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Nickels Nickels

McHughMcHugh

McHughMcHugh

Nickels Cover

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Chapter

6666 Entrepreneurship Entrepreneurship and and

Starting a Small Starting a Small Business Business

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How Did They Begin?How Did They Begin?He was selling baking soda & decided to entice customers by putting in two packages of chewing gum with each sale. The excitement over the gum started him thinking.

Two Seattle teenagers pooled their money & came up with $100. They started delivering messages & parcels for local merchants.

Though he didn’t graduate from college, he found out college students eat a lot of pizza. He started his first pizzeria with $900 near a campus with a promise of 3-minute delivery.

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Small Business Revival

Shift to ServicesShift to ServicesCAD/CAM Lessening CAD/CAM Lessening

Advantages of Big Advantages of Big ManufacturingManufacturing

Maturation of Baby Maturation of Baby BoomersBoomers

More Women in More Women in WorkforceWorkforce

19719700

19819800

19901990 20002000

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Entrepreneurship• DefinitionDefinition

• Characteristics of Characteristics of Successful Successful EntrepreneursEntrepreneurs

• IntrapreneurIntrapreneur

• Micropreneur vs. Micropreneur vs. Home-BasedHome-Based

CorporatioCorporationn

EntrepreneuEntrepreneurr

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Small Business-Small Business- AdvantagesAdvantages

Personalized Service/ Personalized Service/ Personal ContactPersonal Contact

FlexibilityFlexibilityLower CostsLower Costs Innovation OpportunitiesInnovation Opportunities

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Small Business-Small Business-DisadvantagesDisadvantages

- Limited ExperienceLimited Experience

- Long HoursLong Hours

- Insufficient CapitalInsufficient Capital

- High Failure RateHigh Failure Rate

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Why People StartWhy People Start Their Own BusinessesTheir Own Businesses

0 10 20 30 40 50 60

Use My Abilities

Control My Life

Build For Family

Like The Challenge

Live Where/How I Like

Source: BFIB/VISA Card Primer

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Reasons Women Leave Jobs in Big Reasons Women Leave Jobs in Big Companies to Start BusinessCompanies to Start Business

0%10%20%30%40%50%60%70%80%90%

Bette

r Ben

efits

More

Fam

ily T

ime

Recogniti

on

Less P

olitic

s

Partn

ers/C

olleagues

Influ

ence S

trate

gy

More

Money

Risk-T

aking

Source: FSB, March 2001

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Self- Perception of Self- Perception of Small Business OwnersSmall Business Owners

0% 5% 10% 15% 20% 25% 30% 35%

Managers

Heroes

Rainmakers

Artists

Mavericks

Source: USA Today, 5/20/03

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Who StartsWho Starts New Businesses?New Businesses?

18 - 2418 - 24 8% 8%25 - 3425 - 34 71% 71%35 - 4435 - 44 13% 13%45 - 5445 - 54 6% 6%55+55+ 2% 2%

AGE AT START-AGE AT START-UPUP

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Entrepreneurial AttributesEntrepreneurial Attributes

A.A. Self-Directed & Self-Self-Directed & Self-DisciplinedDisciplined

B.B. Self-NurturingSelf-Nurturing

C.C. Action-OrientedAction-Oriented

D.D. Highly EnergeticHighly Energetic

E.E. Tolerant of Tolerant of UncertaintyUncertainty

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Hours per WeekHours per Week Entrepreneurs Worked 1st YearEntrepreneurs Worked 1st Year

1 - 39 hours1 - 39 hours 8% 8%

40 - 49 hours40 - 49 hours 15%15%

50 - 59 hours50 - 59 hours 23%23%

60 - 69 hours60 - 69 hours 28%28%

70 - 79 hours70 - 79 hours 13%13%

80 + hours80 + hours 12%12%

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Reasons for Growth ofReasons for Growth of Home-Based BusinessesHome-Based Businesses

TechnologyTechnology

DownsizingDownsizing

AttitudesAttitudes

Tax AdvantagesTax Advantages

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Most Common Types ofMost Common Types ofHome-Based BusinessesHome-Based Businesses

Personal Svcs.14%

Bus. Services

27%

Bldg. Trades31%

Financial & Real Estate

5%Sales &

Distribution10%

Arts/ Design Creative

13%

Source: Independent Insurance Agents of America

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Home Office OwnersHome Office Owners

ChallengesChallenges

• New CustomersNew Customers

• Time ManagementTime Management

• Work vs. FamilyWork vs. Family

• City OrdinancesCity Ordinances

• RiskRisk

FocusFocus

• Find OpportunityFind Opportunity

• Results vs. RoutineResults vs. Routine

• Profit vs. PaycheckProfit vs. Paycheck

• New IdeasNew Ideas

• Long Term vs. Short Long Term vs. Short TermTerm

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Government EffortsGovernment Efforts Immigration Act of Immigration Act of

1990- Investor Visa1990- Investor Visa

Enterprise ZonesEnterprise Zones

IncubatorsIncubators

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What is Small Business?What is Small Business?

