Transcript
ENTREPRENEURSHIP AND STARTING A SMALL BUSINESS
Chapter 7
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ENTREPRENEURSHIP
Entrepreneurship is accepting the challenge of starting and running a business.
The word entrepreneur originates from the French word entreprendre, which means “to undertake.”
In a business context, it means to start a business.
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ENTREPRENEURSHIP DIFFERS FROM SMALL BUSINESS
While many people use the terms entrepreneurship and small business interchangeably, there are significant differences.
Entrepreneurial ventures differ from small businesses in four ways:
Amount of wealth creation
Speed of wealth creation
Risk
Innovation
Entrepreneurship is not always small, and small business is not always entrepreneurial.
While most businesses start small, it’s the intent to stay small that separates small business from entrepreneurship.
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WHY PEOPLE TAKE THE Entrepreneurial CHALLENGE
New Idea, Process, or Product. - Some entrepreneurs are driven by a firm belief that they can produce a better product, or a current product at a lower cost.
Independence - Many entrepreneurs simply do not enjoy working for someone else.
Challenge - Many people thrive on overcoming challenges.
Family Pattern - Some people grow up in families who have started their own businesses
Profit – it can be profitable, an upside not found in employment
Immigration – Programs have existed that allow investment immigration.
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WHAT DOES IT TAKE TO BE AN ENTREPRENEUR?
Entrepreneurial attributes to look for:
Self-directed.
Determined.
Action-Oriented
Highly Energetic
Tolerant of Uncertainty
Able to Learn Quickly
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Micropreneurs and home-based businesses
The smallest of small businesses are called micro-enterprises, most often defined as having fewer than five employees.
Many micropreneurs are owners of home-based businesses.
Challenges:
Getting New Customers
Managing Time
Keeping Work and Family Tasks Separate
Abiding by City Ordinances (Rules)
Managing Risk
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Why people start their own businesses
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Entrepreneurship within firms
Intrapreneurs
Creative people who work as entrepreneurs within corporations.
The idea is to use a company’s existing resources—human, financial, and physical—to launch new products and generate new profits.
The key for large business is to provide conditions to retain entrepreneurial activity and individuals
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small business
Definition: business establishment
Has at least one paid employee
Annual sales revenue of $30,000, or is incorporated
Has filed a federal corporate income tax return at least once in the previous three years.
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Importance of small business
Nearly all small businesses are Canadian-owned and managed.
This is in contrast to large businesses, of which many are foreign-owned and -managed.
Small business thus plays a major role in helping to maintain the Canadian identity and Canadian economic independence.
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causes of small-business failure:
Underpricing or overpricing goods or services.
Underestimating how much time it will take to build a market.
Attempting to do too much business with too little capital.
Starting with too much capital and being careless in its use.
Going into business with little or no experience.
Not allowing for setbacks and unexpected expenses.
Extending credit too freely and too rapidly.
Failing to keep complete, accurate records.
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Ways to get into your first business venture
1. Start your own company.
2. Buy an existing business.
3. Buy a franchise unit
4. Inherit/take over a family business.
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Managing a small business
The functions of business in a small-business setting:
Planning your business
Financing your business
Knowing your customers (marketing)
Managing your employees (human resource development)
Keeping records (accounting).
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Business plan
A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s).
A business plan forces potential owners of small businesses to be quite specific about the goods or services they intend to offer.
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Sample outline of a business plan
Cover Letter
Executive Summary
Company Background
Management Team
Financial Plan
Capital Required
Marketing Plan
Location Analysis
Manufacturing Plan
Appendix
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Sources of funds for a small business
Supplier credit
Personal savings
Retained earnings
Business credit cards
Personal loans, credit cards, lines of credit
Leasing
Loans from friends and relatives
Government lending agencies
Angel investment (next slide)
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Getting money to fund a small business
Angel Investors
Private individuals who invest their own money in potentially hot new companies before they go public.
Angel investors usually target their support (generally $20,000 to $500,000) to pre-start-up and early-stage companies.
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Capital sources of successful entrepreneurs
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Knowing your customers
Market
People with unsatisfied wants and needs who have both the resources and the willingness to buy.
One of the greatest advantages that small businesses have over larger ones is the ability to know their customers better and to adapt quickly to their ever-changing needs.
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Managing employees
Hiring, training, and motivating employees is critical.
Difficult to find good, qualified help when you offer less money and fewer benefits.
More risk, less security for employees than established companies
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Records and Accounting
Small business owners often have to do their own accounting, other records, filings.
It can be a low priority in a successful business, and a distraction if the business is failing.
It is critical to success!
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