Entrepreneurs

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Entrepreneurs. People that start and run their own business. Why are they important to the economy? New Businesses. Choices – Fundamental to the market economy Jobs 80% of new jobs created by firms less than 5 years old. Why are they important to the economy? New Businesses. - PowerPoint PPT Presentation

Transcript of Entrepreneurs

Page 1: Entrepreneurs
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EntrepreneursPeople that start and run their own business.

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Why are they important to the economy?

New Businesses• Choices –

• Fundamental to the market economy

• Jobs• 80% of new jobs created by firms less than 5 years old

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Why are they important to the economy?

New Businesses• Inventions and Innovations

– A high percentage of the most significant inventions and innovations originate in small firms.

• Disney

• Apple

• Cray / SSI

• Google

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Who are they?• Family

• Parent or close relative runs their own business

• Cultural• Prejudice, & Needs of the group

• Hmong grocery stores

• Polish deli in NE Mpls.

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Who are they?

• Psychological

–Control own destiny

–Goal setters

–Risk Takers

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Sample Questions from the Farley test for risk takers

1. I like to improve on ideas.

2. I am high in energy.

3. If I were to gamble, I would never make small bets.

4. I can easily generate lots of money making ideas.

5. I would never bet more money than I had at the time.

6. I am a highly creative person.

7. I like to challenge authority

8. I believe that I control my own destiny.

9. I am highly adventurous.

10. Friends would call me a thrill seeker

11. Making my own decisions is very important to me.

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Entrepreneur Example

• Fred Smith– Federal Express– Told plan would

never work.

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Who are they?• Age

– Most are 25 – 40– Right combination of money and lack of

obligations – 21 & under 3% Anybody here?– 21 - 25 11% – 26 - 30 21%– 31 - 35 20%– 36 - 40 18%Total 73%

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Why do they start?

• Motivation

• Event– Birthday, Family, Move

• Push– Fired from job, Get out of rut

• Goal set– Be own boss, make million by …

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Why do they start?

• Preparation - got idea from• Prior Job 45%• Personal interest/hobby 16% • Chance happening 11%• Suggestion 7%• Family Business 6%• Education/ Courses 6%• Friends / Relatives 5%

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Here’s my report card and an impressive list I’ve compiled of entrepreneurs who never finished high school.

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Why do they start?• Business Climate / Suitability

– Large organizations are difficult to start.– What’s the newest car company?

– Business that can start small and grow.– Software, Services, Low inventory

– Industry must be growing.– Do we need more ________?

– New want or need

– Economy should be growing– Recessions are not good for businesses.

– More people start business during recession.

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2006 Firm Births & Deathsper week average and yearly total

Total Less than 20 Employees

Births 12,886 670,100

12,321 640,700

Deaths 11,525 599,300

11,025 573,300

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Why do they start?

• Financing Sources– Personal Savings & Assets– Friends & Relatives– Banks – Former Owners– Investors – Venture Capitalists– Suppliers – consignments

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Why do they start?

• Regional Climate – Most entrepreneurs start their business in their hometown.

Familiarity with regionNeeds of community

What does Eau Claire need?

Locations BankersCustomers

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What determines success or failure?

• Evaluate the proposed idea– Product – what’s produced?

– Market – who’s served?

– Competition – how is business going to differentiate itself?

– New service– More service– Price

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What determines success or failure?

• Purchase an established business• Get location

• Customers

• Goodwill

• Franchise• Established product

• Systems & Support• Network

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Top Ten Franchises of 2009 according to Entrepreneur Magazine

• Subway• McDonald’s• Liberty Tax Service• Sonic Drive In Restaurants• InterContinental Hotels Group• Ace Hardware• Pizza Hut• The UPS Store• Circle K• Papa Johns

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What determines success or failure?

• Experience & Education• Mix of both is seen as good

• Teamwork - partners• Division of labor• Specialization• Multiple viewpoints• Access to more financing

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What determines success or failure?

• Utilize outside advice.– Small Business Administration– National Federation of Independent Businesses– SCORE– Chamber of Commerce

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What determines success or failure?

• Capital• Need for adequate financing.

– Revenues low during early stages

– Opening costs usually higher than expected

– Family needs are still present.

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What determines success or failure?

• Hours worked per week by new business owners.– Fewer than 50 23%

– 50 - 59 23%

– 60 - 69 28%

– 70 - 79 13%

– 80 or more 12%

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Public Corporation

• firm whose shares are publicly traded (stock market) and are usually held by a large number (hundreds or thousands) of shareholders

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Private Corporation

• firm whose shares are not publicly traded, and are held by a small number of stockholders (shareholders).

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Limited Liability Company “LLC”• Fairly recent type of business entity

• combining the advantage of corporate limited liability with the one-level taxation and managerial and operational flexibility of a partnership.