IndependentIndependent

Not DominantNot Dominant

< 500 Employees< 500 Employees

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U.S. Small BusinessesU.S. Small Businesses

20 Million Full/Part-Time Businesses20 Million Full/Part-Time Businesses

75% of New Jobs75% of New Jobs

45% of Gross Domestic Product45% of Gross Domestic Product

JobsJobs 80% of Americans = 180% of Americans = 1stst Job in Small Business Job in Small Business

75% of New Jobs = Small Business75% of New Jobs = Small Business

Women-Owned Growing RapidlyWomen-Owned Growing Rapidly

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Small Business SuccessSmall Business Success

Learn from OthersLearn from Others

Get ExperienceGet Experience

Take Over Successful FirmTake Over Successful Firm

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Successful BusinessSuccessful Business Management RequirementsManagement Requirements

Business PlanBusiness Plan Adequate FundingAdequate Funding

Lenders/InvestorsLenders/Investors ““Angels”Angels”Venture CapitalistsVenture Capitalists

Professional Advice/HelpProfessional Advice/Help Know Your CustomerKnow Your Customer Manage Human ResourcesManage Human Resources Keep Keep GoodGood Records Records

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Small Business StrategiesSmall Business Strategies

• Examine Marketing & ID Areas for Examine Marketing & ID Areas for GrowthGrowth

• Profile Best Customers & Market to Profile Best Customers & Market to Similar ProspectsSimilar Prospects

• Invest in Sales Training & TechnologyInvest in Sales Training & Technology

• Refresh Business Perspective With Refresh Business Perspective With Outside ViewsOutside Views

• Streamline Business & Eliminate WasteStreamline Business & Eliminate Waste

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Saving A Business In TroubleSaving A Business In Trouble

React/Not React/Not OverreactOverreact

Understand Understand Financial Financial SituationSituation

Find Professional Find Professional HelpHelp

Develop Develop “Recovery Plan”“Recovery Plan”

Be Visible Be Visible Confident LeaderConfident Leader

Remind Remind Employees of Employees of Stake in BusinessStake in Business

Don’t Get Stung Don’t Get Stung By Killer By Killer ““Bankruptcy”Bankruptcy”

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Capital Sources ofCapital Sources of Successful EntrepreneursSuccessful Entrepreneurs

0%

20%

40%

60%

80%

100%

VentureCapital

Family BankLoan

CreditCards

PersonalFunds

By Company Age

< 3 Years6+ YearsSOURCE: FSB, March 2001

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Reasons for aReasons for aBanker To Say “No”Banker To Say “No”

$ I don’t know I don’t know enough about enough about you or your you or your business.business.

$ You haven’t You haven’t clearly stated clearly stated why you need why you need the money.the money.

$ Your numbers Your numbers don’t support the don’t support the loan request.loan request.

$ Your collateral is Your collateral is lacking.lacking.

$ Your business Your business does not support does not support the loan on its the loan on its own merits.own merits.

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Small Business CollaboratorsSmall Business Collaborators

Small Business Administration (SBA)Small Business Administration (SBA) Microloan programMicroloan program SBICsSBICs SBDCsSBDCs

Service Corps of Retired Executives Service Corps of Retired Executives (SCORE)(SCORE)

Active Corps of Executives (ACE)Active Corps of Executives (ACE)

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Ways to ImproveWays to Improve Banking RelationshipsBanking Relationships

1)1) Provide Bank With Business Plan, Provide Bank With Business Plan, Brochures, Business Cards, etc.Brochures, Business Cards, etc.

2)2) Describe Business, Financial Describe Business, Financial Situation, PlansSituation, Plans

3)3) Ask About Scope of Bank ServicesAsk About Scope of Bank Services

4)4) Express Interest In Banker’s Express Interest In Banker’s Background- Family, Hobbies, etc.Background- Family, Hobbies, etc.

5)5) Follow Up With Phone Calls, VisitsFollow Up With Phone Calls, Visits

Source: St. Louis Business Monthly, August 2002

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Small Business & Small Business & International ProspectsInternational ProspectsPositivesPositives

1.1. World MarketWorld Market

2.2. Absorb Excess Absorb Excess InventoryInventory

3.3. Soften U.S. Soften U.S. DownturnsDownturns

4.4. Extend Product Extend Product LifeLife

NegativesNegatives1.1. Financing Financing

DifficultDifficult

2.2. How to Get How to Get Started?Started?

3.3. Lack of Cultural Lack of Cultural UnderstandingUnderstanding

4.4. PaperworkPaperwork

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International Small BusinessInternational Small Business

AdvantagesAdvantages

• Deal With Deal With IndividualsIndividuals

• Faster ShippingFaster Shipping

• Variety of SuppliersVariety of Suppliers

• Professional ServiceProfessional Service

InformationInformation

• Dept. of Commerce- Dept. of Commerce- www.bxa.doc.govwww.bxa.doc.gov

• SBA- International- SBA- International- www.sba.gov/hotlistwww.sba.gov/hotlist/internat.html/internat.html