Chapter 6 Small Business, Entrepreneurship, and Franchising Asst. Prof. Dr. Serdar AYAN 1 5-1
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Cato Corner Farm Farmstead Cheeses Great demand for new, unique artisan cheeses. A mother-son operation in Connecticut is serving that need. 5-3
Entrepreneurship & Small Business Entrepreneurship The process of creating and managing a business to achieved desired objectives is our working definition for entrepreneurship. Entrepreneurship & Entrepreneurs Ability to see emerging trends & create company that satisfies those consumer needs. (Dell Computers) Create new markets (Amazon.com) 5-4
Entrepreneurship & Small Business What is a Small Business? Defined, small business is any independently owned and operated business, not dominant in its competitive area, employing less than 500 people. 5-5
Small Business & Innovation 55% of all innovations Airplane Audio tap recorder Double-knit fabric Fiber-optic examining equipment Heart valve Optical scanner Personal computer Soft contact lenses Zipper Retailing and wholesaling, services, manufacturing and high technology are especially attractive to entrepreneurs. 5-6
Small Business Services 66% of the economy Employs 70% of workforce The Geek Squad one-man service firm, 1994 Manufacturing Small business advantage over large firms product customization Artwork, clothing, jewelry, clothing, furniture 5-7
Advantages of Small Business Ownership Traits Needed to Succeed in Entrepreneurship 5-8
Small Business Ownership ADVANTAGES Costs Flexibility Focus Reputation DISADVANTAGES High Stress Level High Failure Rate 90% of all new businesses fail within the first 5 years Undercapitalization Lack of funds to operate a business normally Managerial Inexperience or Incompetence Inability to Cope with Growth 5-9
Small-Business Ownership Top Five Biggest Challenges, Concerns, and Goals of Small and Medium Businesses. 5-10
Small-Business Ownership Most Common Mistakes Made by Startup Businesses 5-11
Starting the Small Business Start with a concept or general idea Devise a strategy to guide planning & development Make Decisions Form of ownership Financial resources needed Acquire existing business Start a new business Buy a franchise 5-12
The Business Plan Business Plan a precise statement of the rationale for the business and a step-by-step explanation of how it will achieve its goals. Acts as a guide and reference document. Explanation of the business Analysis of competition Income/Expense estimates 5-13
Starting a Small Business Do I start from scratch? Do I buy an existing business? Do I buy a franchise? 5-14
Starting a Small Business Franchising A license to sell another s products or to use another s name in business, or both Franchiser the company that sells a franchise (e.g. Dunkin Donuts, McDonald s, Jiffy Lube) Franchisee the purchaser of a franchise Visit the International Franchise Association Advantages Disadvantages Training & support Fees and profit sharing Brand name appeal Standardized operations National advertising Restrictions on purchasing Financial assistance Limited product line Proven products Possible market saturation Greater chance for success Less freedom in decisions 5-15
Small-Business -- Franchises Fastest Growing & Hottest New Franchises 5-16
The Future for Small Business Demographic Trends Boomers, echo boomers (millennials), Generation Y Immigrants (12% of U.S. population) Technological & Economic Trends Internet usage continues to increase Increase in service exports Economic turbulence Deregulation of the energy market & alternative fuels 5-17
Big Businesses Acting small Common Approaches 1.Large firms emulate smaller ones to improve bottom line 2.Downsizing or rightsizing 3.Acting small from inception Southwest Airlines 4.Intrapreneurs individuals in large firms who take responsibility for the development of innovations within the organization 5-18