Transcript Slide 1

Standard- BMA-IBT-7
Demonstrate an understanding of
entrepreneurship through
recognizing a business
opportunity, how to start a
business based on the recognized
opportunity, and basics of how to
operate and maintain that
business.
 It
is a business started by someone who
notices a need for a product or service.
 It
is the key driver of our economy
because high majority of jobs are created
by small businesses, which later on
become big businesses and give a lot of
people jobs.

Big Business
Little business
turns into….
Business Essentials
FAMOUS
ENTREPRENEURS
Business Essentials
MARY KAY ASH
Company: Mary Kay
 Position: Chairman
 Industry: Cosmetics
 Mary Kay Ash founded the cosmetics empire
that helped to empower and inspire thousands
of women. Her worldwide brand is now
established in more than 30 countries and has a
sales force of more than one million. Kay's
business techniques were unconventional and
attracted much attention with actions like
giving her top sales people pink Mary Kay
Cadillacs as an incentive and appreciation of
their contribution to the company.

Business Essentials
ROBERT L.
JOHNSON




Company: The RLJ Company
Position: Founder, CEO
Industry: Real Estate, Hospitality, Professional
Sports, Media and Entertainment, Gaming
In 1980 Robert L. Johnson launched a cable channel
targeted at African Americans called BET, Black
Entertainment Television. BET became the first
African American firm to be listed on the New York
Stock Exchange in 1991. In 2001, Johnson became
the first African American billionaire when he sold
BET to Viacom for $3 billion. After the sale, Johnson
formed the RLJ Companies, where he began new
business ventures in sports, hotels, lotteries and
restaurants.
Business Essentials
BILL GATES
Company: Microsoft
 Position: Chairman
 Industry: Technology
 Bill Gates is one of the most influential people
in the world. He is cofounder of one of the most
recognized brands in the computer industry
with nearly every desk top computer using at
least one software program from Microsoft.
According to the Forbes magazine (2008), Bill
Gates is third richest man in the United States
with an estimated $58 million.


Satisfaction from taking a risk in becoming a
success

Showing expertise at skills

Working from home

Gaining profit

Total responsibility for the business

Long hours

Financial risks
Entrepreneurship
helps local
economies turn into global
economies. They are often risktakers and try to develop their
economy.
 Example
: McDonald’s was located only in
America, and it spread into world-wide.
Popsicle

Frank Epperson
11 yrs old
 1905

Business Essentials
WHAT IT TAKES

Starting your own business may sound exciting,
but it is not something to take on lightly. Do
some soul searching first to determine . . .
If it is the right path for you?
 If you are really cut out to be an entrepreneur?

Business Essentials
WHAT EXACTLY IS AN
ENTREPRENEUR?

en·tre·pre·neur [ahn-truh-pruh-nur, -noor; Fr. ahntruh-pruh-nɶr] -a person who organizes and manages
any enterprise, esp. a business, usually with
considerable initiative and risk.
Dictionary.com Unabridged (v 1.1) Based on the Random House Unabridged
Dictionary, © Random House, Inc. 2006.
Business Essentials
HOW TO BECOME AN
ENTREPRENEUR?
Develop a product or create a service.
 Become an independent representative for
someone else's company, selling or distributing
their products.
 Buy an existing business or franchise.
 Become an "intrapreneur," operating
autonomously within a company.

Business Essentials
WHY START YOUR OWN BUSINESS?
Many people become entrepreneurs because they
want …
 To create something of their own, to have a
sense of personal achievement.
 To create substantial wealth.
 To break out of the "corporate rat race"
 To be their own boss.
Business Essentials
DOWNSIDE

Being your own boss, however, has its downside.
The most frequently cited disadvantage is the
long hard hours, particularly during the start-up
period. It takes a great amount of effort to get a
business up and running. That means you may
be working late into the night and every weekend
for some time.
Business Essentials
FINANCIAL RISK
The risk that a company will not have adequate
cash flow to meet financial obligations.
Entrepreneurs assume risk. This makes them
different from employees (who are people who
work for someone else).
 Until the business takes off, your income may go
up and down dramatically.
 In addition, you may have to invest some of your
own savings and/or use your personal assets as
collateral for business loans.

