Chapter 06 – Entrepreneurship and Starting a Small Business
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PPT 6-50
Accounting Assistance
The most important assistance to small-business owners
is in accounting.
PPT 6-51
Legal Help
PPT 6-52
Marketing Research
If marketing is about finding and filling customer needs,
how can an entrepreneur better understand what customers
need? Market research helps determine where to locate cus-
tomers, whom to target as customers, and an effective strat-
egy for reaching the market.
Chapter 06 – Entrepreneurship and Starting a Small Business
PPT 6-53
Other Forms of Help
Asking good questions is the key to success in any busi-
ness. Fortunately for entrepreneurs, some of the best ad-
vice comes free. Commercial loan officers can help with the
creation of a business plan as well as financial advice. In-
surance agents can help new entrepreneurs understand and
insure against risk. One interesting and free source of in-
formation is SCORE, Service Corps of Retired Executives.
To start a discussion in class, have students research
SCORE (www.score.org) and the programs offered at local
SCORE offices.
PPT 6-54
Progress Assessment
1. A business plan needs to start with a strong cover
letter. The nine key sections are:
• Executive summary
• Company background
• Management team
• Financial plan
• Capital required
• Marketing plan
• Location analysis
• Manufacturing plan
• Appendix
PPT 6-55
Small Business Prospects Abroad
Chapter 06 – Entrepreneurship and Starting a Small Business
Chapter 06 – Entrepreneurship and Starting a Small Business
lecture
links
“Our company has, indeed, stumbled onto some of its new products. But never for-
get that you can only stumble if you are moving.”
Richard P. Carlton, Former CEO, 3M Corporation
“Imagination is more important than knowledge.”
Albert Einstein
“The greater the difficulty, the more glory in surmounting it. Skillful pilots gain
their reputation from storms and tempests.”
Epictetus
“Keep away from small people who try to belittle your ambitions. Small people al-
ways do that, but the really great make you feel that you, too, can become great.”
Mark Twain
lecture link 6-1
HISTORY’S GREATEST ENTREPRENEURS
Mention successful entrepreneurs today, and the names that come to mind include Bill Gates,
Sam Walton, and Ted Turner, to name a few. But who are the greatest entrepreneurs of all time? MSNBC
recently posted a listing of its picks. The finalists are men (sorry, no women) who excelled at taking capi-
tal and using it to create more capital.
10. STEVEN JOBS and STEVE WOZNIAK. Jobs and Wozniak weren’t the first Silicon Valley
entrepreneurs, but they were the first to successfully market a truly revolutionary device—the
personal computer.
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5. THOMAS EDISON. Edison was probably the world’s greatest inventor—the electric light, the
phonograph, talking motion pictures, and more than 1,300 other inventions. Unlike other inven-
tors, he also succeeded in exploiting the profit potential of his creations, something other inven-
tors have failed to do.
4. P. T. BARNUM. Americans have always loved a spectacle. Barnum catered to this fascination
with the Barnum and Bailey Circus. Along the way, he invented modern advertising and became
rich.
lecture link 6-2
LUCKY OFFICE SPACE
The building at 165 University Avenue in Palo Alto, California, is “blessed with good karma,”
according to owner Saeed Amidi. Some of the most successful Silicon Valley entrepreneurs agree. Over
the years the two-story building has been home to such fledgling enterprises as PayPal, Logitech, and
Google.
lecture link 6-3
CHARLES BABBAGE: 19TH-CENTURY ENTREPRENEUR
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Nineteenth-century England was not ready for Charles Babbage. The mathematician had already
proven his ingenuity by inventing the speedometer, the cowcatcher, and the first reliable life-expectancy
tables when his enthusiasm turned to the problem of calculations. His first machine, which was designed
to calculate logarithms, was an intricate system of gears and cogs, which he called the Differential En-
gine.
lecture link 6-4
INVENTING FROM THE OUTSIDE
Traditionally, independent inventors who pitch their product ideas to established companies are
met with little consideration. More often than not, an inventor’s idea ends up in the garbage can instead of
in development. This is exactly what happened to retired ad executive Fred Sulpizio, the inventor of a
trash bag ironically enough. The bag is equipped with a built-in device that prevents it from collapsing as
it fills with garbage. Sulpizio shopped his prototype around to dozens of companies with a mountain of
rejection letters to show for his determination.
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lecture link 6-5
EX-CONTREPRENEURS
For many ex-convicts, finding an honest job after prison life can be difficult. Despite laws that
prevent employers from discriminating based on a prison record, a lot of companies will bury an individ-
ual’s resume if he or she has done time. This lack of steady work drives many ex-cons back to crime and,
inevitably, another stint in prison.
