LET Entrep Notes

LET Review
Shailini G. Gestosani, M.Ed.

Entrepreneurship
• The concept of entrepreneurship has a wide range of meanings. On
the one extreme an entrepreneur is a person of very high aptitude
who pioneers change, on the other extreme definitions, any one who
wants to work for himself or herself is considered to be an
entrepreneur.
• The work entrepreneur originates from the French word
“entreprende” which means “to undertake”.
• In business context, it means to start a business.
• The Merriam-Webster Dictionary presents the definition of an
entrepreneur as ome who organizes, manages, and assumes the risks
of a business or enterprise.
Entrepreneurship
• Entrepreneurship is defined as an activity that involves the discovery,
evaluation and exploitation of opportunities to introduce new goods
and services, ways of organizing, markets, processes and raw
materials through organizing efforts that previously had not existed
(Venkatamaraman, 1997; Shane & Ventakataraman, 2000)
• Other definitions adheres to the notion of innovations as a key
attribute of entrepreneurship
Entrepreneurship
• The process of creating something new with value by devoting time
and effort, assuming the accompanying financial, psychic and social
risks, and receiving the resulting rewards of monetary and personal
satisfaction and independence.
•
Schumpter’s Definition of Entrepreneur
Reform or revolutionize the pattern of production by

exploiting an invention or more generally , an untried
technological possibility for producing a new
commodity
Drucker’s view on Entrepreneur
Innovation is a specific tool of entrepreneurs, this
means by which they exploit changes as an
opportunity for different business or a different
service.
Who is an entrepreneur?
• An entrepreneur is a person who starts and or operates a business.
• Creative and innovative
• Starts something new
• Owner-manager and willing to take risks
• He is someone not willing to work for others, instead, he wants others to work for
him
• Employment Considerations:
Whether to be self-employed or a dependent is a major decision for any
individuals. It requires careful consideration.
Advantages of employment
• Security
• the prestige or pride in association or working with a well-known reputable business or
government organization
• regularity of income
• less annoyance from shifting from one type of work to another
• less worry outside business hours
• absence of risk of capital or personal savings
• personal reputation or the success of the business
• shorter hours
• regular vacations and pay for overtime
• less planning for tomorrow’s work
• limited responsibility
• more regular routine
Disadvantages of employment:
• low salary
• possibility of transfer
• the limitation of the employee’s right to exercise personal judgment
and initiative
Advantages of Entrepreneurship
1. Security. Once established small business ownership offers security comparable
to employment
2. A feeling of independence. The satisfaction of being known in the community
as an independent businessman and not merely an employee who takes orders
from his boss.
3. Opportunities for greater profit. All the profit goes to the owner or
entrepreneur.
4. Owner manager. If a person owns his own business, he cannot be fired.
5. Confidence. No fear of jealousy, fractions, internal politics, favouritism instead,
he has the forces of competition to be met successfully.
6. There is freedom to exercise personal judgment. As his own boss, the individual
has no restraints on his actions and is able to express himself more fully and
can develop any creative idea he wants. He has a chance to exercise all his
abilities, skill, knowledge, energy and desire for pioneering and adventure.
Disadvantages of Entreprenurship
1. Risk of Financial Loss
2. Uncertainty or irregularity of business income.
3. Longer hours of work and sometime more worry
4. Entire responsibility for all decisions, and for meeting expenses
5. Income is small, at the beginning of the business operation.
Why Be an Entrepreneur?
The biggest reward of becoming an entrepreneur is the personal
satisfaction that comes from having the freedom to make your own
business decisions and then act on them.
 Making Your Own Rules. When you own a business,

you get to be your own boss.
 Doing Work You Enjoy. Since the majority of most
peoples’ lives is spent working, why not spend that time
doing something you enjoy?
 Creating Greater Wealth. There’s no limit to what an
entrepreneur can make.
 Helping Your Community. Being an entrepreneur lets
you make your community and world a better place.
Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education,
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
Risks of Being an Entrepreneur
 Potential Business Failure. Being fully responsible
means the success or failure of your business rests on
you.
 Unexpected Obstacles. Problems can happen that
you don’t expect.
 Financial Insecurity. Many new businesses don’t
make much money in the beginning, so you may not
always be able to pay yourself.
 Long Hours and Hard Work. It’s not unusual for
entrepreneurs to work a lot of extra hours to make their
businesses successful. This is especially true during
the initial start-up process.
Characteristics of Successful
Entrepreneurs
Self-assessment—evaluating your strengths and weaknesses—
is an important part of becoming an entrepreneur.
 An aptitude is a natural ability to do a particular type of

