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  1. 1. PowerPoint Image Slideshow Introduction to Business Chapter 5 ENTREPRENEURSHIP: STARTING AND MANAGING YOUR OWN BUSINESS
  2. 2. Learning Outcomes 1. Why do people become entrepreneurs, and what are the different types of entrepreneurs? 2. What characteristics do successful entrepreneurs share? 3. How do small businesses contribute to the U.S. economy? 4. What are the first steps to take if you are starting your own business? 5. Why does managing a small business present special challenges for the owner? 6. What are the advantages and disadvantages facing owners of small businesses? 7. How does the Small Business Administration help small businesses? 8. What trends are shaping entrepreneurship and small-business ownership?
  3. 3. Types of Entrepreneurs
  4. 4. Table 5.1 The Economic Impact of Small Business
  5. 5. Table 5.2 Are You Ready to be an Entrepreneur?
  6. 6. Table 5.3 Statistics for Minority-Owned Businesses
  7. 7. Entrepreneurship • What drives a person to take the risks associated with entrepreneurship, and is this drive something that a person is born with or can develop with education and practice? In the beginning of Section 5.1, the feature box Catching the Entrepreneurial Spirit declares Jack Bonneau the “quintessential entrepreneur”. View both the short video clip from IndieGoGo and the longer TEDX presentation young Jack gave in 2018.
  8. 8. Entrepreneurship 1. Explain what could inspire the authors of your Introduction to Business text to select an 11-year-old for the example they provide to readers such as yourself of a successful entrepreneur? Feel free to do additional research on Jack himself or his company, Jack’s Stands & Marketplaces. 2. Could Jack’s entrepreneurial ventures at such a young age be proof that entrepreneurs are “born rather than made”? 3. Should parents encourage their young children to follow Jack’s path, or do you think this kind of success story is rare and that’s why it’s so fascinating and inspiring?
  9. 9. The person who takes the risk of starting and managing a business to make a profit is called a(n): A. entrepreneur B. venture capitalist C. capitalistic adventurer D. franchiser E. ultra capitalist Andy Yocom saw prime advertising space on the flags on the golf course. He reasoned that any marketing messages would get prominent attention if they were placed on the flags since golfers focus on them when they take their shots. As a result Yocom used his own initiative and money to start Invision Golf Group Inc. Yocom is an example of a(n): A. entrepreneur B. venture capitalist C. capitalistic adventurer D. franchiser E. ultra capitalist The difference between the small business owner and the entrepreneur is that the entrepreneur: A. manages the business B. files taxes for the business C. assumes the risk of the business D. is responsible for the profits of the business E. is accurately described by all of the above An entrepreneur is a person who _____ a business. A. finances B. manages C. locates D. owns and operates E. works for
  10. 10. When Art Baer read that Singapore would lift its ban on chewing gum, he thought to himself, "There has to be a market there." Baer, 26, knew if he was going to move beyond the daydreaming stage, he had to move fast. After investing $20,000 of his own money into developing a product he called Impress Gum, Baer quit his job, flew to Singapore, talked to the right people in the government, lined up a manufacturer, and hired a marketing firm to promote his gum, which fights tooth decay. Baer is an example of a(n) ______ entrepreneur. A. growth-oriented B. classic C. opportunistic D. risk-aversive E. debt-based _____ are entrepreneurs who start a series of companies. A. Multipreneurs B. Intrapreneurs C. Multi-venturists D. Multi-faceted venturists E. Growth capitalists When Suzanne Pogell wanted to learn to sail, but she could find no one to teach her because men were the ones who sailed, and women were their crew. She finally convinced someone to teach her to sail, and after mastering sailing, she started an all-woman sailing school called Womanship. Pogell started small and plans to stay small. She would be correctly called a(n): A. interpreneur B. multipreneur C. intrapreneur D. growth entrepreneur E. micropreneur When Allison Logue found out her children were allergic to corn, she started looking for sweets and starches that were corn-free and was dismayed to find very few such products on the market. As a result, she has started her own small business to produce and market corn-free desserts. It is a small market, and Logue plans to keep her business small. Logue is an example of a(n): A. interpreneur B. multipreneur C. intrapreneur D. growth entrepreneur E. micropreneur
  11. 11. 1. Why do people become entrepreneurs, and what are the different types of entrepreneurs? • CONCEPT CHECK 1. Describe several types of entrepreneurs. 2. What differentiates an entrepreneur from a small-business owner? 3. What are some major factors that motivate entrepreneurs to start businesses?
