Chapter 7: SMALL BUSINESS AND ENTREPRENEURSHIP
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1 Chapter 7: SMALL BUSINESS AND ENTREPRENEURSHIP Economic Rocket Fuel 1
2 LOOKING AHEAD Why do individuals start businesses? What is the mindset of an entrepreneur? What are the opportunities and threats for small businesses? What are options for starting a new business? Where can entrepreneurs get assistance? What are funding sources for small businesses? What contribution does small business make to the economy? 2
3 LAUNCHING NEW VENTURES: WHAT S IN IT FOR ME? Greater Financial Success Independence Flexibility Challenge Survival On any given day in the United States, more people are trying to start a new business than are getting married or having children. 3
4 ENTREPRENEURS Entrepreneurs People who risk their time, money, and other resources to start and manage a business. 4
5 THE ENTREPRENEUR: A DISTINCTIVE PROFILE 5
6 OPPORTUNITIES FOR SMALL BUSINESS Opportunities: Market Niches Personal Customer Service Lower Overhead Cost Technology 6
7 THREATS FOR SMALL BUSINESS Threats: Higher Risk of Failure Lack of Knowledge and Experience Too Little Money Bigger Regulatory Burden Higher Health Insurance Costs 7
8 SMALL BUSINESS FAILURE 8
9 DOT-COM DEBACLES Webvan: the value of this early online grocer peaked at $1.2 billion, but Webvan left 2,000 people out of work when it closed its doors in the middle of Pets.com: Shutting down only nine months after its $82.5 million IPO, Pets.com hawked pet care products from doggie treats to kitty litter, but lacked a workable plan for high shipping costs. ismell: The idea is to develop a digital scent device that lets customers smell the aromas of the web (whatever those may be!). How long do you think it will last? 9
10 FAILING WITH STYLE Walt Disney was fired from an ad agency for a singular lack of drawing ability. Ray Kroc, McDonald s founder, failed at real estate, he didn t discover the McDonald brothers hamburger stand until he was 52 years old. Steve Jobs, founder of Apple computer, was dumped by his board of directors, but returned a decade later to launch the imac and the ipod. Your failure may be the first step of the next big thing. 10
11 LAUNCH OPTIONS Starting from scratch Buying an established business Buying a franchise 11
12 STARTING A BUSINESS FROM SCRATCH Key Pros: It s all you : Your concept, your decisions, your structure. You don t have to deal with the prior owner s bad decisions. Key Cons: It s all you. That s a lot of pressure. It can be hard to get credit. Logistics can be challenging It takes time, money, and sheer sweat to build a customer base. 12
13 BUYING AN ESTABLISHED BUSINESS Key Pros: The concept, organizational structure, and operating practices are in place. Relationships are established. Obtaining financing is less challenging. Key Cons: Working with someone else s idea may not be fun. You may inherit old mistakes. 13
14 BUYING A FRANCHISE Key Pros: Partnering with established brand Possibility of assistance with management and financing Low failure rate Key Cons: Less opportunity for creativity Tied to national brand s mistakes Purchase price and ongoing royalties can be steep 14
15 TOOLS FOR BUSINESS SUCCESS Small Business Administration Gain Experience Learn from Others Educate Yourself Business Plan 15
16 BUSINESS PLANS: THE ROADMAP! Executive Summary! Description of Business! Competitive and Industry Research! Marketing Strategies! Operating Procedures! Personnel! Financial Projections 16
17 FINDING THE MONEY: FUNDING OPTIONS Personal Resources Loans Angel Investors Venture Capital 17
18 SMALL BUSINESS AND THE ECONOMY: AN OUTSIZED IMPACT Creating New Jobs Fueling Innovation Vitalizing Inner Cities 18
19 ECONOMIC IMPACT Just 9.8% of the world s entrepreneurs expect to create almost 75% of the jobs generated by new business ventures in the next five years. 19
20 LESS IS MORE Eric Truran, founder of a small New England manufacturing firm and retail store, eventually closed his retail store to focus strictly on online and telephone sales. His income dropped by about 50%, but his free time more than quadrupled. He went from working 80 to 90 hours a week to working 15 to 20 hours a week. He uses his free time to pursue other passions, such as playing guitar with his two bands. 20
21 THE ENTREPRENEURIAL SPIRIT Intrapreneurs - are innovative workers who focus on launching new products and generating new profit streams for the company that employ them. 21
22 MINIPRENEURS Minipreneurs individuals launching super small scale enterprises. Include microbusiness, freelancers, side businesses, weekend entrepreneurs, web-driven entrepreneurs, free agents and more.. 22
23 ENTREPRENEURSHIP AROUND THE WORLD 23
24 ENTREPRENEURSHIP, A WORLD OF DIFFERENCE Entrepreneurship has an economic impact in countries around the world 1 out of 10 adults worldwide start businesses every year Three key factors drive entrepreneurship globally: Per Capita Income Opportunity Cost Cultural/Political Environment 24
25 LOOKING BACK Why do individuals start businesses? What is the mindset and characteristics of an entrepreneur? What are the opportunities and threats for small businesses? What are options for starting a new business? Where can entrepreneurs get assistance and tools for success? What are funding sources for small businesses? What contribution does small business make to the economy? 25
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