work or activity well.
 An attitude is a way of viewing or thinking about
something that affects how you feel about it.
Entrepreneurs tend to be people with positive attitudes.
Characteristics of Successful
Entrepreneurs
Personal Characterisitics Skills
 Courage A skill is an ability that’s learned
 Creativity through training and practice.
 Curiosity  Business Skill
 Determination  Communication Skill
 Discipline  Computer Skill
 Empathy  Decision-Making and Problem-
 Enthusiasm Solving Skills
 Flexibility  Mathematical Skill
 Honesty  Organizational Skill
 Patience  People Skills
 Responsibility
Increasing Your Potential
Increase your business and entrepreneurial potential by
focusing on six specific areas.
 Business Knowledge. Reading magazine and newspaper articles,

search the Internet, and talk to business owners.
 Financial Skills. Strengthen your math skills.
 Career Exploration. Evaluate your strengths and weaknesses,
explore careers interest you.
 Community Awareness. Look for volunteering opportunities and find
out if any companies in your area provide internship programs.
 Education. Obtaining a good education benefits you personally and
open doors to more career opportunities.
 Relationships. Spend time with people who believe in you and
inspire you.
Why Study Entrepreneurship?
There are two primary reasons why studying entrepreneurship
makes sense: you learn to think like an entrepreneur and you
develop a vision for your life.
What is an Entrepreneur?
One who creates a new business in the face of risk
and uncertainty for the purpose of achieving profit
and growth by identifying and assembling the
necessary resources to capitalize on them.
CONCEPT OF ENTERPRENEUR
• RISK BEARER
• ORGANISER
• INNOVATOR
Four basic aspects of being an entrepreneur:
• Creation of something of value
• Devotion of necessary time and effort
• Assumption of necessary risks
• Getting rewards
Characteristics of Entrepreneurs
• Desire for responsibility
• Preference for moderate risk
• Confidence in their ability to succeed
• Desire for immediate feedback
• High level of energy
• Future orientation
• Skilled at organizing
• Value achievement over money
Functions of Entrepreneur
• Innovation
• Risk Taking
• Organization Building
• Absorb uncertainty
• Frame the Challenge
• Build Commitment
Traits of an Entrepreneur
• Self-confident and optimistic
• Able to take calculated risk
• Respond positively to changes
• Flexible and able to adapt
• Knowledgeable of markets
• Able to get along well with others
• Independent minded
Traits of an Entrepreneur
• Energetic and diligent
• Creative, need to achieve
• Dynamic Leader
• Responsive to suggestions
• Take initiatives
• Resourceful and persevering
• Perceptive with foresight
Motivation is an inner spirit that activates and
direct our behavior towards our goal.
What motivates an individual to behave entrepreneurially is
explained by the behavioral scientists?
Entrepreneurship: Sources of Supply &
Motivation
Entrepreneurial Source of Entrepreneurial
Author Phenomenon Supply Motive Force
Schumpt Innate urge to achieve
er Individual Extraordinary individuals sucess
Weber Status Groups Extraordinary individuals Religious beliefs
Mc Religious & Social Individuals with high n- Child rearing practices &
Celland Groups achievement creative climate
Subordinated Individuals in the soceity driven by Status withdrawal & relative
Hagen Groups a duty to achieve social blockage
INTERNAL FACTORS
• Desire to do something new
• Educational Background
• Experience
EXTERNAL FACORS
• Govt. assistance and support
• Availability of labor and raw material
• Encouragement from big business houses
• Promising demand for the product
TYPES OF ENTREPRENEUR
• According to the type of business
• According to the use of technology
• According to the motivation
• According to the growth
• According to the area
• According to the gender & age
• According to the sale of operation
Type of Business
• Business Entrepreneur( individuals who conceive an idea for a new product
or service & then create a business to materialize their idea.)
• Trading Entrepreneur (Is one who undertakes trading activities & is not
concerned with the manufacturing work)
• Industrial Entrepreneur (a manufacturer who identifies the potential needs
of customers & tailors a product to meet the marketing needs)
• Corporate Entrepreneur (Is a person who demonstrates his innovative skill in
organizing & managing corporate undertaking)
• Agricultural Entrepreneur ( Is one who undertake agricultural activities as raising
