chapter 6 managing small business start-ups. the process of initiating a business venture organizing...

Chapter 6Managing Small Business Start-Ups

• The process of initiating a business venture

• Organizing necessary resources: risk/reward

• An entrepreneur engages in entrepreneurship

– Recognizes a valuable idea

– Assumes financial and legal risks

• Successful entrepreneurs have many different motivations

What is Entrepreneurship?

Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 2

6.1 Five Types of Small Business Owners


• Vital, dynamic, and increasingly important to the economy– Generated 64% of new jobs over the last 15 years– Employs more than ½ private sector jobs– Represent 99.7% of all firms

• Entrepreneurial companies are engines for job creation and innovation

• Entrepreneurship is booming around the world

Entrepreneurship Today


• Independently owned and operated, organized for profit but not dominant in the field

• Size standards for small business are currently under revision– Meet change and shifting economy– Daunting task but will provide greater flexibility

Definition of Small Business


6.2 Entrepreneurial Activity Around the World


6.3 Examples of SBA Definitions of Small Business


• More likely to be the first-born• Parents are likely entrepreneurs• Immigrants often start businesses• Women are embracing entrepreneurship• Minorities show a high rate of

entrepreneurship• As younger people become entrepreneurs

due to the economy; entrepreneurship will be increasingly diverse

Who Are Entrepreneurs?


6.4 Racial & Ethnic Composition of Small

Business Owners


• High importance on being free to achieve• Want to maximize their potential• Six important traits:

Internal Locus of Control High Energy Level Need to Achieve Self-Confidence Awareness of Passing Time Tolerance for Ambiguity

Personality Traits


6.5 Characteristics of Entrepreneurs


Combines the creativity, business smarts, passion, and hard work of the traditional entrepreneur with a mission to change the world for

the better

Social Entrepreneurship


Start with an idea

Write a business plan

Choose a legal structure

Arrange financing

Launching an Entrepreneurial Start-Up


6.6 Entrepreneurial Motivation and New Business Ideas


1. Clear, compelling vision

2. Realistic financial projects

3. Profile target market

4. Profile the industry and competition

5. Introduce the management team

6. Well written and formatted

7. Keep it short

8. Highlight critical risks

9. Outline sources of funding

10. Capture attention with a great summary

Writing a Business Plan


• Sole proprietorship – unincorporated business owned by an individual for profit

Unlimited liability

• Partnership – an unincorporated business owned by two or more people

Possible disagreementsUnlimited liability

• Corporation – an artificial entity created by the state and existing apart from its owners

Expensive and complex

Choosing a Legal Structure


• Debt Financing, money that must be repaid:– Family and friends– Bank loans/Finance companies– Personal credit cards– Wealthy individuals– Angel financing

• Equity Financing, money invested by owners or those purchasing stock– Venture capital firms

Arranging Financing


6.7 Sources of Start-up Capital

for Entrepreneurs


Start a new businessBuy an existing businessBuy a franchiseParticipate in a business incubator

Tactics for Becoming a Business Owner

• Franchising is an arrangement to purchase the right to distribute the product or service with the help of the owner

• Business incubators provide resources to entrepreneurs like office space, support services, and legal advice


6.8 Top Ten Fastest Growing Franchises for 2010


6.9 Sample Questions for Choosing a Franchise


• The Internet is aiding in the launch of new businesses and new ventures

• Starting an online business:– Find a market niche– Create a professional website– Create a domain name– Build online relationships

Starting an Online Business


6.10 Five Stages of Growth for an Entrepreneurial

Company


• Planning– The business plan should be treated as a living document– Recognize the value of the web for operations

• Organizing– Delegate and decentralize as the business grows– Teams, policies, and divisions will be required

• Leading– Motivate employees for cooperation and growth

• Controlling– Accounting records, budgets, statistical reports, and

technology

Managing A Growing Business


chapter 6 managing small business start-ups. the process of initiating a business venture organizing...

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