The Challenges Of

Starting A Business
Exploring Business

Chapter 2
© 2007 Prentice-Hall, Inc. 2-1
 Chapter Objectives
Exploring Business

1. Define entrepreneurship & reasons

individuals become entrepreneurs
2. Describe importance of small business
to the U.S. economy
3. Explain advantages & disadvantages
of starting a business
4. Evaluate business ownership options
5. Discuss the business plan
6. Discuss why businesses succeed or
fail
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© 2007 Prentice-Hall, Inc.
 Entrepreneur
Exploring Business

“…someone who identifies a

business opportunity and
assumes the risk of creating
and running a business to
take advantage of it.”

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 Why Entrepreneurship?
Exploring Business

 Be Your Own Boss

Achieve Financial
Independence
Enjoy Creative
Freedom
Use Your Own Skills &
Knowledge
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© 2007 Prentice-Hall, Inc.
 Entrepreneurs vs.
Owners
Exploring Business

Entrepreneurs
Innovators
New/Improved Products
Grow & Expand

Owners
Provide Income
Not Innovative
No Plan For Expansion
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© 2007 Prentice-Hall, Inc.
 Small Business
Exploring Business

SBA Classification
• Independently Owned
• Little Influence In Industry
• Less Than 500 Employees
Economic Impact
• 20+ Million Businesses
• About 50% Of GDP
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© 2007 Prentice-Hall, Inc.
 Small
Business Founders
Exploring Business

Henry Ford Ford Motor

Thomas Edison General Electric
Bill Gates Microsoft
Sam Walton Wal-Mart
Steve Jobs Apple
Michael Dell Dell Computers
Steve Case AOL
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© 2007 Prentice-Hall, Inc.
 Small Business
Exploring Business

Creates Jobs
Sparks Innovation
Provides Opportunities
• Women & Minorities
• Financial Success &
Independence
Supports Big Business
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© 2007 Prentice-Hall, Inc.
 Net New Jobs
Exploring Business

2-9
© 2007 Prentice-Hall, Inc.
 Innovations From
Small Business
Exploring Business

Airplane
Personal Computer
Tape Recorder
Pacemaker
Soft Contract Lenses
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© 2007 Prentice-Hall, Inc.
 Small Business
Advantages In Innovation
Exploring Business

Attract Talent
Faster Decision
Making
Focused Research
Compensation Incentives
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 Women/Minority
Owned Business
Exploring Business

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© 2007 Prentice-Hall, Inc.
 Small Business
Supports Big Business
Exploring Business

Suppliers Of Goods
Suppliers Of Services
–Accounting
–Legal Work
–Insurance
Outsourcing
Sales Agents
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© 2007 Prentice-Hall, Inc.
 Industries Of Small Business
Exploring Business

80% = Services
–Retailing = 25%
–Wholesaling = 10%
–Professional/Business
Services = 35%
20% = Goods-Producing
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© 2007 Prentice-Hall, Inc.
 Small Business By Industry
Exploring Business

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© 2007 Prentice-Hall, Inc.
 Small Business Ownership
Exploring Business

Advantages Disadvantages
 Independence
Financial – Financial Risk
Rewards – Stress
Lifestyle
Learning Opps. – Time
Creative Commitment
Freedom & – Undesirable
Personal
Satisfaction Duties
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 Entrepreneur’s Work Week
Exploring Business

2-17
© 2007 Prentice-Hall, Inc.
 Decisions For
Starting A Business
Exploring Business

Type of business?
oManufacturer, retailer, wholesaler
oProfessional/Personal services
oHome?
Innovate?
Idea? Feasible?
New, existing, franchise?
Self or others?
Business form?
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© 2007 Prentice-Hall, Inc.
 Business Plan
Exploring Business

“…a document that identifies

the goals of your proposed
company and explains how
they will be achieved… a
blueprint for a proposed
company…”
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© 2007 Prentice-Hall, Inc.
 Business Plan Purposes
Exploring Business

1) How business will be

built
2) How you intend
to make it
sturdy
3) Get financing
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 Sources For
Business Idea
Exploring Business

Previous Hobbies Industry

Experience Experience

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 Ownership Options
Exploring Business

Start From Scratch

Buy Existing

Get A
Franchise
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 Growth Of Franchising
Exploring Business

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 Franchise
Exploring Business