& marketing of crops, fertilizers & other input.)
• Retail Entrepreneur
• Service Entrepreneur
Use of Technology
• Technical Entrepreneur (he demonstrates his innovative capabilities in matter
of production of goods & rendering services)
• Non- Technical Entrepreneur (concerned only with developing alternatives
marketing & distribution strategies to promote their business)
• Professional Entrepreneur (a person who is interested in establishing the
business but does not have interest in managing it once)
According to Motivation
• Pure Entrepreneur (an individual who is motivated by psychological & economic
rewards)
• Induced Entrepreneur (is one who induced to take up entrepreneurial task due to
the policy measures of the Govt.)
• Motivated Entrepreneur (they are motivated by the desire of self fulfillment)
• Spontaneous Entrepreneur (those who start their business their by natural
talents (inborn abilities)
According to area
• Urban Entrepreneur
• Rural Entrepreneur
According to gender & age
• Men Entrepreneur
• Women Entrepreneur
According to sale of operation
• Small scale Entrepreneur
• Large scale Entrepreneur
• Innovating Entrepreneurs
• Imitative Entrepreneurs
• Fabian Entrepreneurs
• Drone Entrepreneurs
INNOVATING ENTERPRENEURS
Is one who introduces a new goods, inaugurates new
method of production, discovers new market &
reorganizes the enterprise
IMITATIVE ENTERPRENEURS
These are characterized by readiness to adopt
successful innovations inaugurated by innovating
entrepreneurs
FABIAN ENTERPRENEURS
These are characterized by a great caution & skepticism in
experimenting any changes in their enterprises
DRONE ENTERPRENEURS
These are characterized by a refusal to adopt opportunities to
make changes in the production formulae even at the cost of
severely reduced returns relative to the other like producers.
THEORIES OF ENTREPRENEURSHIP
• Economic
• Psychological
• Sociological
ECONOMIC THEORY
Economic incentives are the main drive for the entrepreneurial
activities. The persons inner drives have always been associated with
economic gains .Thus these incentives are regarded as sufficient
conditions for the emergence of industrial entrepreneurship.
SOCIOLOGICAL THEORY
Sociologists argue that entrepreneurship is most likely to
emerge under a specific social culture. Social values are the
most important determinant of the attitudes & role
expectations.
PSYCHOLOGICAL THEORY
This theory, entrepreneurship is most likely to emerge when a society
has sufficient supply of individuals possessing particular characteristics.
Schumpter believes that entrepreneurs are primarily motivated by will
of conquer.
Mc Clelland asserts that it is high need for achievement that motivates
people towards entrepreneurial activities.
Barriers to Entrepreneurship
• Lack of viable concept
• Lack of market knowledge
• Lack of technical skills
• Lack of capital
• Lack of business know how
• Time presences and distractions
• Legal constraints and regulations
Culture
• The sum total of social behavior that includes at least three elements namely,
knowledge and beliefs, ideals and preferences.
• Entrepreneurial culture implies vision,values,norms and traits that are conductive
for the development of the economy.
• The emerging market environment and globalization is challenging every
organization & every person in the organization to consider, evaluate and bring
out the changes in thinking, vision and action.
Nature of Culture
• Basic beliefs and assumptions about the company
• Emotional aspect
• Reflect history
• Inherently symbolic
• Substance and Form
Components of Culture
• Values
• Rules of Conduct
• Vocabulary
• Methodology
• Rituals
• Myths and Stores
Elements of an Entrepreneurial Culture
• People and empowerment focused
• Value creation through innovation and change
• Attention to the basics
• Hands-on management
• Doing the right thing
• Freedom to grow and to fail
• Commitment and personal responsibility
• Emphasis on the future and a sense of urgency
Individualism vs Collectivism
• Individualism
• Self-orientation
• Emphasis on self-efficiency and control
• Pursuit of individual goals
• Value system driven by pride in their own accomplishments
• Collectivism
• Group-orientation
• Subordination of personal interests and goals
• Emphasis on sharing
• Concern for group welfare
• Entrepreneurial Intensity is achieved by balance between
individualism and collectivism
Steps in the Entrepreneurial Process
1. Discovery
2. Concept Development
3. Resourcing
4. Actualization
5. Harvesting
Discovery: The stage in which the

