Topic 4 - Entrepreneurship: Starting and Managing Your Own Business

Question 1

Define

Entrepreneurs

Answer 1

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.

Question 2

List

Types of Entrepreneurs

3

Answer 2

• Classic Entrepreneurs
• Multipreneurs
• Intrapreneurs

Question 3

Classic Entrepreneurs

Answer 3

Risk takers who start their own companies

Question 4

Multipreneurs

Answer 4

Entrepreneurs who start a series of companies

Question 5

Intrapreneurs

Answer 5

Employees who apply their creativity, vision, and knowledge within the large corporation

Question 6

List

Why become an entrepreneur?

Answer 6

• 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

Question 7

List

Which characteristics do successful entrepreneurs share?

Answer 7

• Curiosity
• Structured Experimentation
• Adaptability
• Decisiveness
• Team Building
• Risk Tolerance
• Comfortable with Failure
• Persistence
• Innovation
• Long-Term Focus

Question 8

List

What is a small business?

Answer 8

• Independently managed
• Owned by an individual or a small group
• Locally based
• Not a dominant company

Question 9

What is a business profile?

Answer 9

This introduction to your business plan provides important information about your company’s business structure, key principles, professional advisors, and financial history.

Question 10

List

What are the first steps to take if you are starting your own business?

Answer 10

1. Identify your reasons
2. Self-analysis
3. Personal skills and experience
4. Finding a niche
5. Market analysis (market research)
6. Planning your startup: write a business plan
7. Finances: how to fund your business

Question 11

What are the 5 key features of a business plan?

Answer 11

• General description of the company
• Qualifications of the owner(s)
• Description of the product or service
• Analysis of the market
• Finance plan

Question 12

Outline

11 parts of a business plan

Answer 12

• 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

Question 13

Outline

What will the business plan contain?

4

Answer 13

• Balance Sheet
• Income Statement
• Cash flow forecast
• Personal financial statement

Question 14

There are two main ways to finance your business

Answer 14

• Equity
• Debt

Question 15

Defne

Equity

Financing

Answer 15

Funds raised through the sale of stock (ownership) in the business.

Question 16

Define

Debt

Financing

Answer 16

Borrowed funds that must be repaid with interest over a stated time period.

Question 17

Equity Financing

Answer 17

Can be obtained through savings or investors. Investors typically receive an ownership interest in your company in return for their investment.

Question 18

Start-up equity financing is typically sourced through yourself and people you know:

Equity Financing

Answer 18

• Personal savings
• Friends and relatives
• Government
• Angel or informal investors

Question 19

Why invest your money in the business?

Answer 19

• 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.

Question 20

Debt Financing

2

Answer 20

• 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.

Question 21

List 6

Sources of debt financing

Answer 21

• 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.

Question 22

List

Common Causes for Business Failures

4

Answer 22

• 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

Question 23

List

What are the advantages facing owners of small business.

Answer 23

• 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.

Question 23

What are the disadvantages facing owners of small business.

Answer 23

• Difficulties in obtaining adequate financing
• Limited managerial skills may impact growth
• Expensive to comply with federal regulations
• Requires a major commitment by owner

Question 24

How does the small business administration help small businesses?

Small Business Administration (SBA)

Answer 24

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.