Topic 4 - Entrepreneurship: Starting and Managing Your Own Business Flashcards
Define
Entrepreneurs
People with vision, drive, and creativity who are willing to take the risk of starting and managing a business to make a profit, or greatly changing the scope and direction of an existing firm.
List
Types of Entrepreneurs
3
- Classic Entrepreneurs
- Multipreneurs
- Intrapreneurs
Classic Entrepreneurs
Risk takers who start their own companies
Multipreneurs
Entrepreneurs who start a series of companies
Intrapreneurs
Employees who apply their creativity, vision, and knowledge within the large corporation
List
Why become an entrepreneur?
- The challenge of building a business
- The desire to control their own destiny
- Financial independence
- Frustration working for someone else
- Personal satisfaction
- Creating the desired lifestyle
List
Which characteristics do successful entrepreneurs share?
- Curiosity
- Structured Experimentation
- Adaptability
- Decisiveness
- Team Building
- Risk Tolerance
- Comfortable with Failure
- Persistence
- Innovation
- Long-Term Focus
List
What is a small business?
- Independently managed
- Owned by an individual or a small group
- Locally based
- Not a dominant company
What is a business profile?
This introduction to your business plan provides important information about your company’s business structure, key principles, professional advisors, and financial history.
List
What are the first steps to take if you are starting your own business?
- Identify your reasons
- Self-analysis
- Personal skills and experience
- Finding a niche
- Market analysis (market research)
- Planning your startup: write a business plan
- Finances: how to fund your business
What are the 5 key features of a business plan?
- General description of the company
- Qualifications of the owner(s)
- Description of the product or service
- Analysis of the market
- Finance plan
Outline
11 parts of a business plan
- Title page
- Table of content
- Executive summary
- Vision and Mission statement
- Company overview
- Product and/or service plan
- Marketing plan
- Management plan
- Operating plan
- Financial plan
- Appendix of supporting documents
Outline
What will the business plan contain?
4
- Balance Sheet
- Income Statement
- Cash flow forecast
- Personal financial statement
There are two main ways to finance your business
- Equity
- Debt
Defne
Equity
Financing
Funds raised through the sale of stock (ownership) in the business.
Define
Debt
Financing
Borrowed funds that must be repaid with interest over a stated time period.
Equity Financing
Can be obtained through savings or investors. Investors typically receive an ownership interest in your company in return for their investment.
Start-up equity financing is typically sourced through yourself and people you know:
Equity Financing
- Personal savings
- Friends and relatives
- Government
- Angel or informal investors
Why invest your money in the business?
- Least costly source of funds
- You are more likely to get a loan with adequate equity in your business
- A business that has adequate equity is more likely to succeed.
Debt Financing
2
- The lender will evaluate your ability to borrow based on the strength of your business plan.
- Management capabilities, financing, your past personal credit history, and collateral available to secure a loan.
List 6
Sources of debt financing
- Line of credit
- Credit cards
- Suppliers’ credit
- Business Term Loan
- Leasing
- Government programs
- Leasing
- Government programs
- Line of credit – Used to cover short-term expenses like supplies, payroll, and rent.
- Credit cards – to cover and track small expenses or everyday business expenses.
- Suppliers’ credit – Sometimes a very cheap source of financing, do not overlook the value of this source.
- Business Term Loan – used to purchase long-term assets required to operate your business.
- Leasing – used to obtain assets to run your business, may provide more flexible options than traditional loans.
- Government programs – there are many government programs to support small businesses.
List
Common Causes for Business Failures
4
- Economic factors
- Financial causes
- Lack of experience
- Personal reasons
- Economic factors – business downturns and high interest rates
- Financial causes – inadequate capital, low cash balances, and high expenses
- Lack of experience– inadequate business knowledge, management experience, and technical expertise.
- Personal reasons– the owners may decide to sell the business or move on to other opportunities
List
What are the advantages facing owners of small business.
- React more quickly to changing market forces
- Develop innovative product ideas faster, with fewer financial resources and fewer people.
- Service specialized markets
Offer a higher level of personal service.
What are the disadvantages facing owners of small business.
- Difficulties in obtaining adequate financing
- Limited managerial skills may impact growth
- Expensive to comply with federal regulations
- Requires a major commitment by owner
How does the small business administration help small businesses?
Small Business Administration (SBA)
A government agency that helps people start and manage small businesses, helps small-business owners win federal contracts, and speaks on behalf of small businesses.
