Slide 1: Chapter 7
Understanding Entrepreneurship & the Small Business
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Slide 2: What is a Small Business?
Small Business Administration (SBA) Federal agency charged with assisting small businesses Small Business Independently owned and managed business that does not dominate its market Leonardo Matarrese @MyPlick
Slide 3: The Importance of Small Business in the U.S. Economy
Most U.S. businesses employ fewer than 100 people. Most U.S. workers are employed by small firms.
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Slide 4: The Importance of Small Business
86.09 Percentage of All U.S. Businesses Percentage of All U.S. Workers
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25.60 29.10 25.50 12.70 7.10
Under 20 2099 100- 500- 1000 or 499 1000 more
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11.00 2.00 0.20 0.10
Under 20 2099 100- 500- 1000 or 499 1000 more
Total Employees
Total Employees
Slide 5: The Importance of Small Business in the U.S. Economy
Job Creation Innovation Importance to Big Business
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Slide 6: Big Business: Jobs Created & Lost
-181,100 -116,000 -92,153 -86,578 -86,475 -21,100 -16,340 -3,400 General Motors PepsiCo IBM General Mills Kmart National Semiconductor Quaker Oats General Motors Wal-Mart Dayton Hudson Albertson’s Circuit City Barnes & Noble Dell Computer ConAgra America Online
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+639,000 +100,000 +45,000 +36,270 +29,000 +22,900 +21,631 +12,100
Losses
Gains
7-6
Slide 7: Popular Forms of Small-Business Enterprise
Services Retailing Construction Financial Insurance Wholesaling Transportation Manufacturing
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Slide 8: Small Business by Industry
Manufacturing 5% Finance & Insurance 10% Wholesale 8% Transportation 5% Other 1.7% Services 37.6%
Construction Retailing 10% Leonardo Matarrese @MyPlick 22.7%
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Slide 9: Entrepreneurship
Although the concepts of entrepreneurship and small business are closely related, there are some important, though often subtle, differences between them.
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Slide 10: The Distinction Between Entrepreneurship & Small Business
Entrepreneur Businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture
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Slide 11: Entrepreneurial Characteristics
Most successful entrepreneurs have characteristics that set them apart from most other business owners —for example: They are resourceful.
They have a concern for good, often personal, customer
relations.
Most successful entrepreneurs also have a strong desire
to be their own bosses.
Many express a need to “gain control over my life” or
“build for the family” and believe that building successful businesses will help them do it.
Leonardo Matarrese @MyPlick
They can also handle ambiguity and deal with surprises.
Slide 12: Success and Failure in Small Business
For every Henry Ford, Walt Disney, Mary Kay Ash, or Bill Gates—people who transformed small businesses into major corporations—there are many small business owners and entrepreneurs who fail.
Leonardo Matarrese @MyPlick
Slide 13: Trends in Small Business Start-Ups
Thousands of new businesses are started in the United States every year.
The following five factors help account for this trend:
The emergence of e-commerce Entrepreneurs who cross over from big business Increased opportunities for minorities and women New opportunities in global enterprise Improved rates of survival among small businesses
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Slide 14: Reasons for Failure
Managerial incompetence or inexperience Neglect Weak control systems Insufficient capital
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Slide 15: Reasons for Success
Hard work, drive, and dedication Market demand for the products or services being provided Luck
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Slide 16: Starting & Operating the Small Business
The Internet, of course, is rewriting virtually all of the rules for starting and operating a small business. Getting into business is easier and faster than ever before, there are many more potential opportunities than at any time in history, and the ability to gather and assimilate information is at an all-time high.
Leonardo Matarrese @MyPlick
Slide 17: Starting the Small Business
Would-be entrepreneurs must decide how to get into business. Should they: Buy Out an Existing Business? Start from Scratch?
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Slide 18: When starting from scratch, entrepreneurs must determine:
Who are my customers? Where are they? At what price will they buy my product? In what quantities will they buy? Who are my competitors? How will my product differ from those of my Leonardo Matarrese @MyPlick competitors?
Slide 19: Where can a small business owner get necessary information?
The best way to gain knowledge about a market is to work in it before going into business in it. The local Yellow Pages or an Internet search will reveal many potential competitors. Studying magazines, books, and web sites aimed specifically at small businesses can be helpful. You can hire professionals to survey the market for. Leonardo Matarrese @MyPlick
Slide 20: Financing the Small Business
Common sources for funding are:
Family & Friends Personal Savings Banks & Similar Lending Institutions Investors
Governmental Agencies Lending institutions are more likely to help finance the
purchase of an existing business than a new business because the risks are better understood. Individuals starting up new businesses, on the other hand, are more likely to have to rely on their personal resources.
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Slide 21: Other Sources of Investment
Venture Capital Company
Group of small investors that invest money in companies with rapid growth potential
Small-Business Investment Company (SBIC)
A government-regulated investment company that borrows money from the SBA to invest in or lend to a small business
Minority Enterprise Small-Business Investment Company (MESBIC)
Federally sponsored company that specializes in financing businesses that are owned and operated by minorities Leonardo Matarrese @MyPlick
Slide 22: Leonardo Matarrese @MyPlick
SBA Financial Programs
Guaranteed Loans Program
Program in which the SBA guarantees to repay 75 to 85 percent of small-business commercial loans up to $750,000
Immediate Participation Loans Program
Program in which small businesses are loaned funds put up jointly by banks and the SBA
Local Development Companies (LDCs) Program
Program in which the SBA works with local forprofit or nonprofit organizations seeking to boost a community’s economy
Slide 23: Sources of Management Advice
Advisory Boards Management Consultants Small Business Administration (SBA) Networking
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Slide 24: Management Consultant
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Independent, outside specialist hired to help managers solve business problems
Slide 25: Small Business Administration
Service Corps of Retired Executives (SCORE) SBA program in which retired executives work with small businesses on a volunteer basis Active Corps of Executives (ACE) SBA program in which currently employed executives work with small businesses on a volunteer basis Small Business Institute (SBI) SBA program in which college and university students and instructors work with small-business owners to help solve specific problems Small Business Development Center (SBDC) SBA program designed to consolidate information from various disciplines and make it available to small Leonardo Matarrese @MyPlick businesses
Slide 26: Networking
Interactions among businesspeople for the purpose of discussing mutual problems and opportunities and perhaps pooling resources
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Slide 27: Leonardo Matarrese @MyPlick
Franchising
Franchise Arrangement in which a buyer (franchisee) purchases the right to sell the good or service of the seller (franchiser) Franchisee Buyer Franchiser
Slide 28: Advantages & Disadvantages of Franchising
ADVANTAGES Franchiser (parent company) supplies financial, managerial, & marketing assistance Franchising enables small businesses to grow rapidly Franchising risks are lower than those in starting a new business from scratch
DISADVANTAGES High cost of purchasing a franchise The franchisee sacrifices independence and creativity Owning franchises provides no guarantee of success
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