entrepreneur generates ideas,
recognizes opportunities, and studies
the market
Concept Development:
• Develop a business plan: a detailed proposal
describing the business idea
• Choose business location
• Will a patent or trademark be required?
Resourcing: The stage in which the entrepreneur
identifies and acquires the financial, human, and
capital resources needed for the venture startup, etc
Actualization: The stage in which the entrepreneur
operates the business and utilizes resources to achieve
its goals/objectives.
Harvesting: The stage in which the entrepreneur
decides on venture’s future growth, development, or
demise.
• The Philippine government, recognizing the importance of
entrepreneurship to the economy had initiated the inclusion of
subjects on Entrepreneurship in intermediate grade and high school.
Entrepreneurship has been among the subject offerings and course
majors in the college level and also in the post-graduate schools. The
government also provide initiative for more people to go into
business. In addition, government projects like trade fairs, trade
mission are being pushed to help entrepreneurs. Established
businesses also serve as big brothers to would-be entrepreneurs. Civic
organizations and non-government organizations called NGO’s help
promote entrepreneurship.
Role of Entrepreneurs in the Economy
• Provide employment and income that moves the economy forward
employment
and income
entrepreneur Savings and

investment taxes
Vicious Cycle of Development

The Vicious Cycle of Development also shows
that entrepreneurs are:
1. Mobilizers of capital  entrepreneurs sometime use their own savings as
capital for their business ventures. However, if they do not have the capital,
money can be borrowed from banks to finance heir intended business
2. Service providers  Business ventures of entrepreneurs could be along the line
of service like parlor, spas or coffee shops
3. Employers  usually, entrepreneurs hire people to help them in their business.
4. Tax payers  business establishments pay taxes to the government. Thus,
more business would mean more taxes and better government service
5. Suppliers of products  products and services are available through the efforts
of the entrepreneurs. Without them, a scarcity of certain products and services
will be felt.
Role of Entrepreneurship in Economic Growth
• Micro, small and medium enterprises (SMEs) are a vital component of
the economy.  they provide employment of 70% of the Philippine
labor force.
• It is important for the economy to increase the output of the MSME’s
to help the conomy moving and growing.
• To attain this, MSME’s should have:
• Credit
• Better sources of raw materials
• Modern technology
• More marketing information
Government strategies to help MSMEs:
1. Provide credit, technology and marketing support to new
enterprises
2. Tap overseas Filipino workers to invest their earnings in MSMEs
3. Promote greater involvement of local government units (LGUs) in
promoting small business activities by providing them information
on business opportunities, available sources of funds, and the latest
product design
RA 9178 Barangay Micro Business Enterprise
(BMBEs) Act of 2002 provides five incentives and
benefits for entrepreneurs:
1. Exempts BMBE’s from income tax and encourages LGUs to exempt
or reduce local taxes imposed on BMBEs.
2. Exempts BMBEs from coverage of the minimum wage law
3. Improves credit delivery to BMBEs
4. Provides for technology transfer, production and management
training and marketing assistance to BMBEs
5. Provides trade and investment promotion to BMBEs.
Feasibility Study
• Designed to discover if a business or project is “feasible” or not
• Does the business or project further investment of time, money and
further study or is it a non-starter?
• A feasibility study is a relatively inexpensive way to safeguard any wastage
of further investment.
• The feasibility study outlines and analyzes several alternatives or methods
of achieving business success.
• The feasibility study helps to narrow the scope of the project to identify the
best business scenario(s).
• If a project is seen to be feasible from the results of the feasibility study,
the next logical step is to commission a full business plan
Feasibility study
• The feasibility helps to narrow the scope of the project to identify and
define two or three scenarios or alternatives.
• If venture is deemed not to be feasible, efforts may be made to
correct its deficiencies, other alternatives may be explored, or the
idea is dropped.
Business plan
• Designed to plan in advance how a business or project will be started,
implemented and managed
• Business plans are commissioned for one of the three reasons:
reorganization, investment/funding or a management blueprint for
operation
• A detailed road map for building a given company
• Contains all that the feasibility study has plus specific timelines, detailed
budgets with forecasts, letters of intent, resume of staff, background,
competition, strengths and weakness, worksheets (with full supporting
references and notations) and appendices (may include copies of all
documentations in relation to key analyses as well as plans that together
represent the road map for company development)
Business plan
• A well-written business plan will show exactly what revenues can be
expected and when to expect them, what overheads and expenses
will need to be paid and exactly when they will be due.
• It will also show staffing levels and salaries along with costs of
employment, sales with monthly and seasonal trends, set-up costs,
building/office ands supplies costs and a myriad of other costs and
projections.
• However, while these costs and revenues form an important part of
the required picture, a business plan will also need to demonstrate
that all required plans are completed
Business Plan
• Provides a planning function
• The business plan outlines the actions needed to take the proposal
from “idea” to “reality”
• The business plan deals with only one alternative or scenario.
• The blueprint for project implementation.
Managing the business  Profit making
business
• Running a small-scale business is not only buying , producing and selling.
• It also means:
• Keeping clear records
• Verifying profit and loss
• Managing cash flows
• Maintaining tools, equipment and buildings
• Reviewing the market regularly
• Expanding the business wisely
• Although setting up the micro-enterprise may have its difficulties, making it
a profitable venture is the biggest challenge  It is therefore necessary to
closely monitor each investment and purchase cost to know the exact
amount.
Cash flow
• Cash flow is the money moving in and out of the enterprise.
• The amount of money coming in and going out of the business.
• If all the money received is put in the bank and all the expenses are paid
from the money in the bank, the cash flow is the total amount of money
moving in the bankbook.
• However care must be taken not to spend what appears to be profit before
reviewing further investment needs. These needs can include
• Purchasing of raw material
• Payment of utilities (electricity, water, etc.)
• Repair of broken equipment
• Payment for extra labor
• Repayment of the loan
• Replacement of tools and materials
Marketing functions
• For a marketing system to be operative and effective, there are three
general types of functions which it must provide:
• Exchange functions
• Physical functions
• Facilitating functions
Exchange Functions
• Buying
• Selling
• Pricing
• Exchange functions are what is commonly thought of as marketing. They