Business Essentials
RESPONSIBILITY
Running your own business is a tremendous
responsibility.




Your employees depend on you to provide stable
employment.
Your customers expect you to deliver on your promises.
Your suppliers and bankers expect you to pay your bills.
Your investors expect you to turn a decent profit.
Are you the kind of person that can handle that
kind of pressure?
Business Essentials
CHARACTERISTICS

Studies have identified a variety of personality
characteristics associated with successful
entrepreneurs. Among the most important are a
healthy sense of self confidence and an
optimistic attitude.
Business Essentials
CHARACTERISTICS

Successful entrepreneurs take risks, but they are
calculated risks. They don't plunge blindly into
new situations. Instead, they are thorough and
prepared.
Business Essentials
ENTREPRENEURS…
 Accepts
Risks & Opportunities in
Creating/Operating A New Business
 Characteristics





Resourceful
Good Customer Relations
Desire To Be Own Boss- Gain Control Of Life
Build For Family
Tolerance For Uncertainty/Risk
Business Essentials
NON-FINANCIAL REASONS
TO START A BUSINESS
Do Something I Love
9%
7%
More Flexibility
41%
9%
Be Key Decision Maker
Change Lifestyle
13%
Spend More Time With Family
21%
Don't Know or Not Stated
Source: CIBC World Markets, Economics & Strategy, “Secrets to Small Business
Success”, research.cibcwm.com/economic_public/ download/sb-ssbs-10192004.pdf
Business Essentials
FINANCIAL REASONS
TO START A BUSINESS
27%
Loss of Job Or Change Of
Employment
39%
More Income For Necessities
Second Income
Bridge A Gap Till Retirement
13%
Forced Into Early Retirement
Don't Know Or Not Stated
3%
12%
6%
Source: CIBC World Markets, Economics & Strategy, “Secrets to Small Business
Success”, research.cibcwm.com/economic_public/ download/sb-ssbs-10192004.pdf
Business Essentials
RECOGNIZING OPPORTUNITY

Many of America’s most successful companies
started with one person who recognized an
opportunity and came up with an idea for a
business in response to that opportunity.
Business Essentials
ACCORDING TO THE SBA…
SMALL BUSINESS ADMINISTRATION


In 2009, out of the 27.5 million businesses in the
U.S., there were 5.9 million firms with employees
and 21.4 million without employees. Small firms
with fewer than 500 employees represent 99.9%
of total businesses in the United States. Only
18,469 U.S. businesses are considered large.
Seven out of 10 new employer firms survive at
least 2 years, half at least 5 years, a third at least
10 years, and a quarter stay in business 15 years
or more.
Business Essentials
STARTING A BUSINESS
 Develop
a Business Plan
 Acquire
Finances
 Meet
Legal Requirements
Business Essentials
Develop a Business
Plan
•A detailed proposal
that describes a new
business
•Presented to potential
investors and lenders
•Most business plans
are 30 pages or more.
Business Essentials
Purposes of a business plan
•To obtain financing
•Banks and potential
lenders require a
business plan
•Helps organize and
analyze data critical to
the new business
•To provide a start-up
proposal
•Provides an outline to
follow when starting the
business
Business Essentials
The components of a business
plan
•Executive summary: brief
one- to two-page description of the
key points of each section of the
business plan
•Product/service plan:
presents
• Product or service being
offered
• Unique features of product or
service
•Management team plan:
•Qualifications of the
entrepreneur
Business Essentials
The components of a business
plan
•Industry/market analysis
analyzes the:
•Customers
•Competition
•Industry
•Demographic, geographic, and
economic data
•Operational plan:
includes all
processes involved in producing
and/or delivering the product or service
to the customer
Business Essentials
The components of a business
plan
•Organizational plan:
•Management philosophy of the
business
•Key management personnel
•Key employment policies
•Marketing plan: Describes
•How the business will make its
customers aware of its products
or services
•The market being served
•Marketing strategies
•Promotional plan
•Marketing budget
THE COMPONENTS
OF A
Business Essentials
BUSINESS PLAN
• Growth plan: The growth
plan presents plans for future
expansion of the business
• Financial plan: includes
financial statements that will
help forecast the future
financial health of the
business
Business Essentials
FINANCE THE
BUSINESS
Identify family and friends
who are potential investors.
 Are there other businesses
that would be probable
investors?
 Seek Employees

