Chapter 8 Entrepreneurship PDF

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Chapter 8 Entrepreneurship Professor Ryan Lessans...

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The Small Business Administration (SBA) uses size standards to determine whether a business counts as small.  The SBA has established two widely used size standards, expressed either in terms of average number of employees during the previous twelve months or the average annual receipts during the previous three years: five hundred (or fewer) employees for most manufacturing and mining industries and $7.5 million (or less) in average annual receipts for many non-manufacturing industries.  Frugality We try not to spend money on things that don’t matter to customers  Contribution to the economy o Job Creation  Creates more than large business. o Innovation  Often invent new products and can change the way we do things. o Financial success and independence opportunities o Provide parts, services, and distribution for large companies.  An entrepreneur has traditionally been defined as “a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.” o Lifestyle entrepreneur develops the business to alter their lifestyle, not for the sole purpose of money. o Social entrepreneurs act as agents of change for society. They solve problems. o Serial entrepreneur continually generates new ideas and starts new businesses. See Elon Musk  Traits of an entrepreneur o Creativity, being able to develop a new product, service, or method. o Risk tolerance, failure is not uncommon and there is a high risk of it. o Persistence and resilience, business takes time to grow and often encounters setbacks. They must be able to bounce back from failure. o Flexibility to changes in the market, technology, and customer tastes. Netflix went from renting DVDs to on demand streaming. o Passion needed to see it through  Advantages of small-business ownership o Independence, get to determine their working hours, make decisions, have freedom o Financial Gain, offers a greater possibility of achieving significant financial rewards o Control, allows you to be involved in the total operation of the business o Prestige, being in charge o Equity, allows you to build equity by owning the business. o Opportunity, allows a person to make a contribution to society  Disadvantages o Time commitment, the beginning will have few employees and large responsibility to the owner. It’s average to work 8+ hour weeks in the beginning. 

o Risk, can create major financial setbacks o Uncertainty, external factors such as economy change and new competitors may stall growth. o Financial commitment, requires large capital to start  Reasons for failure o Only 50% make it to the 5 year mark and 33% to the 10 year mark. o Lack of planning o Failure to delegate o Unwillingness to change o Forgetting that cash is king, don’t lose track of money o Lack of objective targets, is the PR campaign worth the money, does twitter bring traffic to your website o Failure to ask the right questions, try to get help from the SBD, chambers of commerce, and local economic development agencies  10 steps to starting a business o Write a business plan o Get business assistance and training o Choose a location, research zoning laws  Consider these when searching  Brand image, competition, local labor market, ability to grow, proximity to suppliers, safety / crime rate, and zoning regulations.  Evaluate your finances  Look at hidden costs such as decorating, IT upgrades, etc  Look at taxes, would changing cities or states help?  Does the location have a state specific minimum wage  Is there any local or stage government assistance available o Finance the business  Look into SBA loan programs o Determine the legal structure of the business  Sole proprietorship, LLC, LLP, corporation o Register the business name (DBA Doing Business As) o Get a Tax ID number o Register for state and local taxes o Obtain licenses and permits o Understand employer responsibilities. Consider meeting with an accountant and lawyer to get advice. Groups such as SCORE offer free advice  Eights steps to cover the legal aspects of the hiring process  Obtain an EIN (employer id number)  Set up records for withholding taxes  Register with state’s new hire reporting program

 Employee eligibility verification  buy workers comp insurance  Post required notices  File taxes  Get organize and keep informed  Components of a business plan o Executive summary  Most important part. Says where company is, where it should go, and why it will be successful  Highlight strengths  Include  Mission statement  Company info such as founders, location, number of employees  Growth highlights  Products and services  Financial info such as current bank and investors  Future plans summarized  Keep to one page and be concise o Company description  Nature of business and goal marketplace  More product and service info  Who you will serve  Competitive advantages o Market analysis  Industry description and outlook  Target market info  Distinguishing characteristics, how are you better than others  Size of primary target market  How much market share can you gain  Pricing and gross margin targets  Competitive analysis, what areas are being ignored by your competitors  Regulatory restrictions o Organization and management  Structure, ownership, profiles of managers, qualification of board of directors o Service or product line  Description of service  Details about product life cycle  Intellectual property such as current or pending copyright or patents  Research and development activities o Marketing and sales

 How you will create customers and what your market strategy is o Funding request  How much you need now  How much you will need during the next 5 years  How you plan to use the funds received  Any strategic financial situational plans for the future such as a buyout, selling business, etc. o Financial projections  Historical and prospective financial data o Appendix  Not required and should be provided as needed  Include credit history, resumes, letters of reference, and additional info...