Slide 1 BA-101 Introduction to Business Entrepreneurship New Ventures & Business Ownership Chapter Three 1-1 Slide 2 What Is a Small Business? Small business one that is independent (not part of a larger business) and that has relatively little influence in its market 97.6% of ALL businesses in US employ less than 100 They employ 54.16% of the working population Small Business Administration (SBA) government agency charged with assisting small businesses 3-2 Slide 3 The Importance of Small Business in the U.S. Economy Why is small business important to the US economy? Job Creation First to hire in recovery Innovation Provide products and services to larger businesses 3-3
Slide 4 Popular Areas of Small- Business Enterprise 3-4 Slide 5 Entrepreneurship Entrepreneur businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture 3-5 Slide 6 Entrepreneurial Characteristics Resourcefulness Concern for good, personal customer relations Strong desire to be their own bosses Deal with uncertainty and risk 3-6
Slide 7 Starting and Operating a New Business Business plan Document in which the entrepreneur describes her or his business strategy for the new venture and demonstrates how it will be implemented Sets goals and objectives for the business Projects revenue and expenses Develops a plan for sales and marketing and for making a profit 3-7 Slide 8 How would you start a small business? Buying an Existing Business Franchising Starting from Scratch 3-8 Slide 9 Franchise Purchasing the right to sell the products or services owned by another. Advantages Proven business opportunity Access to management expertise Disadvantages Start-up costs Ongoing payments Strict management rules and restrictions
Slide 10 Starting from Scratch Understanding customers, product & competitors Who and where are my customers? How much will those customers pay for my product? How much of my product can I expect to sell? Who are my competitors? Why will customers buy my product rather than the product of my competitors? 3-10 Slide 11 Financing the Small Business Personal resources Loans from family and friends Bank loans Venture capital companies Small-Business Investment Companies (SBICs) Minority Enterprise Small-Business Investment Companies (MESBICs) SBA financial programs 3-11 Slide 12 Reasons for Failure 1. Managerial incompetence or inexperience 2. Poor planning or No planning 3. Neglect - Lack of time necessary for success 4. Weak control systems 5. Insufficient capital 3-12
Slide 13 Reasons for Success 1. Hard work, drive, and dedication 2. Market demand for the products or services being provided 3. Managerial competence 4. Sticking to a carefully formulated and realistic plan 3-13 Slide 14 Noncorporate Business Ownership Sole Proprietorship business owned and usually operated by one person who is responsible for all of its debts General Partnership business with two or more owners who share in both the operation of the firm and the financial responsibility for its debts 3-14 Slide 15 Sole Proprietorship Advantages Freedom Simple to form Low start-up costs Tax benefits Disadvantages Unlimited liability Limited resources Limited fundraising capability Lack of continuity 3-15
Slide 16 Partnerships Advantages More talent and money More fundraising capability Relatively easy to form Limited liability for limited partners Tax benefits Disadvantages Unlimited liability for general partners Disagreements among partners Lack of continuity 3-16 Slide 17 The Corporate Entity Corporation business that is legally considered an entity separate from its owners and is liable for its own debts; owners liability extends to the limits of their investments 3-17 Slide 18 Corporations Advantages Limited liability Continuity Stronger fundraising capability Disadvantages Can be taken over against the will of its management Double taxation of profits Complicated and expensive to form 3-18
Slide 19 Proportions of U.S. Firms in Terms of Organization Type and Sales Revenue 3-19 Slide 20 Managing a Corporation Corporate Governance roles of shareholders, directors, and other managers in corporate decision making and accountability 3-20 Slide 21 Corporate Governance Stockholder (or Shareholder) owner of shares of stock in a corporation Board of Directors governing body of a corporation that reports to its shareholders and delegates power to run its dayto-day operations while remaining responsible for sustaining its assets Officers top management team of a corporation 3-21