Business Essentials
FINANCE THE
BUSINESS
• Contact financial agencies for
loans, grants and assistance:
• Small Business Administration
• Banks
• Credit Unions
• Insurance companies
Business Essentials
The Legal Environment
Additional legal requirements for some
businesses:
•Permits or licenses
•Building Permits
•Cosmetology license
•First aid certification
•Contracts
•Between partners
•Between owner and
clients
•Zoning laws
•Taxes
Business Essentials
The Legal Environment
(Protect Your Business)
•Trademarks: Protect
business’ name or logo
•Patents: Protect invention
of products or processes
from theft
•Copyright: Protect creative
works:
•Literary
•Musical
•Dramatic
•Artistic work
TYPES OF BUSINESS
OWNERSHIP
Business Essentials
STANDARD/ELEMENT
BMA-IBT-7: Demonstrate an understanding of
entrepreneurship through recognizing a business
opportunity, how to start a business based on the
recognized opportunity, and basics of how of
operate and maintain that business.
 7.6: Differentiate between the types of business
ownership.

Business Essentials
TYPES OF BUSINESS
OWNERSHIP
 Sole
Proprietorship
 Partnership
 Franchise
 Corporation
Business Essentials
SOLE PROPRIETORSHIP

A business owned by only one person
Advantages
1. Complete control
2. Sole decision maker
3. No corporate tax
payments
4. Minimal legal costs
5. Few formal business
requirements
Disadvantages
1. Personally liable for
all debt
2. Assumes all risks of
business
3. Business decisions
rely solely on you
4. Investors are slow to
invest
Business Essentials
PARTNERSHIP

A business owned by two or more people who
share its risks and rewards
Disadvantages
Advantages
1. Easy to format
2. Diverse skills ad
expertise
3. Large resources
4. Flexibility of
operations
5. Sharing of risks
6. Benefits of unlimited
liability
7. Promptness in
decision making
1.
2.
3.
4.
Limited capital
Unlimited liability
Instability
Risk of implied
authority
5. Lack of harmony
6. Non-transferability
of interest
7. Lack of public
confidence
Business Essentials
CORPORATION

Company that is registered by a state and
operates apart from its owners.
Advantages
Disadvantages
1. Shareholders have
1. Requires more time
limited responsibility
to integrate
2. Can obtain more
2. Supervised and
capital through sale
subject to rules of
of actions
entities
3. Can deduct the cost
3. Payment of more
of benefits offered to
taxes
employees
Business Essentials
FRANCHISE

Contractual agreement to use the name and sell the
products and services of a company in a designated
geographic area.
Advantages
1. Owning an
established business
2. A known brand
3. Simpler business
financing
4. Business
relationships
5. Support and security
6. Less likely to fail
Disadvantages
1. Having no control
Ties to suppliers
2. Risks from others
3. Franchise costs
4. Cut of your profit
Business Essentials
VOCABULARY







Unlimited liability: a liability that holds the owner
fully responsible for a company’s debts
Limited liability: A claim that holds a firm's owners
responsible for no more than the capital that they
have invested in it.
Cooperative: Organization that is owned and operated
by its members.
Nonprofit organization: A type of business that
focuses on providing a service rather than making a
profit.
Sole: having no sharer; being the only one
Income: A gain or recurrent benefit usually measured
in money that derives from capital or labor.
Regulate: to bring under control of law or constituted
authority