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

Section 6-1 Becoming an Entrepreneur

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

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

Characteristics of Entrepreneurs
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

Characteristics of Entrepreneurs
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

Characteristics of Entrepreneurs
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

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

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

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

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

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

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

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

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