  12. 12. Managerial Ability and Technical Knowledge • Organize a company • Develop operating strategies • Obtain financing • Manage day-to-day activities. Interpersonal and communication skills • Employees • Customers • Businesspeople
  13. 13. Table 5.4 Snapshot of Small Business Owners
  14. 14. Table 5.5 Number of Employees, by Percentage of Established Small Businesses
  15. 15. Which of the following is a characteristic of the entrepreneurial personality? A. Risk-aversion B. Willingness to be a follower rather than a leader C. Dependence on others D. Dependence on others for motivation E. Ambitious All of the following are characteristics of an entrepreneurial personality EXCEPT: A. the willingness to take risks B. creativity C. problem solving skills D. a high energy level E. the willingness to be a follower rather than a leader Michael Bronner made a fortune in the direct marketing business as the cofounder and CEO of Bronner Slosberg Humphrey, a wildly successful direct-marketing firm. His newest venture, Upromise Inc., enlists some of America's largest corporations to help families pay for college and is extremely successful. Entrepreneur Bonner would more than likely have which of the following characteristics? A. Ambitious B. Independent C. Self-confident D. Visionary E. All of the above
  16. 16. 2. What characteristics do successful entrepreneurs share? • CONCEPT CHECK 1. Describe the personality traits and skills characteristic of successful entrepreneurs. 2. What does it mean when we say that an entrepreneur should work on the business, not in it?
  17. 17. Small Business • Independently owned • Owned by an individual or a small group of investors • Based locally • Not a dominant company in its industry Eligible for government programs In business at least five years Employ at least one, but less than 50, employees
  18. 18. Small Business Economic activity Industry
  19. 19. Small Business: Driving America's Growth • What do small businesses contribute to the economic growth of the USA, and how can entrepreneurship be promoted, especially in underserved communities? • Table 5.4 in Section 5.3 provides a Snapshot of Small-Business Owners. One of the sources for this information is the Kaufmann Foundation, which the late E.M. Kaufmann set up in Kansas City, Missouri with the mission to help promote small business creation, particularly in underserved communities.
  20. 20. Small Business: Driving America's Growth 1. After watching this video, decide if both the comprehensive presentation and lively panel discussion that follows meets the stated goals of the 2019 State of Entrepreneurship Address to discuss “how, together, we can grow inclusive and empowering economies as we explore the best ways to support the makers, the doers, and the dreamers”?
  21. 21. 3. How do small businesses contribute to the U.S. economy? • CONCEPT CHECK 1. What are three ways small businesses can be defined? 2. What social and economic factors have prompted the rise in small business?
  22. 22. Getting Started Find the Idea Choosing a Form of Business Organization Developing the Business Plan • Keep up with small- business trends • Work in the industry • Type of business • Number of employees • Capital requirements • Tax considerations • Level of risk involved • Attracts appropriate loan financing • Minimizes the risks involved • Critical determinant in whether a firm is succeeds or fails. A comprehensive business plan lets you run various “what if” analyses and operate your business as a dry run
  23. 23. Table 5.8 Key Elements of a Business Plan • Executive Summary • Vision and mission statement • Company overview • Product and/or service plan • Marketing plan • Management plan • Operating plan • Financial plan • Appendix of supporting documents
  24. 24. Table 5.6 Checklist for Starting a Business
  25. 25. Financing the Business Start-up funds from personal accounts, family and friends Debt Borrowed funds that must be repaid with interest Equity Sale of stock (i.e., ownership) in the business Angel Investors • Seed money Venture capital • Investment firms that specialize in financing small, high- growth companies
  26. 26. Buy a Business • Pay yourself and profit faster • The groundwork has already been done • You don’t need to use your own money to buy a business • Make the seller of the business part of the deal • Target Assets “When one company purchases most or all of another company's shares to gain control of that company. Purchasing more than 50% of a target firm's stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company's shareholders.”
