CHAPTER Entrepreneurship and Starting a Small Business McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc All rights reserved NAME that COMPANY While I was an employee at a big company, I developed a product that has become a staple on most office supply lists I needed something to mark the pages of a hymnal without falling out or damaging the book What started as a simple, yellow piece of paper with a new adhesive evolved into many different versions – now there are Super Sticky, recycled, Pop-Up and electronic versions of my inventions Who am I, who did I work for, and what did I invent? 6-2 WHAT is ENTREPRENEURSHIP? • Entrepreneurship -Accepting the risk of starting and running a business 6-3 NOTABLE ENTREPRENEURS • French immigrant Élruthère Irènèe du Pont de Nemours started Du Pont in 1802 • David McConnell borrowed $500 from a friend to start Avon • George Eastman started Kodak with a $3,000 investment in 1880 • Jeff Bezos started Amazon.com with investments from his family and friends 6-4 ANNE BEILER Auntie Anne’s • Started selling pretzels when her family was living paycheck to paycheck • Now Auntie Anne’s has over 1,200 locations and brings in over $410 million! • Beiler sold the company in 2005 to start focusing on charity work 5-5 YOU’RE NEVER TOO YOUNG to be an ENTREPRENEUR Four reasons to start your business right away: You don’t have a mortgage or kids to take care of You can survive on little funds and work long hours No disruption to your career path It hasn’t started yet! Use your alma mater for resources Source: Entrepreneur, www.entrepreneur.com, accessed November 2014 6-6 YOU’RE NEVER TOO OLD to be an ENTREPRENEUR EITHER! • The highest rate of entrepreneurship activity is in the 55-64 age group! • Since 1996, older Americans have opened businesses at a higher rate than 20-34 year olds • Older entrepreneurs have greater experience and more financial resources Source: U.S News and World Report, www.usnews.com, accessed October 2014 6-7 WHY TAKE the RISK? • Opportunity • Profit • Independence • Challenge 6-8 BIG TIME PROFIT • Michael Dell could buy 1,100 new laptops for every student at the University of Texas at Austin! • Dietrich Mateschitz could buy himself a can of Red Bull every day for the next 11 million years! • Liliane Bettencourt could buy a box of L’Oreal hair color for every woman in the world! Source: Forbes, www.forbes.com, accessed November 2014 Photo Credit: Emran Kassim 6-9 WHAT DOES IT TAKE to be an ENTREPRENEUR? • Self-directed • Self-nurturing • Action-oriented • Highly energetic • Tolerant of uncertainty 6-10 SMALL BUSINESS DEVELOPMENT CENTERS • Small Business Development Centers (SBDC) are funded jointly by the federal government and individual states • SBDCs are able to evaluate the feasibility of your idea, develop your business plan and complete your funding application – for no charge 6-43 HELP PLEASE! More SBA Resources and Other Helpful Groups • Small Business Investment Companies • The Office of Innovation & Entrepreneurship • SCORE • Entrepreneurship.org 6-44 MAJOR BUSINESS FUNCTIONS LO 6-4 • Knowing customers 6-45 KNOWING the MARKET • Market Consumers with unsatisfied wants and needs who have resources, authority and willingness to buy (MAD) • Set out to fill the market’s needs by offering top quality and great service at a fair price • One of the great advantages of small businesses is the ability to know the market and quickly adapt to market needs 6-46 MAJOR BUSINESS FUNCTIONS LO 6-4 • Managing employees 6-48 MANAGING EMPLOYEES • Hiring, training and motivating employees is critical • Employees of small companies are often more satisfied with their jobs – they feel challenged and respected • Entrepreneurs best serve themselves and the business if they recruit and groom employees for management positions 6-49 MAJOR BUSINESS FUNCTIONS • Keeping records 6-50 ACCOUNTING ASSISTANCE • Computers simplify the process by helping with inventory control, customer records and payroll • A good accountant can help in: - Deciding whether to buy or lease equipment - Deciding whether to own or rent a building - Tax planning - Financial forecasting - Choosing sources of financing - Writing requests for funds 6-51 LEGAL HELP • Owners need outside consulting advice early in the process • Small and medium-sized firms cannot afford to hire experts as employees • A competent lawyer can help with: - Leases - Contracts - Partnership agreements - Protection against liabilities 6-52 MARKETING RESEARCH • Marketing decisions need to be made long before introducing a product or opening a store • A marketing research study can help you: - Determine where to locate - Whom to select as your target market - What is an effective strategy for reaching the market 6-53 OTHER FORMS OF HELP 6-54 WHAT WENT WRONG? Five Mistakes Business Owners Make They’re too afraid to take the leap! They hire the wrong people They don’t want to give up control They become complacent They fail to see new opportunities Source: Alan Hughes, www.blackenterprise.com, accessed September 2014 6-55 TEST PREP • A business plan is probably the most important document a small business owner will ever create There are nine sections in the business plan outline Can you describe at least five sections of a business plan? 6-56 SMALL BUSINESS PROSPECTS ABROAD • Small- and medium-sized businesses accounted for 99% of recent export growth • Advantages of global trade for small businesses: - Overseas buyers enjoy dealing with individuals - Small companies can usually begin shipping much faster - They provide a wide variety of suppliers - They can give more personal service and attention 6-57 TEST PREP • Why many small businesses avoid doing business globally? • What are some of the advantages small businesses have over large businesses in selling in global markets? 6-58 ... per week 5- 26 SMALL BUSINESS STATISTICS LO 6- 2 • There are 28 million small businesses in the U.S • Of all nonfarm businesses in the U.S., almost 97% are considered small • Small businesses have... ordinances may restrict your business • Homeowner’s insurance may not cover business- related claims 6- 15 BENEFITS of HOME-BASED BUSINESSES • Ability to start your business immediately • Minimal... efforts LO 6- 1 6- 17 ONLINE BUSINESS • Online sales reached $ 262 billion in 2013, about 8% of all retail sales • All retail sales were up 2.5% in 2013 However, online retail sales grew 13% 6- 18 AFFILIATE