involve finding a buyer or a seller, negotiating price and transferring
ownership (but not necessary physical transfer). These functions take place
at the “market”  the physical meeting point for buyers and sellers at the
point of production or via some other means of communication.
• At this point, formal and informal property rights are important to ensure
the reliable transfer of ownership and to guarantee legality (items for sale
are not stolen and will not be reclaimed)
Physical Functions
• Assembling
• Transport and handling
• Grading and standardization
• Processing and packaging
• Storage
• Physical Functions enable the actual flow of commodities through space and time from
producer to consumer and their transformation to a form desirable product to the consumer.
• Assembling or concentrating the product at convenient points allows its economical
transport (example: getting enough animals together to transport cheaply). This is a valuable
function which is often overlooked in the public perception of traders. Storage allows the
commodity to be held until peak season demand, thereby stabilizing supply. Processing
transforms the commodity into the products desired by the consumers. Grading and
standardization allow the consumer to be more confident of the characteristics of the good
being purchased.
Facilitating functions
• Financing and risk-bearing
• Market information
• Demand and supply creation
• Market research
• Financing and risk-bearing are two important functions. The owner of good at any
marketing stage must sacrifice the opportunity to use the working capital needed to buy
goods elsewhere. Or the owner must borrow that capital. In either case, capital must be
provided by the trader or by some lending source. Regardless, cost is involved. Further,
there is an implicit cost in the risk of losing all or part of that capital through theft,
spoilage, mortality or changing market conditions. Without the willingness to provide the
capital and to bear these costs, not stage of the market chain could function. Other
facilitating functions enable producers to respond to consumer needs and thus provide
goods in the locations, quantity and form desired.
Marketing and Enterprises and Channels
• Enterprises of four types normally fulfill the roles of middlemen.
• These are:
• Independent, locally based private enterprises
• Cooperatives
• Marketing boards and other state enterprises
• Transnational companies
What Is a Business
SECTION
Opportunity?
OBJECTIVES
 Identify ways to recognize business opportunities
 Explain how to use creative thinking to generate ideas
 Compare various types of business opportunities
 Describe methods used to evaluate business opportunities
Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 77
Sources of Opportunity
A business opportunity is a consumer need or want that can
potentially be met by a new business.
Sources of opportunities include:
 Problems. Many well-known companies were started because an
entrepreneur wanted to solve a problem.
 Changes. Our world is continually changing. Change often produces
needs or wants that no one is currently meeting.
 New Discoveries. The creation of totally new products and services
can happen by accident.
 Existing Products and Services. You can get ideas for
opportunities from businesses that already exist by looking for ways
to improve a product significantly.
 Unique Knowledge. Entrepreneurs sometimes turn one-of-a-kind
experiences or uncommon knowledge into a product or service that
benefits others.
Thinking Creatively
Creative thinking is a thought process that involves looking at a
situation or object in new ways.
 Challenge the Usual. Ask lots of “Why?” and “What if?” questions.
 Think Backward. Start by imagining the end result you want.
 Be Flexible. Force yourself to examine things from different angles.
 Judge Later. When brainstorming ideas, don’t worry about being
practical.
 Draw Idea Maps. Use whiteboards, chalkboards, and poster boards
to sketch out ideas.
 Brainstorm in a Group. Ask your friends, family, and classmates to
help you generate ideas.
 Daydream. Letting your mind wander is okay; just make sure you
pick an appropriate time.
Turning Ideas into Opportunities
Four common ways to turn ideas into opportunities are:

