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*Chapter Six

Entrepreneurship and Starting a

Small Business

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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*The Job-Creating Power of Entrepreneurship in the U.S.

• Entrepreneurship -- Accepting the risk of starting and running a business.

WHAT is ENTREPRENEURSHIP?

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*Why People Take the Entrepreneurial Challenge

• Opportunity

• Profit

• Independence

• Challenge

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WHY TAKE the RISK?

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*Why People Take the Entrepreneurial Challenge

• 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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*Small Versus Big Business

• There are 26.8 million small businesses in the U.S.

• Of all nonfarm business in the U.S., almost 97% are considered small.

• Small businesses account for over 50% of the GDP.

• Small businesses generate 60-80% of new jobs.

• About 80% of U.S. workers first jobs were in small business.

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SMALL BUSINESS STATISTICS

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*Small Business Success & Failure

• Owner closing a business to start another is reported as a “failure.”

• Changing forms of ownership is reported as a “failure.”

• Retirement is reported as a “failure.”

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BUSINESS FAILURES are LOWER THAN the REPORTS BECAUSE…

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*Learning About Small Business Operations

• Learn from Others – Investigate your local colleges for classes on small business and entrepreneurship; talk to and work for successful local entrepreneurs.

• Get Some Experience – Gain three years experience in the field; then start a part-time small business.

• Take Over a Successful Firm – Serve as an apprentice and eventually take over once the owner steps down.

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LEARNING ABOUT SMALL BUSINESS

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*Begin with Planning

• Business Plan -- A detailed written statement that describes the nature of the business, the target market, the advantages the business will have over competition, and the resources and owners qualifications.

• A business plan forces potential owners to be specific about what they will offer.

• A business plan is mandatory for talking with bankers or investors.

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BUSINESS PLANS

6-8

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*Getting Money to Fund a Small Business

• Personal savings

• Relatives

• Former employers

• Banks & finance companies

• Government agencies

• Angel investors

• Venture capitalists -- Individuals or companies that invest in new businesses in exchange for partial ownership.

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SOURCES of CAPITAL

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*The Small Business Administration

• 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.

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SMALL BUSINESS DEVELOPMENT CENTERS

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*Knowing Your Customers

• Market -- Consumers with unsatisfied wants and needs who have both resources and willingness to buy.

• 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.

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The MARKET

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