• It can be formed by one or more persons and, if a single owner LLC, it does not have to file a separate Federal tax return.

• All members of the LLC are shielded from personal liability beyond their committed investment.

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Limited Liability Company “LLC”

• the LLC has recently become the most used form for doing business in Wisconsin.

• Best suited for small group, licensing company, etc. Very flexible.

• Can be easily converted to a corporation

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2006 Data Proprietorship Partnerships Corporations

Number of Firms

22,075,000 2,947,000 5,841,000

Percent 71.5 % 9.5% 19 %

Business Receipts

$1,278 $4,131 $26,070

Percent 4.1% 13.1% 82.8%

Average ReceiptsPer firm

$57,893 $1,401,764 $4,463,276

Net Income $278 $667 $1933

Percent 9.6% 23.2% 67.2%

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Cooperatives

• Members are the owners– Limit to one share per member

• Patronage Refund– Profits are returned to members based on the

amount of business they did with the co-op

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Eau Claire Area Co-ops• Credit Unions (12,000)

– RCU, MET, WESTCONSIN

• Retail Stores (500)– MEGA (EC Consumers Co-op)

• Utility– Eau Claire Electrical Coop– Touchstone Energy– Chequamegon Telephone

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2005 Data Proprietorship Partnerships Corporations

Number of Firms 21,468,000 2,764,000 5,671,000

Percent 71.8 % 9.2 % 19 %

Business Receipts(billions $) $1,223 $3,719 $24,060

Percent 4.2 % 12.8 % 83 %

Average ReceiptsPer firm $56,968 $1,345,514 $4,242,638

Net Income(billions $) $270 $546 $1,949

Percent 9.8% 19.7 % 70.5 %

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2005 Data Proprietorship Partnerships Corporations

Number of Firms 21,468,000 2,764,000 5,671,000

Percent 71.8 % 9.2 % 19 %

Business Receipts(billions $) $1,223 $3,719 $24,060

Percent 4.2 % 12.8 % 83 %

Average ReceiptsPer firm $56,968 $1,345,514 $4,242,638

Net Income(billions $) $270 $546 $1,949

Percent 9.8% 19.7 % 70.5 %

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• The following are co-op brands you may recognize

• Ace HardwareACE Hardware, Cleaning and Paint Supplies

• Blue Diamond GrowersBlue Diamond, Smokehouse

• CarpetOneCarpet, vinyl, laminate, ceramic, hardwood

flooring

• Florida's NaturalOrange juice and grapefruit juice

• Land O' LakesLand O'Lakes, Indian Maiden, Lake to Lake,Land-O-Lakes, Bridgeman, Cocoa Classics, Flash

• Sun-DiamondSun-Maid

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2004 Data from

U.S. Statistical Abstract -online

Proprietorship Partnership Corporation

Number of 20,591,000 2,547,000 5,558,000Percentage 71.7% 8.9% 19.4%

Revenue/SalesBillions $ / %

$1,140

4.4%

$3,142

12.1%

$21,717

83.5%Net Income

ProfitBillions $ / %

$248

14.3%

$385

22.0%

$1,112

63.7%

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2004 Firm Births & Deathsper week average and yearly total

Total Less than 20 Employees

Births 12,094 628,900

11,575 601,900

Deaths 10,409 541,000

9,904 515,000

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Why is small business important? According to the NFIB

Small business in the United States serves many purposes.

it supplies goods and services that customers demand

it is a major innovator; a laboratory of economic experiment

it generates the lion’s share of net new jobs

it stabilizes economic cycles through relatively small employment swings           

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Why is small business important? According to the NFIB

its owners provide neighborhood and community leadership           it is an avenue of economic opportunity       it enhances pluralism in economic decision-making, and

it offers personal utility, i.e., personal satisfaction and happiness to its owners.

(Source:  compiled by William J. Dennis, Jr., NFIB Research Foundation.)        

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S-Type Corporation• S-Type corporations are taxed as

partnerships while retaining the advantages of incorporation.

The S-type corporation has all of the advantages and disadvantages of the traditional corporation except in the area of taxes. For tax purposes, the S-corporation shareholders are treated similarly to partners in a partnership. There is no double taxation of an S-type corporation.

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2002 Firm Births & Deathsper week average and yearly total

Total Firms < 20 Employees

Births 10,957 569,800

10,413 541,500

Deaths 11,286 586,900

10,713 557,100

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2001 Firm Births & Deathsper week average and yearly total

Total Firms < 20 Employees

Births 11,252 585,100

10,731 558,000

Deaths 10,640 553,300

10,077 524,000

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EntrepreneursPeople that start and run their own business.

• Why are they important to the economy?

• Who are they?

• Why do they start?

• What determines success or failure?

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Patents – 2003Inventions

• Patent Applications – 367,000

• Patents Issued Individuals

19,600

Corporations 148,500