Transcript Document

*
*
*
**
and Starting
a Small
Business
Nickels
*
McGraw-Hill/Irwin
Understanding Business, 8e
McHugh
*
CHAPTER
*
Entrepreneurship
6
McHugh
1-1
6-1
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
*
*
*
Guess Which Company?
• He was selling baking soda & decided to entice
customers by putting in two packages of
chewing gum with each sale. The excitement
over the gum started him thinking.
• Two Seattle teenagers pooled their money &
came up with $100. They started delivering
messages & parcels for local merchants.
• Though he didn’t graduate from college, he
found out college students eat a lot of pizza.
He started his first pizzeria with $900 near a
campus with a promise of 3-minute delivery.
6-2
*
*
*
Entrepreneurship
• Definition
• Why take the entrepreneurial
challenge?
• Opportunity
• Profit
• Independence
• Challenge
6-3
*
*
*
Who Starts
New Businesses?
AGE AT START-UP
18 - 24
25 - 34
35 - 44
45 - 54
55+
8%
71%
13%
6%
2%
6-4
*
*
*
Entrepreneurial Attributes
• Self-Directed & SelfDisciplined
• Self-Nurturing
• Action-Oriented
• Highly Energetic
• Tolerant of
Uncertainty
6-5
*
*
*
Entrepreneurship
• Entrepreneurial Teams
• Micropreneurs and Home-Based
Businesses
• Web-Based Businesses
• Intrapreneurs
6-6
*
*
*
Reasons for Growth of
Home-Based Businesses
• Technology
• Downsizing
• Attitudes
• Tax Advantages
6-7
*
*
*
Home-Based Business
Challenges
• New Customers
• Time Management
• Work vs. Family
• City Ordinances
• Risk
Focus
• Find Opportunity
• Results vs. Routine
• Profit vs. Paycheck
• New Ideas
• Long Term vs. Short
Term
6-8
*
*
*
Most Common Types of
Home-Based Businesses
Sales &
Distribution
10%
Arts/Design
Creative
13%
Personal
Svcs.
14%
Financial &
Real Estate
5%
Bldg. Trades
31%
Bus.
Services
27%
Source: Independent Insurance Agents of America
6-9
*
*
*
Government &
Entrepreneurship
• Immigration Act of 1990Investor Visa
• Enterprise Zones
• Incubators
6-10
*
*
*
Top Ten States Where
Businesses Have Started
1. Utah
6. Washington D.C.
2. Nevada
7. Maryland
3. Washington
8. Georgia
4. Florida
9. Tennessee
5. Colorado
10. Alaska
Source: Investor Business Daily, June 24, 2004
6-11
*
*
*
Top Ten States Where
Businesses Have Closed
1. Utah
6. Missouri
2. Washington
7. Arizona
3. New Mexico
8. Vermont
4. Nevada
9. Georgia
5. Idaho
10. California
Source: Investor Business Daily, June 24, 2004
6-12
*
*
*
What is Small Business?
• Independently Owned
• Not Dominant in Its Field
• Meet Certain Standards of
Size (Employees, Annual
Receipts)
6-13
*
*
*
U.S. Small Businesses
• 20 Million Full/Part-time Businesses
• Account for More Than 50% of Gross
Domestic Product (GDP)
• Jobs
• 80% of Americans 1st job is in small business
• 75% of new jobs are created by small businesses
• Minority-owned Businesses Growing
Rapidly
6-14
*
*
*
Business Ownership
by Gender
18%
Majority Male-Owned
Majority Female-Owned
Owned Equally by Both
52%
30%
Source: USA Today
6-15
*
*
*
Female Owners’
Top Industries
Services
Retail
Others
0%
10%
20%
30%
40%
50%
SOURCE: USA Today
6-16
*
*
*
Small Business –
Major Causes of Failure
• Plunging in without first
testing
• Under/over pricing
• Too little capital
• Little/no experience
• Borrowing money
without planning
• Trying to do too much
with too little
• Buying too much on
credit
• Expanding credit too
freely and rapidly
• Incomplete and/or
inaccurate records
• Not understanding
business cycles
• Forgetting about taxes,
insurances, etc.
• Owner working or not,
according to whim
6-17
*
*
*
Small Business –
Situations for Success
• Personal attention
• Products not easily
made by mass
production
• Sales are not large
enough for a large
firm
• Unattractive
neighborhood
• Franchising
• Paying attention to
new competitors
• The business is in a
growth industry
6-18
*
*
*
Learning about Small
Business Operations
• Learn from Others
• Get Experience
• Take Over a Successful
Firm
6-19
*
*
*
Where Did They Start?
Hallmark
YMCA room
WilliamsSonoma
Abandoned Hardware Store
Estee Lauder
Vacant Former Restaurant
Walt Disney
Created Mickey in a Garage
Source: World Features Syndicate
6-20
*
*
*
Early Sales of
Well-Known Companies
Johnson &
Johnson
$3,000 Worth of Band-Aids 1st Year
Cyrus
McCormick
Sold No Reapers 1st 10 Years
Subway
312 Sandwiches 1st Day
Burton’s
Snowboards
Sold One 1st Year
Bose
Sold 40 Speakers 1st Year (today #1
in market)
Source: World Features Syndicate
6-21
*
*
*
Managing a Small Business
• Business Plan
• Adequate Funding
• Lenders/Investors
• “Angels”
• Venture Capitalists
• Professional Advice/Help
•
•
•
•
SBA and SBIC Program
Lawyers, Loan Officers, Insurance Agents
SCORE
Local College/universities
• Know Your Customer
• Manage Human Resources
• Keep Good Records
6-22
*
*
*
Reasons for a
Banker To Say “No”
• I don’t know
enough about
you or your
business.
• You haven’t
clearly stated why
you need the
money.
• Your numbers
don’t support the
loan request.
• Your collateral is
lacking.
• Your business
does not support
the loan on its
own merits.
6-23
*
*
*
Small Business Collaborators
• Small Business Administration
(SBA)
• Microloan program
• SBICs
• SBDCs
• Service Corps of Retired
Executives (SCORE)
6-24
*
*
*
Small Business Strategies
•
Examine Marketing & ID Areas for Growth
•
Profile Best Customers & Market to Similar
Prospects
•
Invest in Sales Training & Technology
•
Refresh Business Perspective With
Outside Views
•
Streamline Business & Eliminate Waste
6-25
*
*
*
Saving a
Business In Trouble
• React/Not
Overreact
• Understand
Financial Situation
• Find Professional
Help
• Develop
“Recovery Plan”
• Be a Visible,
Confident Leader
• Remind
Employees of
Stake in Business
• Don’t Get Stung
By Killer
“Bankruptcy”
6-26
*
*
*
Small Business &
International Prospects
Positives
1. World Market
2. Absorb Excess
Inventory
3. Soften U.S.
Downturns
4. Extend Product
Life
Negatives
1. Financing
Difficult
2. How to Get
Started?
3. Lack of Cultural
Understanding
4. Paperwork
6-27
*
*
*
International
Small Business
Advantages
Information
• Deal With
Individuals
• Dept. of Commercewww.bxa.doc.gov
• Begin Shipping
Orders Faster
• SBA- Internationalwww.sba.gov/hotlist
/internat.html
• Variety of Suppliers
• Professional Service
with Undivided
Attention
6-28