Chapter 06 – Entrepreneurship and Starting a Small Business
6-1
chapter
.
Entrepreneurship and
Starting a Small Business
what’s new in this edition 6.3
brief chapter outline and learning objectives 6.5
lecture outline and lecture notes 6.7
PowerPoint slide notes 6.47
lecture enhancers 6.68
lecture enhancer 6–1: HISTORY’S GREATEST ENTREPRENEURS 6.68
lecture enhancer 6–2: CHARLES BABBAGE: 19TH-CENTURY ENTREPRENEUR 6.69
lecture enhancer 6-3: OVERCOMING THE ODDS THROUGH ENTREPRENEURSHIP 6.69
lecture enhancer 6-4: MORE ENTREPRENEURS LAUNCH FROM HOME 6.70
lecture enhancer 6-5: LURING ENTREPRENERUS WITH SPECIAL VISAS 6.70
lecture enhancer 6-6: SU LABS ALTRUISTIC BUSINESS INCUBATOR 6.71
lecture enhancer 6-7: A NEW KING OF BEERS IN ST. LOUIS 6.72
lecture enhancer 6-8: FAILURE IS THE BEST MEDICINE 6.72
lecture enhancer 6-9: TURNING CAREGIVING INTO A FRANCHISE 6.73
lecture enhancer 6-10 MAKING ENTREPRENEURSHIP A COLLEGE MAJOR 6.73
6
Chapter 06 – Entrepreneurship and Starting a Small Business
6-2
critical thinking exercises 6.75
critical thinking exercise 6-1: WHAT DOES IT TAKE TO BE AN 6.75
ENTREPRENEUR?
critical thinking exercise 6-2: WHAT IS SMALL? 6.76
critical thinking exercise 6-3: WRITING A BUSINESS PLAN 6.77
bonus cases 6.79
bonus case 6–1: DRIVING AWAY BUSINESSES WITH THE AMAZON TAX 6.79
bonus case 6-2: 3M COMPANY, INTRAPRENEURIAL LEADER 6.81
Chapter 06 – Entrepreneurship and Starting a Small Business
6-3
what’s new in
this edition
additions to the 11th edition:
• Getting to know Prudencio Unanue of Goya Foods
• Name That Company: Art Fry, 3M, and PostIts
• Adapting to Change: States Test New Crowdinvesting Rules
• Reaching Beyond Our Borders: Beyond Knowing What Your Customers Need
• Video Case: Pillow Pets
revisions to the 11th edition:
• Spotlight on Small Business: Earning While Learning
• Making Ethical Decisions: Should You Stay or Should You Go?
• Statistical data and examples throughout the chapter were updated to reflect current information.
deletions from the 10th edition:
• Getting to Know Jay-Z
• Name That Company: McDonald’s
• Social Media in Business
• Reaching Beyond Our Borders
Chapter 06 – Entrepreneurship and Starting a Small Business
6-4
Chapter 06 – Entrepreneurship and Starting a Small Business
6-5
brief chapter outline
and learning objectives
CHAPTER 6
ENTREPRENEURSHIP AND STARTING
A SMALL BUSINESS
Getting to Know PRUDENCIO UNANUE, founder of GOYA FOODS
I. THE AGE OF THE ENTREPRENEUR
II. THE JOB-CREATING POWER OF ENTREPRENEURS IN THE
UNITED STATES
LEARNING OBJECTIVE 1
Explain why people take the risks of entrepreneurship; list the attrib-
utes of successful entrepreneurs; and describe entrepreneurial teams, in-
trapreneurs, and home– and Web-based businesses.
III. WHY PEOPLE TAKE THE ENTREPRENEURIAL CHALLENGE
A. What Does It Take to Be an Entrepreneur?
B. Turning Your Passion and Problems into Opportunities
C. Entrepreneurial Teams
D. Micropreneurs and Home-Based Businesses
E. Web-Based Businesses
F. Entrepreneurship within Firms
G. Encouraging Entrepreneurship: What Government Can Do
LEARNING OBJECTIVE 2
Discuss the importance of small business to the American economy
and summarize the major causes of small-business failure.
IV. GETTING STARTED IN SMALL BUSINESS
A. Small versus Big Business
B. Importance of Small Businesses
C. Small-Business Success and Failure
Chapter 06 – Entrepreneurship and Starting a Small Business
6-6
LEARNING OBJECTIVE 3
Summarize the ways to learn about how small businesses operate.