Catherine Rohr, founder and CEO of the Prisoner Entrepreneurship Program (PEP), hopes to re-
duce this work-related recidivism by teaching prisoners about starting their own businesses. In 2004 Rohr
lecture link 6-6
START-UPS FOR GROWN-UPS
Move over, Google boys! Older Americans are the new entrepreneurs. Nearly half the country’s
self-employed workers are boomers, reports the U.S. Department of Labor. And that figure is expected to
climb as people retire from one career to start another, lose their jobs, or simply want the independence
and flexibility of working for themselves.
But is it wise to launch a start-up or buy a business at midlife? Experts say it’s risky at any age,
but for older adults, particularly those who finance their venture with savings and retirement funds, the
stakes can be painfully high: If a venture goes belly-up, there’s less time to work and restore retirement
savings. The statistics are sobering. According to the Small Business Administration, 66% of new com-
panies survive at least two years but only 44% last for four years.
Chapter 06 – Entrepreneurship and Starting a Small Business
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lecture link 6-7
A NEW KING OF BEERS IN ST. LOUIS
When the Belgian beer conglomerate InBev bought Anheuser-Busch in 2008, many residents in
A-B’s hometown of St. Louis saw the takeover as a betrayal. The brewer had been headquartered in the
River City since 1852 and reigned for decades as the area’s undisputed “King of Beers” with near total
market dominance. But much of the city’s goodwill faded fast once the company’s new foreign owners
dropped the axe hard on St. Louis. Of the 1,400 jobs InBev slashed just weeks after acquiring the compa-
ny, 75% of those layoffs occurred at A-B’s erstwhile home base.
lecture link 6-8
FAILURE IS THE BEST MEDICINE
Americans tend to think that failure is something to be ashamed of, a personal defeat. Paul Saffo,
director of Institute for the Future, believes that failure, particularly in the high-tech companies of Silicon
Valley, is a blessing.
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Saffo points to the history of the Internet. In 1989, the World Wide Web was invented by Tim
Berners-Lee, a British engineer, for use in interactive television. Half a world away, the Internet revolu-
tion gained momentum, fueled by a lucky failure. Just as Berners-Lee launched the Web, the interactive
lecture link 6-9
COMPETING AGAINST WAL-MART
All across the country small retailers tell the same tale: A retail giant like Home Depot or Wal-
Mart moves into the area and small businesses lose out. However, some local businesses are finding ways
to compete against the giants.
Canadian grocery chain Loblaws differentiates itself by turning some stores into mini-lifestyle
malls catering to mothers with young children. The store stocks prepared foods, a line of children’s cloth-
ing, a café, on-site babysitting, and a health club.
In Fort Wayne, Dave Umber’s three hardware stores also faced the big store threat. He lost
$110,000 in two years. Giant superstores and home centers were chipping away at his sales. Umber held a
family conference and came up with a plan to save the business.
Chapter 06 – Entrepreneurship and Starting a Small Business
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Step three was to set a pricing strategy. Umber’s rule of thumb is to keep his prices within 10% of
the big chains. “For 80% of the products I sell, nobody has any idea what they should cost anyway,” says
Umber. “If it’s the difference between $1.09 and $1.29, customers don’t care, particularly if it saves them
from having to run across town to Home Depot.”
lecture link 6-10
MAKING ENTREPRENEURSHIP A COLLEGE MAJOR
Universities have long been dependable incubators of technological innovation. After all, Google,
now one of the world’s most powerful businesses, began as a Master’s project at Stanford. But while all
universities strive to expand human understanding, only a select few have succeeded in transferring their
scholarly triumphs into entrepreneurial ones as well.
Chapter 06 – Entrepreneurship and Starting a Small Business
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critical
thinking exercises
Name: ___________________________
Date: ___________________________
critical thinking exercise 6-1
WHAT DOES IT TAKE TO BE AN ENTREPRENEUR?
Entrepreneurship is risky business. Thousands of new businesses are started and thousands of
others fail each year. Why would someone give up the security of working for others to assume the risk of
business ownership? Find out by interviewing two or three small-business owners in your area. Ask them
the questions listed below.
1. Did you ever work for someone else? If so, why did you stop?
2. Why did you want to go into business for yourself?
3. What expectations did you have when you started the business?
4. Which of these expectations were fulfilled?
5. Which of your expectations were not fulfilled?
6. What advice do you have for an entrepreneur thinking of starting a new business today?
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Name: ___________________________
Date: ___________________________
critical thinking exercise 6-2
WHAT IS SMALL?