  27. 27. Risky Business Some common causes of business closure include the following: Economic factors Financial causes Lack of experience Personal reasons
  28. 28. Table 5.7 Examples of Successful Entrepreneurs
  29. 29. Table 5.7 Examples of Successful Entrepreneurs, continued
  30. 30. Table 5.9 Making a Heavenly Deal
  31. 31. How to Write a Business Plan • As mentioned in Section 5.4, the planning process is one of the most important steps to complete before starting a business. View the video from the Young Entrepreneurs Forum and compare the 11 elements described in the video to the Key Elements of a Business Plan from Table 5.8 in your text.
  32. 32. How to Write a Business Plan 1. What similarities and differences did you notice? Why wouldn’t the concept of the Business Plan (B Plan) be universally explained by most sources? 2. Would it make sense, then, for an entrepreneur to verify specifically what essential components of a business plan were needed for the particular audience this B Plan was intended, such as a bank, other financial institution, angel investor or venture capitalist? For example, consider FUBU mentioned in Exhibit 5.5, which eventually received a significant investment from Samsung. What do you think would have been the most important information that Samsung executives wanted to see from FUBU management before they wrote a $30 million check?
  33. 33. Once Arnold Patel had decided he wanted to quit working as a Web designer for a large advertising agency and go into some kind of business for himself, he did a self-assessment, which indicated that he had an entrepreneurial spirit. His next step will be to: A. determine where the funding will come from B. look for customers C. create a business plan D. find the idea for his business E. choose a form of business organization Hannah Li wants to quit her job as a legal secretary and start her own small business. She knows that she will be successful if she can find the right idea. Where can Li look for ideas for her new business? A. Problems she noticed in her old job B. Her interest in the history of Asian art C. Suggestions from her family D. Other businesses in other regions of the country E. All of the above Mark Ghermizian had quit his job and was looking to start a small business so he could be his own boss. When he read that people spend up to fifteen minutes every day staring at a bathroom stall door, he decided he would find advertisers who wanted to pay to have their advertising messages on bathroom stall doors. Since he has his idea, Ghermizian’s next step is to: A. determine if he has the right personality to run a business B. choose a form of business organization C. create a name for his business D. get financing for his new business E. create prototype ads A _____ is a formal written statement that describes in detail the idea for a new business and how it will be carried out. A. mission statement B. vision C. business plan D. statement of purpose E. venture plan
  34. 34. Which of the following elements does NOT typically appear in a well-prepared business plan? A. qualifications of the owners B. names of all employees C. description of the product or service D. financial plan E. an analysis of the market A common use of business plans is to: A. comply with SEC regulations B. persuade lenders and investors to finance the venture C. persuade customers to buy the new product or service D. use as a recruitment tool E. showcase innovative factors to production to make the company a success The two forms of business financing are _____ (borrowed funds) and _____ (ownership funds). A. credit; leverage B. equity; debt C. debt; equity D. equity; leverage E. debt; credit Once the business plan is finished, the next step is to: A. choose a business format B. locate customers C. create a promotional campaign D. find financing for the business E. buy all fixed assets needed to operate business
  35. 35. _____ financing is a form of business financing consisting of borrowed funds that must be repaid with interest over a stated time period. A. Credit B. Debt C. Equity D. Monetary E. Venture _____ financing is a form of financing consisting of funds raised through the sale of stock in a business. A. Credit B. Debt C. Equity D. Monetary E. Venture Jill Hansom borrowed $40,000 from a credit union to start a company that makes and sells peach salsa. Hansom used _____ financing. A. debt B. liquid C. equity D. venture E. entrepreneurial _____ are individual investors or groups of experienced investors who provide funding for start-up businesses. A. Angel investors B. Entrepreneurial capitalists C. Opportunity entrepreneurs D. Equity entrepreneurs E. Venture entrepreneurs