V. LEARNING ABOUT SMALL-BUSINESS OPERATIONS
A. Learn from Others
B. Get Some Experience
C. Take Over a Successful Firm
LEARNING OBJECTIVE 4
Analyze what it takes to start and run a small business.
VI. MANAGING A SMALL BUSINESS
A. Begin with Planning
B. Writing a Business Plan
C. Getting Money to Fund a Small Business
D. The Small Business Administration (SBA)
E. Knowing Your Customers
F. Managing Employees
G. Keeping Records
H. Looking for Help
LEARNING OBJECTIVE 5
Outline the advantages and disadvantages small businesses have in
entering global markets.
VII. GOING GLOBAL: SMALL-BUSINESS PROSPECTS
VIII. SUMMARY
Chapter 06 – Entrepreneurship and Starting a Small Business
6-7
Getting to Know PRUDENCIO UNANUE, founder of GOYA
FOODS
Prudencio Unanue founded a small New York City grocery store that eventually
grew into a $1 billion business, Goya Foods.
I. THE AGE OF THE ENTREPRENEUR
A. Today, young people will probably not have the tra-
ditional 30-year career in one job.
B. ENTREPRENEURSHIP is accepting the risk of
starting and running a business.
II. THE JOB-CREATING POWER OF ENTREPRE-
NEURS IN THE UNITED STATES
A. The need to CREATE MORE JOBS is a major issue
in the U.S. today.
B. The success of great American entrepreneurs
shows the JOB-CREATING POWER of entrepre-
neurship.
C. The text lists examples including PAST ENTRE-
PRENEURS George Eastman (Kodak), Henry Ford
(Ford Motor Company), and Jeff Bezos
(Amazon.com).
While I was an employee at a big company, I developed a product that has become a staple
on most office supply lists. I needed something to mark the pages of a hymnal without falling
out or damaging the book. What started as a simple, yellow piece of paper with a new adhe-
sive evolved into many different versions – now there re Super Sticky, recycled, Pop-Up and
electronic versions of my invention. Who am I, who did I work for, and what did I invent?
(Students should read the chapter before arriving at the answer: Art Fry, 3M, Post-It
notes.)
Chapter 06 – Entrepreneurship and Starting a Small Business
6-8
PPT 6-1
Chapter Title
McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights r eserved.
Entrepreneurship
and
Starting a
Small Business
CHAPTER 6
PPT 6-2
Learning Objectives
LEARNING OBJECTIVES
6-2
1. Explain why people take the risks of
entrepreneurship; list the attributes of successful
entrepreneurs; and describe entrepreneurial teams,
intrapreneurs, and home- and web-based
businesses.
2. Discuss the importance of small business to the
American economy and summarize the major
causes of small-business failure.
PPT 6-3
Learning Objectives
LEARNING OBJECTIVES
6-3
3. Summarize the ways to learn about how small
businesses operate.
4. Analyze what it takes to start and run a small
business.
5. Outline the advantages and disadvantages small
businesses have in entering global markets.
PPT 6-4
Prudencio Unanue
PRUDENCIO UNANUE
Goya Foods
6-4
• Goya Foods has provided for
Hispanic families for over 75
years.
• Unanue, a Spanish
immigrant, opened a small
grocery store in 1936.
• Still family-owned, Goya now
employs over 3,500 and sells
more than 1,500 products.
PPT 6-5
Name That Company
NAME that COMPANY
6-5
While I was an employee at a big company, I
developed a product that has become a staple
on most office supply lists. I needed something
to mark the pages of a hymnal without falling out
or damaging the book. What started as a simple,
yellow piece of paper with a new adhesive
evolved into many different versions – now there
are Super Sticky, recycled, Pop-Up and
electronic versions of my inventions.
Who am I, who did I work for, and what did I invent?
PPT 6-6
What Is Entrepreneurship?
WHAT is ENTREPRENEURSHIP?
6-6
• Entrepreneurship —
Accepting the risk of starting
and running a business.
PPT 6-7
Notable Entrepreneurs
NOTABLE ENTREPRENEURS
6-7
• French immigrant Élruthère Irènèe du Pont de
Nemours started Du Pont in 1802.
• David McConnell borrowed $500 from a friend to
start Avon.
• George Eastman started Kodak with a $3,000
investment in 1880.
• Jeff Bezos started Amazon.com with investments
from his family and friends.
Chapter 06 – Entrepreneurship and Starting a Small Business
6-9
D. CONTEMPORARY ENTREPRENEURIAL TALENT
include the late Steve Jobs (Apple Computer,) Mark
Zuckerberg (Facebook), and Jack Dorsey (Twitter).
learning objective 1
Explain why people take the risks of entrepreneurship; list the attributes of suc-
cessful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home–
and Web-based businesses.
