60-80% of all new jobs60-80% of all new jobs

►Ownership diversityOwnership diversity

Small Business AdvantageSmall Business Advantage

►Meet customer needsMeet customer needs

►Provide unique Provide unique servicesservices

Common small business Common small business problemsproblems

►Failure rate more than success rateFailure rate more than success rate►Reasons for failureReasons for failure

Not keeping adequate recordsNot keeping adequate records Not having enough start up moneyNot having enough start up money Lack of management experienceLack of management experience Lack of experience with the type of business Lack of experience with the type of business Not controlling operating expensesNot controlling operating expenses Poor locationPoor location Failure to manage credit offered to customersFailure to manage credit offered to customers

Chapter 6Chapter 6

6-3 Starting a Small Business6-3 Starting a Small Business

The business decisionThe business decision

►An idea plus experienceAn idea plus experience

►Right place right timeRight place right time

►Team approach Team approach Choose employees wiselyChoose employees wisely Work well with others Work well with others

►Preparation and ResearchPreparation and Research

Elements of a business planElements of a business plan

►Description of the businessDescription of the business The business ideaThe business idea Major products and servicesMajor products and services Ownership structureOwnership structure Strengths/weaknessesStrengths/weaknesses

Elements of a business planElements of a business plan

►Description of competitionDescription of competitionCharacteristics of the Characteristics of the industryindustry

Condition of the economyCondition of the economyStrengths and weaknesses of Strengths and weaknesses of major competitorsmajor competitors

Elements of a business planElements of a business plan

►Customer analysisCustomer analysisDescription of customersDescription of customersLocation, number and Location, number and resources of customersresources of customers

Sales forecastSales forecast

Elements of a business planElements of a business plan

►Operations PlanOperations Plan Organization of the companyOrganization of the company Description of major operationsDescription of major operations Analysis of resources neededAnalysis of resources needed Human resource planHuman resource plan

Elements of a business planElements of a business plan

►Marketing planMarketing planDescription of major marketing Description of major marketing activitiesactivities

Description of resources neededDescription of resources neededSchedule of marketing activitiesSchedule of marketing activities

Elements of a business planElements of a business plan

►Financial plansFinancial plans Start up costsStart up costs Short and long term financial Short and long term financial

needsneeds Sources of financingSources of financing Budgets and financial statementsBudgets and financial statements

Steps in developing the planSteps in developing the plan

►Gather and review informationGather and review information

►Alternative plansAlternative plans

►Write itWrite it

Financing the small businessFinancing the small business

►Types of financing Types of financing Start upStart upShort termShort termLong termLong term