 Starting a new business
 Buying an independent business
 Buying a franchise
 Becoming an inventor
Evaluating an Opportunity
The feasibility of an idea refers to how possible or worthwhile it
is to pursue it, to see if it is actually an opportunity.
Three methods for determining the feasibility of business ideas
are:
 Cost/Benefit Analysis. This is the process of adding up all the
expected benefits of an opportunity and subtracting all the
expected costs. If the benefits outweigh the costs, the
opportunity may be worthwhile.
 Opportunity-Cost Analysis. An opportunity-cost analysis
examines the potential benefits that you forfeit when you
choose one course of action over others.
 SWOT Analysis. This is a business evaluation method that
draws its name from the four areas it evaluates—Strengths,
Weaknesses, Opportunities, and Threats.
Types of Business
SECTION
Ownership
OBJECTIVES
 Define liability
 Examine sole proprietorships
 Learn about partnerships
 Examine corporations
 Understand cooperatives
Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher82 Education,
Liability of Business Owners
Owner’s liability is the legal obligation of a business owner to use
personal money and possessions to pay the debts of the
business.
 Unlimited liability means that a business owner can be

legally forced to use personal money and possessions to
pay the debts of the business.
 Limited liability means that a business owner cannot be
legally forced to use personal money and possessions to
pay business debt.
Sole Proprietorships
A sole proprietorship is a legally defined type of business
ownership in which a single individual owns the business,
collects all profit from it, and has unlimited liability for its debt.
 The sole proprietorship is the simplest and least

expensive option for business ownership.
 Because the owner and the business are one and the
same, business income and costs are reported on the
owner’s personal income tax return.
 In a sole proprietorship, only one individual is responsible
for the business.
 The sole proprietor has unlimited liability for any business
debts.
Partnerships
A partnership is a legally defined type of business organization
in which at least two individuals share the management, profit,
and liability.
 In a general partnership, all partners have unlimited
liability.
 A limited partnership is structured so that at least one
partner (the general partner) has limited liability for the
debts of the business.
 General partnerships rely on the entrepreneurial skills
and financial backing of at least two individuals.
 Because general partners have unlimited liability, they
risk losing personal money and possessions to pay
business debts.
Corporations
A corporation is a legally defined type of business ownership in
which the business is considered a type of “person” (or “entity”)
under the law, and limited liability is granted to the business
owner(s).
 The owners of a corporation are called its shareholders or