  36. 36. Angel investors: A. are most interested in investing in businesses that are well-established B. are another name for bank loan officers who are responsible for funding start-up businesses C. provide equity financing to a business by loaning the business money at a low interest rate D. provide funding for start-up businesses E. provide debt financing to a business by buying stock within the company Who provides the start-up financing for the majority of new small businesses? A. the business owner and his or her family and friends B. the Small Business Administration (SBA) C. the local bank D. venture capitalists E. finance companies . Venture capital: A. is another name for the principal which a business borrows from a bank B. includes all the money the owner of the business invests in his or her new enterprise C. is borrowed money invested in start-up businesses and provided by the Small Business Administration D. gives the investor no voice in how the company in which he or she has invested will operate E. is financing obtained from investment firms that specialize in financing small, high-growth companies Jeff Arnold and Reggie Bradford created WebMD, an Internet provider of health care information. Early in the development of this high-growth company, Arnold and Bradford attracted a group of investors who provided them with money needed to acquire other Internet companies with similar missions. The investment group is called: A. entrepreneurial capitalists B. equity entrepreneurs C. angel investors D. investment counselors E. consulting owners
  37. 37. 4. What are the first steps to take if you are starting your own business? • CONCEPT CHECK 1. How can potential business owners find new business ideas? 2. Why is it important to develop a business plan? What should such a plan include? 3. What financing options do small-business owners have? What risks do they face?
  38. 38. Managing a Small Business Using Outside Consultants • CPA • Attorney • Marketing • Employee benefits • Insurance Hiring and Retaining Employees • Creative to find new employees Going Global With Exporting Export Management Companies (EMCs) handle aspects of exporting • Finding customers • Billing, • Shipping, • Helping the company comply with foreign regulations
  39. 39. International trade specialists that buy goods at a discount from small businesses and resell them abroad are called: A. business trade unions B. export management companies C. domestic channel members D. commission house brokers E. export trading companies One way to ease the burden of managing a business is to: A. keep minimal inventory on hand B. only operate the business 20 hours a week C. do all the work yourself and hire no employees D. hire outside consultants E. sell a service instead of a tangible product Marc Adler is the owner of Macquarium, a multimillion-dollar communications company that does everything from video productions to creating Web sites to public relations campaigns. Macquarium has done this sort of work for BellSouth and SnapOn Tools. Even though these companies could have prepared their videos and created their Web sites in- house, these tasks were: A. outsourced B. supplied outside normal channels C. autonomous productions D. seen as conflicting with the mission statements of the companies E. supplied as part of a relational marketing strategy Export management companies: A. work on flat fees per month B. only do consulting work C. form joint ventures with small exporting businesses D. handle all aspects of exporting, for a percentage fee of the business E. import as well as export
  40. 40. 5. Why does managing a small business present special challenges for the owner? • CONCEPT CHECK 1. How does the small-business owner’s role change over time? 2. How does managing a small business contribute to its growth? 3. What are the benefits to small firms of doing business internationally, and what steps can small businesses take to explore their options?
  41. 41. Small Business, Large Impact • Small businesses continue to thrive in the United States for a variety of reasons. 1.Independence and a better lifestyle 2.Personal satisfaction from work 3.Best route to success 4.Rapidly changing technology 5.Major corporate restructuring and downsizing 6.Outsourcing 7.Small businesses are resilient
  42. 42. Why Stay Small?
  43. 43. Which of the following is a reason why small business thrives in the United States? A. guaranteed profits B. regular working hours C. an aversion to success D. the ability to avoid outsourcing E. rapidly changing technology Which of the following is NOT one of the advantages of owning a small business? A. flexibility B. efficiency of operation C. ability to serve specialized markets D. avoidance of taxes E. personal service Kirby Frigo has opened a dog grooming business. Frigo, like other small business owners, probably will experience: A. guaranteed profits B. short work hours C. interest-free loans D. burdensome government regulations E. relief from taxation All of the following are examples of disadvantages associated with the ownership of a small business EXCEPT: A. burdensome government regulations B. fund-raising difficulty C. being your own boss D. extreme personal commitment E. limited management skill
  44. 44. 6. What are the advantages and disadvantages facing owners of small businesses? • CONCEPT CHECK 1. Why are small businesses becoming so popular? 2. Discuss the major advantages and disadvantages of small businesses.
