7/29/2019 Student 06

1/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 1

Putting Yourselfin Charge:

Entrepreneurs and SmallBusiness Owners

7/29/2019 Student 06

2/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 2

The World of Small Business

Independently owned and operated

Not dominant in its field

Relatively small annual sales

Fewer than 500 employees

7/29/2019 Student 06

3/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 3

Roles of Small Business

Provide new jobs

Introduce new products

Service large corporations

Inject money into the economy

Take business risks

Provide specialty goods and services

7/29/2019 Student 06

4/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 4

Types of Small Business

Lifestyle High-Growth

Run by Individuals

Limited Products/Services

Limited Resources

Limited Marketplace

Run by Teams

Multiple Products/Services

Investment Capital

Large Marketplace

7/29/2019 Student 06

5/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 5

The Typical Small Business

Few products or services

Narrow customer base Close market contact

Limited resources

Increased innovation

7/29/2019 Student 06

6/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 6

How Entrepreneurs Spend Their Time

Dealing with employees

Keeping records

Direct selling

Production

Maintenance

Dealing with suppliers

Arranging financial matters

Planning growth and change

Other services

7/29/2019 Student 06

7/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 7

Factors Contributing to

Small Business Growth E-commerce and technology

Growing diversity Downsizing and outsourcing

7/29/2019 Student 06

8/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 8

Characteristics of

Entrepreneurs Highly disciplined

Self confident Energy and stamina

Control their destiny

Relate well to others

Learn new skills

7/29/2019 Student 06

9/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 9

Characteristics of

Entrepreneurs Learn from mistakes

Monitor market changes Exploit new opportunities

Driven to succeed

Think positively

Take moderate risks

7/29/2019 Student 06

10/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 10

Develop a Business Plan

Summarize the business

Communicate goals

Highlight plans

Show customer benefits

7/29/2019 Student 06

11/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 11

Importance

of a Business Plan Guide company operations

Outline a strategy Attract lenders and investors

7/29/2019 Student 06

12/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 12

Starting a New Business

+

Control your destiny+ Reach your potential

+ Unlimited profits

+ Recognition

+ Doing what you enjoy

Uncertainty of income Risk of loss

Long hours & hard work

Complete responsibility

High stress levels

Advantages Disadvantages

7/29/2019 Student 06

13/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 13

Buying an Existing Business

+

Customer base+ Business systems

+ Product or service

+ Location

+ Financing

Alienated customers Obsolescence

Location

Personality clashes

Outstanding receivables

Advantages Disadvantages

7/29/2019 Student 06

14/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 14

The Franchise Alternative

Franchisee

Franchisor

Types of franchises

Product

ManufacturingBusiness-format

7/29/2019 Student 06

15/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 15

How to Evaluate a Franchise

Initial franchise

Periodic royalties

Trademarks and names

Advertising and promotion

Business location

7/29/2019 Student 06

16/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 16

How to Evaluate a Franchise

Exclusive territory

Right of first refusal

Equipment and supplies

Agreement and termination

Franchise assignment

7/29/2019 Student 06

17/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 17

The Pros and Cons of

FranchisingAdvantages

Get a viable business

Name recognition

Network of support

Blueprint for success

Disadvantages

No guarantee of success

High monthly royalties

Limited independence

Limited flexibility

7/29/2019 Student 06

18/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 18

Why New Businesses Fail

Management Incompetence

Lack of Experience

Insufficient Financing

Poor Business Planning

Unworkable Goals

Diminished Customer Base

Uncontrolled Growth

Inappropriate Location

Poor System of Controls

Poor Entrepreneurial Skills

7/29/2019 Student 06

19/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 19

Sources of Small Business

Assistance SCORE

Incubators The Internet

7/29/2019 Student 06

20/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 20

Financing A New Business

Avoid common mistakes

Overestimating sales

Overestimating cash flow

Underestimating expenses

7/29/2019 Student 06

21/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 21

Sources of Private Financing

Banks and microlenders

Venture capitalists

Angel investors

Credit cards

7/29/2019 Student 06

22/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 22

Small Business Administration

SBA-backed loans

SBA-microloans

Small business investmentcompanies (SBICs)

7/29/2019 Student 06

23/23

Prentice Hall, 2007 Excellence in Business, 3e Chapter 6 - 23

Going Public

Initial public offering (IPO)

Advantages

Raising capital

Disadvantages

Expensive and time consuming