Ch 1. Starting and Operating a Small Business Flashcards
Entrepreneurship
Process in which individuals pursue opportunities without regard to resources they currently control
Opportunity
Is an idea based on customer needs, or wants and are willing to buy sufficiently often at a high enough price to sustain the business
The Entrepreneurial Process
- Deciding to Become an Entrepreneur
- Developing successful business ideas
- Moving from an idea to an entrepreneurial firm
- Managing and growing the firm
Types of Entrepreneurs
- Necessity Based
2. Opportunity Based
Small Business
A company having < 500 employees and selling < 5 mils. worth of product
Taking The Long View
Entrepreneurs must start the business with the end in mind
Things to Consider when Taking the Long View
- How long do you plan to stay active? What will you do after?
- What will happen to the business when you retire? Who will take over?
- Who will you sell the business to?- Govt/Private entities. Will you stay with the business after its sold?
Benefits of Becoming an Entrepreneur
- You can pay yourself through salaries, wages, dividends etc.
- You control business values and mission
Potential Costs of becoming an entrepreneur
- Business Failure
- Obstacles
- Loneliness/Isolation
- Long hours
Cost-Benefit Analysis
A decision-making process in which costs of taking action are compared to the benefits
Cost
The money, energy, and time you will invest, as well as opportunities forgone to start the business
Benefit
The wealth you will accrue and the knowledge, skills, self-esteem and experience you will gain
Opportunity Cost
The value of the next best alternative forgone
Entrepreneurial Options
The various ways in which profits can be used to benefit society
Social Entrepreneurship
In this concept, social impact is more important than making a profit. Profit is only used to keep the business going
Social Business
A company created to achieve a social objective, while generating enough profit to increase reach, improve product and subsidize social mission.
Venture Philanthropy
Where financial and human capital is invested into not-for-profit and for-profit companies for social rather than financial returns.
Green Entrepreneurship
Business activities that avoid harming the environment or help to protect it in some way.
What green entrepreneurship does
- Increase energy efficiency; saving costs
- Decrease harm to worker’s health
- Preserve natural resources that communities and businesses depend on for business and quality of life.
Faces of Entrepreneurship
Looks at the form business will take
Microenterprises
Firms with <5 employees, <50,000 initial capital, regular operational involvement of the owner.
Lifestyle businesses
These are micro-enterprises that allow owners to have the desired life goal.
E.g. paying off college tuition
Mainstream Small Businesses
They provide/have the potential to provide substantial profit to owners.
Made to continue, permanent wealth-building, unlike micro.
Unicorns
Startups with companies valued over $USD16 million. Usually software companies, special technology
Schumpeter’s Five Basic Ways to Create a Business
- Using new technology to produce a new product
- Using existing technology to produce a new product,
- Using existing technology to produce an old product in a new way
- Finding a new supply of resources
- Developing a new market for an existing product.
Franchise
A business that markets a product developed by a franchisor, typically in the manner specified by that franchisor
Acquisition
The purchase of a business
