C H AP T E R

SLIDE 1

CHAPTER

Entrepreneurship and
Small Business Management
6-1

Becoming an Entrepreneur

6-2

Small Business Basics

6-3

Starting a Small Business

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

6-2

Small Business
Basics

Goal 1 Identify important characteristics of

small businesses.
Goal 2 Recognize the competitive
advantages of small businesses.
Goal 3 Identify problems faced by many
small businesses.
2012 Cengage Learning. All Rights Reserved.

SLIDE 2

C H AP T E R

SMALL BUSINESS
OWNERSHIP

SLIDE 3

Description of a small business

Owner is usually the manager

Operates in one or very few locations
Typically serves a small market
Not dominant in its field

Small business employment

On average, small businesses are responsible for creating 6080% of all new jobs

Ownership diversity women 1/4th of all small business,

17% AA, Asian, Hispanic.
Age variances as well (majority over 35, 14% under)
Half are home based businesses
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Principles of Business, 8e

C H AP T E R

Common Types of Small Businesses

as Percent of All Small Businesses

2012 Cengage Learning. All Rights Reserved.

SLIDE 4

Principles of Business, 8e

SMALL BUSINESS
ADVANTAGES

C H AP T E R

SLIDE 5

Meeting customer needs

Although they may not be able to match costs of larger
businesses, they can compete by paying attention to their
customers and modifying to meet their needs

Providing unique services

Small businesses are especially suited to provide unique
services to customers.
They are able to provide products and services where smaller
orders and projects are required and tend to fill unique customer
needs, which larger companies do not provide.
Big business has an advantage when large numbers of
customers are involved, but small business wins through
personalization and details of customer desires.
2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

COMMON REASONS FOR

SMALL BUSINESS FAILURE

C H AP T E R

SLIDE 6

Not keeping adequate records

Not having enough start-up money
Lack of management experience
Lack of experience with the type of business
Not controlling operating expenses
Poor location for the business
Failure to manage credit offered to customers

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

SMALL BUSINESS
ASSISTANCE

C H AP T E R

SLIDE 7

University and college faculty members

Local groups of business people
Small Business Administration (SBA)

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

6-3

Starting a Small
Business

Goal 1 Recognize important factors to be

considered when starting a business.
Goal 2 Describe the elements of a business
plan.
Goal 3 Identify types and sources of financing
for a small business.
2012 Cengage Learning. All Rights Reserved.

SLIDE 8

C H AP T E R

SLIDE 9

THE BUSINESS DECISION

An idea plus experience come from hobbies, interests and business

experiences
Right place and time location, customer traffic, and timing are
important
Team approach a business is not easy to run without the help of
others
A team approach allows employees to feel valued and motivated to take
personal responsibility for the benefit of the business.
Owners cannot expect to be able to do everything alone. Building a team
will allow the business to increase productivity and, ultimately, profits.

Preparation and research having enough information to make the

right decisions.
Customer info, competition, government regulations, etc.
Knowing these things in advance can help the business operate smoothly

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

WHAT IS A
BUSINESS PLAN?

C H AP T E R

SLIDE 10

A business plan is a written description of

the business idea and how it will be
carried out, including all major business
activities.

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

ELEMENTS OF A
BUSINESS PLAN

C H AP T E R

SLIDE 11

Description of the Business

The business idea
Major products and services
Ownership structure
Strengths/weaknesses
Long- and short-term goals

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

ELEMENTS OF A
BUSINESS PLAN

C H AP T E R

SLIDE 12

(continued)

Description of Competition
Characteristics of the industry
Condition of the economy
Strengths and weaknesses of major
competitors

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

ELEMENTS OF A
BUSINESS PLAN

C H AP T E R

SLIDE 13

(continued)

Customer Analysis
Description of customers
Location, number, and resources of
customers
Sales forecasts

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

ELEMENTS OF A
BUSINESS PLAN

C H AP T E R

SLIDE 14

(continued)

Operations Plan
Organization of the company
Description of major operations
Analysis of resources needed
Human resource plans

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

ELEMENTS OF A
BUSINESS PLAN

C H AP T E R

SLIDE 15

(continued)

Marketing Plan
Description of major marketing activities
Description of resources needed
Schedule of marketing activities

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

C H AP T E R

ELEMENTS OF A
BUSINESS PLAN

SLIDE 16

(continued)

Financial Plans
Start-up costs
Short- and long-term financial needs
Sources of financing
Budgets and financial statements

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

STEPS IN DEVELOPING THE

BUSINESS PLAN

C H AP T E R

SLIDE 17

Gather and review information

Develop the strategic alternatives
Write the plan
Ask an expert to review the plan

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

C H AP T E R

SLIDE 18

What are the strategic alternatives in a

business plan?
Strategic alternatives are alternative plans for
production, staffing, financing, and so on.
Even the best business plan cannot predict every
possible circumstance.
An alternate plan allows a business to be prepared
for the unforeseeable.

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

FINANCING
THE SMALL BUSINESS

C H AP T E R

SLIDE 19

Types of financing
Start-up financing
Short-term financing
Long-term financing

Sources of financing
Owner-supplied funds
Borrowed funds

2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e

C H AP T E R

SLIDE 20

In addition to owner-supplied capital,

what are several other sources of
financing for a small business?
Borrowed money may come from banks,
finance companies, or other individuals,
such as friends and family.
Some suppliers may also be willing to
extend credit.
2012 Cengage Learning. All Rights Reserved.

Principles of Business, 8e