Advantages Disadvantages
 Recognized ✤Expensive
Name/Product – Franchise Fee
– Royalty Fee
Help In Start-up ✤Franchiser’s Rules
Advertising ✤Franchiser May
Not Follow Through
Ongoing Support

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© 2007 Prentice-Hall, Inc.
Exploring Business
Business Plan:
I. Business Concept
II. Management Qualifications
III. Legal Form Of Business
IV. Explain Goods/Services
V. ID Customers/Competitors
VI. Product Development
VII. Production Methods
VIII. Marketing
IX. Projected Profits &
Borrowing Needs
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© 2007 Prentice-Hall, Inc.
 Benefits Of
Business Plan
Exploring Business

Forces You To Think

Critically
Reduces Risk
Analyze
Concept/Industry
Persuade Investors &
Lenders 2-26
© 2007 Prentice-Hall, Inc.
 Planning
Strategic Decisions
Exploring Business

Management
Staffing
Production
Marketing
Finance
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© 2007 Prentice-Hall, Inc.
 Plan Audiences
Exploring Business

Investors
• Quality of Concept
• Management
Ability

Bankers—Ability
To Repay Loan
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 Executive Summary
Exploring Business

1-3 Page Overview

Most Important Part
Written After Rest
Of Plan Completed

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© 2007 Prentice-Hall, Inc.
 Description Of Business
Exploring Business

What Will Do?

Goods/Services
Provided?
Unique?
Customers?
How Sold?
Location?
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© 2007 Prentice-Hall, Inc.
Exploring Business
Industry Analysis
Industry Players?
Industry Outlook?
Industry Projected
Sales?
Factors of Expansion Or
Contraction?
Affect of Future Economic
Conditions? 2-31
© 2007 Prentice-Hall, Inc.
 Mission Statement
& Core Values
Exploring Business

Mission Statement—
Purpose or mission of
company
Core Values—Fundamental
beliefs about what is/is not
appropriate in conducting
business activities, ideals
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© 2007 Prentice-Hall, Inc.
 Management Plan
Exploring Business

Member Qualifications
–Education
–Experience
–Expertise
Legal Form
–Sole Proprietorship
–Partnership
–Corporation
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© 2007 Prentice-Hall, Inc.
 Goods & Services
Exploring Business

Description
Better Than
Competitors
Market Needs
Competitive Advantage
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© 2007 Prentice-Hall, Inc.
Exploring Business Development & Production
Obtain/Make Products
Product Design
Design/Manufacture
Technology
Own Or Contract For
Facilities
Where?
Equipment
Design/Layout Of Facilities
Number of Employees
Units Produced
Ensure High Quality?
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© 2007 Prentice-Hall, Inc.
 Marketing
Exploring Business

Target Market
Pricing
Distribution
Promotion
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© 2007 Prentice-Hall, Inc.
 Global Issues
Exploring Business

Buying/Selling In
Other Countries
Identify Cross-
Border Challenges
How To Overcome Challenges
Strategies For Future
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© 2007 Prentice-Hall, Inc.
 Financial Plan
Exploring Business

Cash Needs
– Start-up
– Operations
– Funding Sources
Repay Debt
Projections
– Expected Sales
– Costs
– Profits (Losses)
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© 2007 Prentice-Hall, Inc.
 Appendices
Exploring Business

Resumes
Financial Statements

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© 2007 Prentice-Hall, Inc.
 Succeeding In Business
Exploring Business

Know Your Business

Know Basics Of Business
Management
Have Proper Attitude
Get Adequate Funding
Manage Money Effectively
Manage Time Efficiently
Know People
Satisfy Customer
Know© 2007
How To Compete
Prentice-Hall, Inc.
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 SBA Assistance
Exploring Business

Assistance In:
– Business Plan
– Starting Business
– Obtaining Financing
– Managing
Financing
Management/Technical
Services/Training

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© 2007 Prentice-Hall, Inc.
 SBA Loan Guarantees
Exploring Business

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© 2007 Prentice-Hall, Inc.
Exploring Business
SBA Providers
Small Business
Development Centers
(SBDC)—Assists with
–Business Problems
–Free Training/Technical Info.
Service Corps of Retired
Executives
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© 2007 Prentice-Hall, Inc.
 Why Businesses Fail
Exploring Business

Bad Business Idea

Cash Problems
Inexperience or
Incompetence
Lack Of Customer Focus
Inability To Handle Growth
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© 2007 Prentice-Hall, Inc.