III. WHY PEOPLE TAKE THE ENTREPRENEURIAL
CHALLENGE
A. Reasons why people are WILLING TO TAKE THE
RISKS of business ownership include:
1. OPPORTUNITY to share in the American dream
through initiative and hard work
2. PROFIT: Entrepreneurship made Bill Gates the
richest person in the world
3. INDEPENDENCE
a. Many entrepreneurs don’t enjoy work ing for
someone else.
b. Some have found more self-satisfaction in
starting their own businesses.
4. CHALLENGE
a. Some believe that entrepreneurs are excite-
ment junkies who enjoy taking risks.
b. In reality, entrepreneurs take MODERATE,
CALCULATED RISKS.
c. In general, entrepreneurs seek ACHIEVE-
MENT more than POWER.
Chapter 06 – Entrepreneurship and Starting a Small Business
6-10
lecture enhancer 6-1
HISTORY’S GREATEST
ENTREPRENEURS
SPOTLIGHT ON
small
business
PPT 6-8
Earning While
Learning
EARNING while LEARNING
6-8
• Jeremy Young – Developed a prepaid laundry
service for students at his university.
• Jessica Mah – Started InternshipIn that helps
students find high-quality internships.
• Zach Workman – Launched Punch, an all-natural
energy drink.
• John Goscha – Created her one-of-a-kind jewelery
company, Tramonti, during her freshman year.
PPT 6-9
You’re Never Too Young to Be an
Entrepreneur
YOU’RE NEVER TOO YOUNG
to be an ENTREPRENEUR
6-9
Four reasons to start your business right away:
1. You don’t have a mortgage or kids to take care of.
2. You can survive on little funds and work long hours.
3. No disruption to your career path. It hasn’t started yet!
4. Use your alma mater for resources.
Source:Entrepreneur,www.entrepreneur.com,accessedNovember2014.
PPT 6-10
You’re Never Too Old to Be an En-
trepreneur Either!
YOU’RE NEVER TOO OLD to be
an ENTREPRENEUR EITHER!
6-10
• The highest rate of
entrepreneurship activity is in
the 55-64 age group!
• Since 1996, older Americans
have opened businesses at
a higher rate than 20-34 year
olds.
• Older entrepreneurs have
greater experience and more
financial resources.
Source:U.S.NewsandWorldReport,www.usnews.com,accessedOctober2014.
PPT 6-11
Why Take the Risk?
WHY TAKE the RISK?
6-11
LO 6-1
• Opportunity
• Profit
• Independence
• Challenge
PPT 6-12
Big Time Profit
Source:Forbes,www.forbes.com,accessedNovember2014.
BIG TIME PROFIT
6-12
• Michael Dell could buy 1,100
new laptops for every
student at the University of
Texas at Austin!
• Dietrich Mateschitz could
buy himself a can of Red Bull
every day for the next 11
million years!
• Liliane Bettencourt could buy
a box of L’Oreal hair color for
every woman in the world!
LO 6-1
PhotoCredit:EmranKassim
Chapter 06 – Entrepreneurship and Starting a Small Business
6-11
B. WHAT DOES IT TAKE TO BE AN ENTREPRE-
NEUR?
1. ENTREPRENEURIAL ATTRIBUTES Entrepre-
neurs tend to be:
a. SELF-DIRECTED: Be self-disciplined and
comfortable being the boss.
b. SELF-NURTURING: Believe in your own
ideas.
c. ACTION-ORIENTED: Have a desire to build
the dream into reality.
d. HIGHLY ENERGETIC: Be emotionally, men-
tally, and physically able to work long hours
in order to succeed.
e. TOLERANT OF UNCERTAINTY: Have the
ability to take calculated risks and give up
some security.
C. TURNING YOUR PASSION AND PROBLEMS INTO
OPPORTUNITIES
1. Many entrepreneurs see business opportunities
in problems or challenges.
2. The ideas for entrepreneurs’ products and se r-
vices don’t usually come from s ome FLASH of
inspiration—often the source of innovation is
more like a FLASHLIGHT.
3. Not all ideas are opportunities—an idea must
meet someone else’s needs.
4. A business idea is a GOOD OPPORTUNITY if:
a. It fills cust omers’ needs
Chapter 06 – Entrepreneurship and Starting a Small Business
6-12
critical thinking
exercise 6-1
WHAT DOES IT TAKE TO BE AN
ENTREPRENEUR?