stockholders.
 A share of stock is a unit of ownership in a corporation.
 Each share may earn its owner a dividend, which is a
portion of the corporation’s profit.
 Shareholders have a limited liability. They risk only the
money they invested in the corporation.
Types of Corporations
 Most corporations are C corporations, which are taxed as
an entity by the federal government.
 A subchapter S corporation differs from a C corporation in
how it is taxed. It is not taxed as an entity, rather its income
or loss is applied to each shareholder and appears on their
tax returns.
 A limited liability company is a legally defined type of
business ownership similar to a C corporation, but with
simpler operating requirements and tax procedures and
greater liability protection for the business owners.
 A nonprofit corporation is a legally defined type of
business ownership in which the company operates not to
provide profit for its shareholders but to serve the good of
society.
Cooperatives
 A cooperative is a business owned, controlled, and
operated for the mutual benefit of its members—people
who use its services, buy its goods, or are employed by it.
 In the U.S., cooperatives are not as common as other
types of businesses and are often organized as
corporations.
 Cooperatives often share their earnings with the
membership as dividends.
SECTION
Types of Business
OBJECTIVES
 Identify the four main types of business
 Examine trends in business startups in recent decades
 Explore growth expectations for business
Types of Business
A manufacturing business (manufacturer) converts materials
into goods suitable for use and then sells those goods to others.
 A wholesaling business (wholesaler) buys goods in

large quantities, typically from manufacturers, and resells
them in smaller batches to retailers.
 A retailing business (retailer) buys goods, often from
wholesalers, and resells them directly to consumers, who
are the end buyers.
 A service business provides services to customers for a
fee.
Managing
SECTION
Operations
OBJECTIVES
 Define operations
 Study general operating policies
 Learn the importance of customer service policies
What Are Operations?
 Operations are the everyday activities that keep a

business running.
 Operations management is the management of the
everyday activities that keep a business running.
General Business Policies
A policy is a procedure or set of guidelines that specifies exactly
how something should be accomplished or handled.
 Most businesses set their hours of operation to what best serves
their customers’ needs as well as their own.
 The three C’s” for deciding whether to extend credit are:
• Character—The financial trustworthiness of the customer.
• Capacity—The customer’s current cash inflow.
• Capital— The customer’s total financial assets.
 Companies that sell products need to establish policies for handling
returns.
 Businesses set a delivery policy to make customers aware of their
delivery options, costs, and timetables.
Customer Service Policies
"It costs more to gain a new customer than it does to keep an
existing one."
 Repeat customers come back again and again.