  45. 45. The Small Business Administration • How does the SBA support small business growth in the USA, and what specific resources does the SBA offer to help with Business Plans? • Section 5.7 details several ways the Small Business Administration (SBA) provides assistance to small businesses, including start-ups and established organizations. In 2019, the SBA updated their business plan page to offer two different options, a traditional and a lean startup plan.
  46. 46. The Small Business Administration Government agency Helps people start and manage small businesses Helps small business owners win federal contracts, speaks on behalf of small business Private lenders to qualified small businesses that cannot obtain financing Assistance for Women, Minorities, Veterans
  47. 47. Service Corps of Retired Executives (SCORE) • Executives in these programs use their business backgrounds to help small business owners. • The SBA offers free online resources and courses for small business owners
  48. 48. The Small Business Administration 1. What are the main differences between the lean startup plan and the traditional version (See Section 5.4)? 2. Which kinds of business ventures do you think would be better suited to each kind of Business Plan?
  49. 49. The _____ is an agency of the federal government that offers both managerial and financial assistance to small businesses. A. Business Incubator Agency B. Federal Aid Program C. Business Welfare Administration D. Small Business Administration E. Council for Small Business Hawaiian-born Jon P. Farmer is the founder of Kolopua Hawaii LLC, a company that markets Pure Hawaiian Air. Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii. Which of the following federal agencies should Farmer contact if he needs management assistance? A. Business Incubator Agency B. Federal Aid Program C. Business Welfare Administration D. Small Business Administration E. Council for Small Business The Small Business Administration (SBA) offers a broad range of aids to small businesses. They include: A. guarantees on loans made by private lenders B. entrepreneurial ideas C. employee recruiting, hiring, and firing D. the elimination of sales and employee taxation for the first three years of operation E. all of the above Privately owned and managed _____ are licensed by the SBA and provide long-term financing for small businesses. A. Small Business Development Centers B. Service Corps of Retired Executives C. Small Business Investment Companies D. Angel Capital Electronic Networks E. Active Corps of Executives
  50. 50. Which of the following is a trend that is changing the face of entrepreneurship and small business ownership? A. stagnant demographics B. entrepreneurial diversity C. decreased use of overseas bundling D. an increase in the number of corporate mergers and acquisitions E. all of the above In the management assistance area, the Small Business Administration (SBA) provides all of the following EXCEPT: A. free college credit courses in management B. toll-free advice numbers C. training and educational programs D. counseling by business development officers E. free publications on business topics The Small Business Administration (SBA): A. helps people start and manage small businesses B. is a privately-owned company C. is a financial institution D. does not have a Web site E. is accurately described by all of the above
  51. 51. 7. How does the Small Business Administration help small businesses? • CONCEPT CHECK 1. What is the Small Business Administration (SBA)? 2. Describe the financial and management assistance programs offered by the SBA.
  52. 52. Trends in Entrepreneurship and Small-Business Ownership Demographic, social, and technological trends Small-business activity leads to continued strong overall economic growth Baby boomer entrepreneurs Minorities How Far Will You Go to Get Rich San Francisco, New York Metro, Silicon Valley, and New England
  53. 53. 8. What trends are shaping entrepreneurship and small-business ownership? • CONCEPT CHECK 1. What significant trends are occurring in the small-business arena? 2. How is entrepreneurial diversity impacting small business and the economy? 3. How do ethics impact decision-making with small-business owners? This OpenStax ancillary resource is © Rice University under a CC-BY 4.0 International license; it may be reproduced or modified but must be attributed to OpenStax, Rice University and any changes must be noted. Any images credited to other sources are similarly available for reproduction, but must be attributed to their sources.