Small business is defined as an enterprise that “is independently owned and operated; is not dom-
inant in its field of operation; and meets certain standards in terms of employees or annual receipts.”
Those “certain standards” are set by the Small Business Administration Office of Size Standards. In some
Use the table on the SBA website to find the size limitations for the following industries:
1. Scheduled passenger air transport ______________________________
2. Internet service providers ______________________________
3. Credit unions ______________________________
4. Breakfast cereal manufacturing ______________________________
5. Cheese manufacturing ______________________________
6. Florists ______________________________
7. Aircraft manufacturing ______________________________
8. Motorcycle and bicycle manufacturing ______________________________
9. Cellular and wireless telecommunications ______________________________
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10. Radio stations ______________________________
Name: ___________________________
Date: ___________________________
critical thinking exercise 6-3
WRITING A BUSINESS PLAN
One of Mike McNeely’s favorite pastimes as a teenager was taking his old car apart and putting it
1. What important items are missing from Mike’s plans?
2. What steps can Mike take to ensure success if he starts his own business?
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notes on critical thinking exercise 6-3
1. What important items are missing from Mike’s plans?
The business plan should start with a brief overview stating the goals and objectives of the firm.
How big does Mike want to get? How many employees? In what locations? Using what kind of financ-
ing?
2. What steps can Mike take to ensure success if he starts his own business?
6-75
critical thinking exercise 6-4
COMPETING AGAINST WAL-MART
Lecture Link 6-9 discusses methods small businesses have used to compete against retail giants
like Home Depot or Wal-Mart
1. Analyze the strengths and weaknesses of your business right now. What do you do well? Are
there any gaps in services provided? Does your small business have any strategic advantages in
the marketplace? Who are your customers and what do they want?
2. Prepare a six-month plan for meeting the Wal-Mart competition. How can you differentiate your
business? Describe any changes you plan to make. What are the core characteristics of your en-
terprise that could be used to meet the competition?
3. At the end of the six-month period, what impact do you think Wal-Mart’s Optical Center will
have on your business? Will you still be profitable?
Chapter 06 – Entrepreneurship and Starting a Small Business
bonus
cases
bonus case 6-1
DRIVING AWAY BUSINESSES WITH THE AMAZON TAX
Amazon’s online retail empire has been a contentious issue for state governments almost since
the company’s founding. Amazon makes billions of dollars selling everything from books to auto parts,
often without ever collecting one cent of sales tax. This is all perfectly legal thanks to a 1992 Supreme
Court ruling that exempts companies without a “substantial nexus” in a state from collecting the tax. But
the rules are changing in states like Illinois where money is tight and government debt soars. The Land of
Lincoln’s so-called Amazon tax requires the site and other online retailers to collect the state’s sales tax.
discussion questions for bonus case 6-1
1. Is it fair that online retailers like Amazon do not collect sales taxes?
2. Should the U.S. Congress act to force online retailers to collect sales taxes?
6-77
notes on discussion questions for bonus case 6-1
1. Is it fair that online retailers like Amazon do not collect sales taxes?
2. Should the U.S. Congress act to force online retailers to collect sales taxes?
Chapter 06 – Entrepreneurship and Starting a Small Business
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3. Is it healthy for a corporation to be involved in widely diverse industries such as Scotch tape and
bioelectronic ears? Doesn’t that prevent the corporation from having expertise in all those areas?
4. Could 3M survive without intrapreneuring?
notes on discussion questions for bonus case 6-2
1. Why is it important for laboratory people to follow their new product ideas through production
and marketing?
2. How can a multibillion-dollar corporation keep its entrepreneurial spirit alive?
3. Is it healthy for a corporation to be involved in widely diverse industries such as Scotch tape and
bioelectronic ears? Doesn’t that prevent the corporation from having expertise in all those are-
as?
4. Could 3M survive without intrapreneuring?
Chapter 06 – Entrepreneurship and Starting a Small Business
endnotes
vi Source: Angie Lau and Duane Stanford, “Challenging Bud on Its Home Turf,” Bloomberg Businessweek, January
13, 2011.
vii Sources: Alice Z. Cuneo, “Rival Retailers, Devise Ways to Compete Against Giant,” Advertising Age, October 6,
2003; Joshua Hyatt, “Beat the Beast,” Fortune Small Business, September 1, 2004; Thomas Lee, “Prospect of Com-
peting Against Wal-Mart Gives Old Rivals Some Common Ground,” Star Tribune, April 9, 2006.
viii Source: Sramana Mitra, “Key to Innovation: Universities,” Forbes, April 3, 2009.