 Word of mouth is verbal publicity. Positive word of mouth
about a company can bring in new customers.
 The five fundamental elements for the treatment of
customers are:
• Courtesy
• Respect
• Prompt Attention
• Knowledgeable Employees
• Credibility
What is Business?
• Business is an economic system in
which goods and services are exchanged
for one another or money, on the basis of
their perceived worth. Every business
requires some form of investment and a
sufficient number of customers to whom
its output can be sold at profit on
a consistent basis.
TYPES
OF
BUSINESSES
Corporation:
• A corporation provides limited liability for the
investors. Except as indicated below, none of
the shareholders in a corporation is obligated
for the debts of the corporation; creditors can
look only to the corporation's assets for
payment. The corporation files its own tax
return and pays taxes on its income. If the
corporation distributes some of its earnings in
the form of dividends, it does not deduct the
dividend in computing its taxes, but the
shareholder recipients must pay taxes on those
dividends even though the corporation has paid
taxes on its earnings. A corporation has some
tax benefits such as deductibility of health
insurance premiums.
Cooperative:
• A cooperative (also co-operative or co-op) is
a business organization owned and operated by
a group of individuals for their mutual
benefit. A cooperative is defined by
the International Cooperative
Alliance's Statement on the Cooperative
Identity as "an autonomous association of
persons united voluntarily to meet their
common economic, social, and cultural needs
and aspirations through jointly owned and
democratically controlled enterprise". A
cooperative may also be defined as a business
owned and controlled equally by the people
who use its services or by the people who work
there. Various aspects regarding cooperative
enterprise are the focus of study in the field
of cooperative economics.
Partnerships:
• A partnership is the relationship existing
between two or more persons who join to carry
on a trade or business. Each person contributes
money, property, labor or skill, and expects to
share in the profits and losses of the business.
• A partnership must file an annual information
return to report the income, deductions, gains,
losses, etc., from its operations, but it does not
pay income tax. Instead, it "passes through"
any profits or losses to its partners. Each
partner includes his or her share of the
partnership's income or loss on his or her tax
return.
Sole Proprietorship:
• A sole proprietorship is one person alone. He
or she will have unlimited liability for all debts
of the business, and the income or loss from
the business will be reported on his or her
personal income tax return along with all other
income and expense he or she normally reports
(although it will be on a separate schedule).
Although proprietorship avoids the expense of
forming a partnership or corporation, many
start businesses this way because they are
unfamiliar with the other forms of
organizations.
incorporated:
•A firm or company that has
been formed into
a legal corporation by
completing the required
procedures.
ASSETS
AND
LIABILITIES
• Assets, liabilities and owners' equity are the three
components that make up a company's balance
sheet. The balance sheet, which shows a business's
financial condition at any point, is based on this
equation:
• Assets = Liabilities + Owners' EquityThis equation is
also the framework for keeping track of money as it
flows in and out of your company. Starting with the
first penny you earn, you'll record in a general ledger
each and every transaction using a double-entry
system of debits and credits. Assets get recorded on
the top or the left side of the balance sheet;
liabilities and owners' equity are recorded on the
bottom or the right side of the balance sheet.
• The information on each company's general ledger
is unique to that business; however, all companies
classify their general ledger accounts as assets,
liabilities or owners' equity. Businesses use more
specific accounts within each classification, for
example, "current assets" or "long-term liabilities,"
to organize and track their finances.
What are ASSETS?
• An asset is anything of value that your
company owns — including cash. Assets get
recorded on the balance sheet in terms of their
dollar values. Remember, even if you used
credit to purchase an asset, you still own it. Its
full dollar value gets recorded on one side of
the balance sheet as an asset, and the amount
you owe gets recorded on the other side of the
balance sheet as a liability.
There are several types of assets:
• Current assets. These are assets with dollar amounts
that continually change, for example, cash, accounts
receivable, inventory or raw materials your company
uses to make a product. They are listed on the balance
sheet in order of their liquidity, or how fast they can be
converted into cash.
• Investments. Companies, like individuals, can own
securities such as stocks and bonds. Investments, like
cash or property, are considered assets.
• Capital assets. Think of capital assets, also called plant
assets, as permanent things your company owns. Land,
buildings, equipment and vehicles are common capital
assets. So are things like computers, furniture and
appliances, as long as they remain for use within your
business and are not items you sell.
• Intangible assets. Patents, copyrights and other
nonmaterial assets that have value are referred to as
intangible.
What are LIABILITIES?
•Liabilities are anything a
company owes to people or
businesses other than its
owners is considered a
liability.
There are two types of liabilities:
• Current liabilities. In general, if a liability
must be paid within a year, it is considered
current. This includes bills, money you
owe to your vendors and suppliers,
employee payroll and short-term loans.
• Long-term liabilities. A long-term liability
is any debt that extends beyond one year,
such as a mortgage.
Owners' Equity:
• Owners' equity, also called capital, is any debt
owed to the business owners. For example, if
you invested $50,000 of your savings to start a
business, that amount is recorded in a capital
account, also referred to as an owners'-equity
account. In publicly traded companies,
outstanding preferred and common stock also
represents owners' equity.
• Your business's revenues and expenses are also
recorded in capital accounts because they
relate to how much money your company
makes over a period of time. At the end of each
accounting cycle, a business' profits get
transferred to a capital account.

LET Entrep Notes

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

LET Entrep Notes

Caricato da

Copyright:

Formati disponibili

LET Review

Shailini G. Gestosani, M.Ed.

Reform or revolutionize the pattern of production by

 Making Your Own Rules. When you own a business,

 An aptitude is a natural ability to do a particular type of

 Business Knowledge. Reading magazine and newspaper articles,

Discovery: The stage in which the

entrepreneur Savings and

Vicious Cycle of Development

• Exchange functions are what is commonly thought of as marketing. They

 Compare various types of business opportunities

 Describe methods used to evaluate business opportunities

Four common ways to turn ideas into opportunities are:

 Learn about partnerships

 Unlimited liability means that a business owner can be

 The sole proprietorship is the simplest and least

 The owners of a corporation are called its shareholders or

 Explore growth expectations for business

 A wholesaling business (wholesaler) buys goods in

 Learn the importance of customer service policies

 Operations are the everyday activities that keep a

 Repeat customers come back again and again.

Potrebbero piacerti anche