PPT 6-13
What Does It Take to Be an
Entrepreneur?
WHAT DOES IT TAKE to be an
ENTREPRENEUR?
6-13
LO 6-1
• Self-directed
• Self-nurturing
• Action-oriented
• Highly energetic
• Tolerant of uncertainty
PPT 6-14
Five Steps to Starting Your Busi-
ness in School
Source:Entrepreneur,www.entrepreneur.com,accessedNovember2014.
FIVE STEPS to STARTING YOUR
BUSINESS in SCHOOL
6-14
LO 6-1
1. Find a problem or need.
2. Zero in on specifics.
3. Do research on
campus, test products
with students.
4. Move forward with your
ideas. Don’t wait!
5. Sacrifice.
lecture enhancer 6-2
CHARLES BABBAGE:
19TH-CENTURY ENTREPRENEUR
lecture enhancer 6-3
OVERCOMING THE ODDS
THROUGH ENTREPRENEURSHIP
PPT 6-15
An Idea Is a Good Opportunity If…
An IDEA is a
GOOD OPPORTUNITY IF…
6-15
LO 6-1
• It fills customers’ needs.
• You have the skills and resources to start a
business.
• You can sell the product or service at a
reasonable price and still profit.
• You can get your product or service to customers
before the window of opportunity closes.
• You can keep the business going.
Chapter 06 – Entrepreneurship and Starting a Small Business
6-13
b. You have the skills and resources to start a
business
c. You can sell the product or service at a price
customers are willing and able to pay and
still make a profit
d. You can get your product or service to cus-
tomers before your window of opportunity
closes
e. You can keep the business going
5. An ENTREPRENEURIAL READINESS QUES-
TIONNAIRE is presented in the text box on text
pages 156–157.
D. ENTREPRENEURIAL TEAMS
1. An ENTREPRENEURIAL TEAM is a group of
experienced people from different areas of busi-
ness who join together to form a managerial
team with the skills needed to develop, make,
and market a new product.
2. This COMBINATION OF SKILLS is needed to
get the new company off to a great start.
3. The text uses the example of the “smart team” of
entrepreneurs who founded Apple Computers.
E. MICROPRENEURS AND HOME–BASED BUSI-
NESSES
1. MICROPRENEURS are entrepreneurs willing to
accept the risk of starting and managing the type
of business that remains small, lets them do the
kind of work they want to do, and offers them a
balanced lifestyle.
2. Micropreneurs are content with limited growth.
3. Many micropreneurs are HOME-BASED BUSI-
Chapter 06 – Entrepreneurship and Starting a Small Business
6-14
box in text
ENTREPRENEUR READINESS
QUESTIONNAIRE
PPT 6-16
Entrepreneurial Teams
ENTREPRENEURIAL TEAMS
6-16
LO 6-1
• Entrepreneurial team — A
group of experienced people from
different areas of business who
join to form a managerial team
with the skills to develop, make
and market a new product.
• An entrepreneurial team
(Steve Jobs, Steve Wozniak
and Mike Markkula) was key to
Apple’s success.
PPT 6-17
Micropreneurs
MICROPRENEURS
6-17
LO 6-1
• Micropreneurs — Entrepreneurs willing to accept
the risk of starting and managing a business that
remains small, lets them do the work they want to do,
and offers a balanced lifestyle.
• About half of U.S. micropreneurs are home-based
business owners – writers, consultants, video
producers, architects, bookkeepers, etc.
• Nearly 60% of home-based micropreneurs are
men.
Chapter 06 – Entrepreneurship and Starting a Small Business
6-15
NESS OWNERS.
4. Many are owned by people who are trying to
combine career and family.
5. Reasons for the GROWTH OF HOME-BASED
BUSINESSES:
a. COMPUTER TECHNOLOGY allows home-
based businesses to look and act as big as
corporations.
b. CORPORATE DOWNSIZING has eroded job
security, leading many to start new ventures.
c. SOCIAL ATTITUDES have changed to en-
courage home-based businesses.
d. New TAX LAWS have loosened the re-
strictions regarding deductions for home of-
fices.
6. MAJOR CHALLENGES facing home-based
businesses include:
a. Getting new customers
b. Managing time
c. Keeping work and family tasks separate
d. Abiding by city ordinances
e. Managing risk
7. HOME OFFICE ENTREPRENEURS SHOULD
FOCUS ON:
a. Finding opportunity instead of accepting se-
curity
b. Getting results instead of following routines
c. Earning a profit instead of earning a
paycheck