Chapter 6: Entrepreneurship and Starting a Small Business Flashcards
entrepreneur
someone who accepts the risks of business and runs a business
incentives to become entrepreneurs
-opportunity
-profit
-independence
-challenge: taking moderate, calculated risks
skills required to become an entrepreneur
-self-directed, self-nurturing, action-oriented, highly energetic, tolerant of uncertainty
A business idea=good opportunity
-fills consumer needs
-have skills and resources to start a business
-sells product at a price that consumers are willing to buy while making a profit
-get product to consumers before their tastes and
preferences change
-can keep business
entrepreneurial team
group of experienced people from different areas of business who join to form a managerial team: have the potential to develop, make, and market a new product
intrapreneurs
creative individuals who works as entrepreneurs within a company
micropreneurs
normal balanced lifestyle while doing the work that they want to do at home
-nearly half are home-based
-have less than 5 employees
Growth of home-based businesses
-computer technology: leveled the playing field
-corporate downsizing; outsourcing
-social attitudes have changed
new tax laws: less taxes on -home offices
challenges to micro entrepreneurships
-gaining new customers
-managing time
-keeping work and family separate
-abiding by city ordinances
-managing risk
-homeowner’s insurance may not cover business related claims
online businesses
offer unique products and services online
-D: easy to find copycats
enterprise zones
geographical areas where governments attract private business investment by offering lower taxes and government support
incubators
offer new business low-cost offices with basic services (accounting, legal advice, and secretarial help) in the beginning stages of their business
Self Employment Assistance (SEA) program
few states offer this to qualified applicants that give self-employment payments instead of regular unemployment checks
-encourages unemployed people to start their own businesses through self-employment checks
Small Business Administration (SBA)
U.S. government agency that aids and advises small businesses by providing management training and financial advice and loans
-started as a microloan program in 1991
-judges worthiness off of borrower’s integrity and soundness of their business idea
Small Business Investment Company (SBIC)
program where private investment companies licensed by the SBA lend money to small businesses
-SBIC must have minimum of $5 million and can borrow up to $2 million for every $1 million of capital it has
-can identify business problems early and can reschedule loan payments accordingly
Small Business Development Centers (SBDC)
funded jointly by the federal government and individual states
-evaluate feasibility of your idea, establish a business plan, complete your funding application for no charge
Small business
independently owned and operated, not dominant in its field/operation/meets certain standards of size deemed by the SBA
-generate more than 43% of GDP
-usually someone’s first job
-over 30 million small businesses in the US
-must have fewer than 1500 employees
Why are business failure rates inaccurate?
-closing a business to start a new one=failure
-changing forms of ownership=reported failure
-retirement=reported failure
Major business functions
-planning
-financing
-knowing customers
-managing employees
-keeping records
Business plan
detailed written statement explaining: target market, nature of the business, advantages in comparison to competition, and the resource/qualifications of owners
(2-3 pages long)
cover letter
addressed to a specific person and summarizes companies goals and objectives
executive summary
management summary of proposed venture: short description of the business, lists major goals and objectives
-catches the interest and tempts investors to read
company background
company operations, potential legal considerations areas of risk. summarize a firm’s financial condition, include past and current balance sheets, income and cash flow statements, other financial records
-areas of risk
-financial condition
management team
organizational chart, job descriptions of listed positions, detailed resumes of current executives
-workers at the place
financial plan
provide 5-year income, expense, and funding sources (adjustments for economy/sale projections)
capital required
amount of capital required to continue operations, describe how these funds are to be used
indicate totals on cash flow statement
manufacturing plan
describe minimum plant size, machinery required, production capacity, inventory/inventory control methods, quality control, plant personnel requirement, estimate production costs
-details plant control, inventory, and other operational steps
Location analysis
the geographic area that a company decides to target for customers and their traffic patterns
Appendix
include all marketing research on product/service and other information about product concept of market size. provide a bibliography of all the reference materials used. Demonstrate that the market won’t be entering a declining market
-research of the product itself and its ability to interact in a market
Sources of Capital (listed in most to least commonly used)
-personal savings
-family
-business associates
-banks and finance institutions
-government agencies
-angel investors
-venture capitalists: individuals or companies that invest money into a company and gain partial ownership in company profits in return (shark tank)
Community development financial institutions
-CFI’s are a major factor in economic recovery
-1% of loans were not paid back in the last 30 years
-provide business counseling as well as loans
markets
people with unsatisfied wants and needs who demand limited goods/services
Managing employees
-hiring, training, and motivating employees is critical
-small business employees are more satisfied=feel challenged and respected
-entrepreneurs best serve themselves if they recruit and train employees for management positions
Who can assist a small business
accountants, competent lawyers, commercial loan officer, insurance agent
What can a marketing research study help you determine
-where to locate
-whom to select as your target market
-what is an effective strategy for reaching the market
Service Corps of Retired Executive (SCORE)
more than 11,000 volunteers from industry, trade association, and education who counsel small businesses at no cost
**small and medium-sized businesses account for 99 percent of recent export growth
Advantages of global trade for small businesses
-overseas buyers enjoy dealing with individuals (smaller companies)
-can ship products faster
-provide a wide variety of suppliers
-give more personalized service and attention
principles of management are similar for a small neighborhood business and a giant global firm
True or False
all organization require what?
-planning
-capital
-information management
inexpensive computer systems and free open-source software what what two things easier for a small business manager
-managing consumer records
-follow daily sales and expenses
How to get involved in the global market and surpass the hurdles that might prevent this?
financing is often difficult to find and exports don’t always know how to get started
