Place Slide Title Text Here

JOHN R. SCHERMERHORN, JR.

MANAGEMENT
12 Edition
th

Chapter 6

Entrepreneurship and
Small Business
Management
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 Chapter 6 Study
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Slide TitleAhead
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Questions
1. What is entrepreneurship and who
are entrepreneurs?
2. What is special about small
business entrepreneurship?
3. How do entrepreneurs start and
finance new ventures?

2013JohnWiley&Sons,Inc.Allrightsreserved.

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Chapter
Learning
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1. Nature of Entrepreneurship
1.
2.
3.
4.

Who are the entrepreneurs?

Characteristics of entrepreneurs
Women and minority entrepreneurs
Social entrepreneurship

2. Entrepreneurship and Small Business

1.
2.
3.
4.
5.

Why and how to get started

Web-based business models
Family businesses
Why small businesses fail
Small business development

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Chapter
Learning
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3. New Venture Creation

1.
2.
3.
4.

Life cycles of entrepreneurial firms

Writing the business plan
Choosing the form of ownership
Financing the new venture

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Takeaway
1: Nature
of Entrepreneurship
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Entrepreneurship
Risk-taking behavior that results in new
opportunities

Classic entrepreneur
Pursues opportunities others view as problems

Serial entrepreneur
Starts and runs business and nonprofits over
and over again

First-mover advantage
First to exploit a niche or enter a market

2013JohnWiley&Sons,Inc.Allrightsreserved.

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Takeaway
1: Nature
of Entrepreneurship
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Intrapreneurs
Display entrepreneurial behavior
as employees of larger firms

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Takeaway
1: Nature of
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Entrepreneurship

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Takeaway
1: Nature of
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Entrepreneurship

Women and minority entrepreneurs

are growing in numbers
Necessity-based entrepreneurship
People start a business because no
other
employment opportunities exist

2013JohnWiley&Sons,Inc.Allrightsreserved.

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Takeaway
1: Nature of
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Title Text Here
Entrepreneurship

Social entrepreneurship

Unique form of ethical entrepreneurship

that seeks new ways to solve pressing
social problems
Social entrepreneurs
Take risks to find new ways to solve
pressing
social problems such as poverty, literacy,
illness,
homelessness

2013JohnWiley&Sons,Inc.Allrightsreserved.

6-9

Takeaway
2: Entrepreneurship
and Small
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Business

A small business has fewer than 500 employees

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Takeaway
2: Title
Entrepreneurship
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Starting a small business
Franchise
One business owner sells to another the right to operate
the same business in another location

Business model
Plan for making a profit by generating revenues that are
greater than costs

Startup
New and temporary venture that is trying to establish a
profitable business model

Lean startups
Use open source software and free web services to contain
costs while staying small and keeping operations simple

2013JohnWiley&Sons,Inc.Allrightsreserved.

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Takeaway
2: Entrepreneurship
and Small
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Business
Types of web-based business models

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Takeaway
2: Entrepreneurship
and Small
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Business
Family owned businesses
Account for 78% of new jobs created in the
U.S.
Provide 60% of the nations employment
Feuds result when family members
disagree over how the business is run
Possible succession problems
Who will run the business when the current
head leaves?
Succession plan outlines leadership transition
and financial matters

2013JohnWiley&Sons,Inc.Allrightsreserved.

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Takeaway
2: Entrepreneurship
and Small
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Slide Title
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Business
Why small businesses fail
SBA reports that as many as 60 to 80%
of new businesses fail in first five years
Reasons why small businesses fail
- Lack of experience

- Lack of expertise

- Lack of commitment
- Lack of strategy
leadership
- Ethical failure

- Growing too fast

- Lack of strategic
- Poor financial control

2013JohnWiley&Sons,Inc.Allrightsreserved.

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Takeaway
2: Entrepreneurship
and Small
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Slide Title
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Business
Small business development
Business incubator
Offers space, shared services and advice to
get small businesses started

Small Business Development Centers

Founded with U.S. Small Business
Administration to provide advice to new
and existing small businesses

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Takeaway
New
Venture Creation
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Life cycles of entrepreneurial firms

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Takeaway
New
Venture Creation
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Business plan
Describes the direction for a new
business and the financing needed to
operate it
Banks want to see a well-developed
business plan before loaning money

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Takeaway
New
Venture Creation
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Sample Business Plan Outline:

Executive Summary
Industry Analysis
Company description
Products and services description
Market description
Marketing Strategy
Operations description
Staffing description
Financial projections
Capital needs
Milestones
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Takeaway
New
Venture Creation
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Forms of ownership
Sole Proprietorship
An individual or married couple pursuing
business for a profit. This does not involve
incorporation.

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Takeaway
New
Venture Creation
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Forms of ownership
Partnership
Two or more people agree to contribute resources to
start and operate a business together

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Takeaway
New
Venture Creation
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Forms of ownership
Corporation
A legal entity that exists separately from its
owners

Limited Liability Corporation (LLC)

A combination of sole proprietorship,
partnership, and corporation
Protects owners against personal loss other than
what is invested in the company
Treated as a proprietorship or partnership for tax
purposes

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Takeaway
New
Venture Creation
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Financing
Debt Financing
involves borrowing money from another person, a
bank, or a financial institution

Equity Financing
involves exchanging ownership shares for outside
investment monies

Venture Capitalists
Involves making large investments in new ventures
in return for an equity stake in the business

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Takeaway
New
Venture Creation
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Financing
Angel Investor
A wealthy individual willing to invest in
return for equity in a new venture

Initial Public Offering (IPO)

An initial selling of shares of stock to the
public at large

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