Small business and entrepreneurship

Question 1

Why start a business? (6)

Answer 1

• Greater financial success: Better chances of getting rich - or even achieving moderate financial success
• Independence: Being your own boss - totally responsible for success or failure
• Flexibility: Freedom to control the schedule
• Challenge: Unmatched challenges and endless opportunities for learning that can provide more satisfaction than grinding out the hours as an employee
• Survival: “Necessity entrepreneurs” believe that starting their own business is their only economic option
• Passion

Question 2

Small businesses advantages (6)

Answer 2

• are able to take risk
• better at making decisions than big companies: they are nimble and bold, don’t have to spend months or years evaluating new ideas
• innovative
• market niches
• personal customer service
• lower cost

Question 3

Market niches

Answer 3

Small businesses can specialize in specific products or services that larger companies may not focus on also with fewer competitors than big businesses because they simply aren’t big enough

Question 4

Small business threats (5)

Answer 4

• Higher risk of failure: About a third of all new businesses fail within the first 5 years of launching
• Regulatory Challenges: Small businesses often face difficulties complying with government regulations, especially in industries like healthcare or manufacturing, where regulations are strict
• Lack of knowledge and experience: In-depth knowledge in a specific area doesn’t necessarily mean expertise in running a business
• Too little money: lack of start-up money. Ongoing profits don’t usually begin for a while
• Providing benefits to employees can be a significant burden for small businesses, making it harder for them to attract and retain talent compared to larger firms

Question 5

Starting business options

Answer 5

→ Starting from scratch
→ Buying an established business
→ Buying a franchise

Question 6

Starting business from scratch advantage (2) and disadvantage (4)

Answer 6

Advantages
→ It’s all you: Your concept, your decisions, your structure
→ You don’t have to deal with the prior owner’s bad decisions

disadvantages
→ It’s all you: That’s a lot of pressure
→ It can be hard to get credit
→ Logistics can be challenging
→ It takes time, money, and sheer sweat to build a customer base

Question 7

Buying an established business advantage (3) and disadvantage (2)

Answer 7

advantages
→ The concept, organizational structure, and operating practices are in place
→ Relationships are established
→ Obtaining financing is less challenging

disadvantages
→ Working with someone else’s idea may not be fun
→ You may inherit old mistakes

Question 8

Challenges of starting a business (2)

Answer 8

• it involves financial risk, hard work, and perseverance - Many businesses fail within their first few years, so entrepreneurs need to be prepared for failure and learn from it
• Most new businesses are funded by the personal savings of the entrepreneurs or money from family and friends.

Question 9

Traits of entrepreneurs (6)

Answer 9

• Vision: most entrepreneurs are wildly excited about their own new ideas, which many seem to draw from a bottomless well. Entrepreneurs find new solutions to old problems, and they develop new products that we didn’t even know we needed until we had them. They see opportunities where others see problems.
• Self-reliance: new business owners need to do everything themselves.
  → They need Self-reliance that comes with an internal locus of control (sense that
  the individual is personally responsible for what happens in their life): When things go well, people with an internal locus of control feel that their efforts have been validated, and when things go poorly, those same people feel that they need to do better next time. This sense of responsibil- ity encourages positive action.
  → Less successful entrepreneur: In contrast, people with an external locus of control rely less on their own efforts, feeling buffeted by forces such as random luck and the actions of others, which they believe will ultimately control their fate
• Energy: 6 hours to 12 hours work days are the norm
• Confidence: Successful entrepreneurs typically have confidence in their own ability to achieve, and their confidence encourages them to act boldly.
• Tolerance of uncertainty: entrepreneurs are willing to take risks and handle uncertainty because they know the rewards could be great
• Tolerance of failure: they tend to view failure as a chance to learn rather than as a sign that they just can’t do it

Question 10

Different ways of funding a new business

Answer 10

• Personal resources: family, friends, and credit cards
• Loans: ​​banks lend money to businesses that meet certain criteria, like having a strong business plan and the ability to pay back the loan
• Angel investors: wealthy individuals invest in promising start-up companies in exchange for a share ownership
• Venture capitals: companies that invest large amount of money in new companies in exchange for a share ownership, which can sometimes be as high as 60% (ex: Ycombinator)
• Crowdfunding: crowdfunding is a method of raising capital by asking a large number of people. Entrepreneurs would present their business idea on a crowdfunding platform (such as Kickstarter, Indiegogo, or GoFundMe) and ask for financial support. In return for their contributions, backers may receive different types of rewards depending on the type of crowdfunding.