Business Ch 6 Entrepreneurship and starting a small business – Flashcards
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Accepting the risk of starting and running a business
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Entrepreneurship
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Opportunity, Profit, Independence, and challenge
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Why people take the Entrepreneurial challenge
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Self-directed, self-nurturing, action-oriented, highly energetic, tolerant of uncertainty
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What does it take to be an Entrepreneur
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To share in the American dream is one reason people take the Entrepreneurial challenge
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Opportunity
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What you earn after expenses and another reason that people take the Entrepreneurial challenge
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Profit
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Not having to work for someone else is another reason that people take the Entrepreneurial challenge
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Independence
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More than the excitement of taking a gamble, reaching achievements is another reason people take the Entrepreneurial challenge
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Challenge
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In order to succeed as an Entrepreneur you must be thoroughly comfortable being your own boss
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Self-directed
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In order to succeed as an Entrepreneur you must be able to replenish your own enthusiasm
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Self-nurturing
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In order to succeed as an Entrepreneur you must be able to realize and actualize your dream to build it into reality
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Action-oriented
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In order to succeed as an Entrepreneur you must be able to emotionally, physically, and mentally work long hours
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Highly energetic
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In order to succeed as an Entrepreneur you must not be afraid to fail and able to take some risk
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Tolerant of uncertainty
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What do I want but can never find? What product or service would improve my life? What really irritates me and what product or service would help?
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What three questions can you ask to identify opportunities
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It fills customers' needs, you have the skills and resources to start a business, you can sell the product or services at a price customers are willing and able to pay and still make a profit, you can get your product or service to people before the window closes or before competition, you can keep the business going
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What is a good opportunity
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A group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product
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Entrepreneurial team
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Entrepreneurs willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle.
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Micropreneurs
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Most owned by people combining home and business not just moms with young children but 60% are men
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Home-based business
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Technology has leveled the competitive playing field so that these businesses can look and act like big businesses, corporate downsizing has led many to venture out on their own and some corporations are outsourcing to small companies, social attitudes have changed so that these jobs are considered real jobs, lastly tax laws have loosened restrictions on deducting expenses for home offices
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Reasons for the growth of home-based business
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Getting new customers, managing time, keeping work and family tasks separate, abiding by city ordinances, and managing risk
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Challenges of working at home
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Business conducted through the internet making up 11% of all retail sales.
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Web-based business
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An internet-based marketing strategy in which a business rewards individuals or other businesses (affiliates) for each visitor or customer the affiliate sends to its website.
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Affiliate marketing
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Creative people who work as entrepreneurs within corporations
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Intrapreneurs
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Increase investor visas, enterprise zones, or incubators
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What government can do to encourage Entrepreneurship
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Part of the Immigration Act of 1990 that allowed 10,000 people to come to the US if they invest $1 million in an enterprise
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Investor visas
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Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support aka empowerment zones or enterprise communities
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Enterprise zones
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States create programs that offer new businesses low-cost offices which basic services like accounting, legal advice, and secretarial help.
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Incubators
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National Business Incubator Association
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NBIA
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Program allows participants to collect unemployment checks while they build their businesses; they also can receive training and counseling.
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Self-Employment Assistance (SEA) program
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A federal agency that sets the standard that defines a small business and helps them by providing management, training, and financial advice about loans
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Small Business Administration (SBA)
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A business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size in terms of employees or annual receipts
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Small Business
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27.8 million
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Small business in the US
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97% of all nonfarm businesses
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Percent of small business in the US
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50%
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Percent of GDP of small business in the US
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600,000 new tax-paying, employee hiring businesses
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Small businesses started each year in the US
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60-80% generated by small business
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Percent of new jobs in the US
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small business employs half
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amount of private sector employees
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80% of workers found in small business
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First jobs in the US
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under or over pricing, underestimating how much time it takes, too little capital, not enough experience or knowledge of the industry, borrowing money with no planning on how to pay it back, buying too much on credit, poor record keeping, overspending, not paying taxes or insurance
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Small business failures
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Customer requires a lot of attention, product is not easily made my mass-production, sales are not large enough to attract large firms, the neighborhood is not attractive due to crime or poverty, large business sells a franchise to local buyers, the owner pays attention to competitors, and the business is in a growth industry
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Increase the success of small business
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Learn from others, get some experience, take over a successful firm
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Learn about small business
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Plan the business, finance the business, know your customers (marketing), manage employees (HR), keep records (accounting)
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Managing a small business
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A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resource and qualifications of the owner(s)
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Business plan
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Cover letter, Executive summary, company background, management team, financial plan, capital required, marketing plan, location analysis, manufacturing plan, appendix
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Writing a business plan
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Since bankers receive many business plans, this is the point where you must catch their interest quickly.
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Executive summary
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A source of funding for businesses in lower-income communities that have an incentive to make sure their clients succeed. Only 1% did not repay the loan in the past three decades.
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Community development financial institutions (CDFIs)
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Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses
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Venture capitalists
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A program through which private investment companies licensed by the SBA lend money to small businesses
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Small Business Investment Company (SBIC)
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People with unsatisfied wants and needs who have both the resources and the willingness to buy
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Market
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An SBA office with volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses)
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Service Corps of Retired Executives (SCORE)
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Overseas buyers often enjoy dealing with individuals rather than large corporate bureaucracies, can ship faster, provide a wide variety of suppliers, and give customers personal service and undivided attention
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Advantages of small businesses going global
