978-0078023163 Chapter 6 Part 4

Chapter 06 – Entrepreneurship and Starting a Small Business

6-46

test

prep

PPT 6-60

Progress Assessment

TEST PREP

6-60

• Why do many small businesses avoid doing

business globally?

• What are some of the advantages small

businesses have over large businesses in selling

in global markets?

Chapter 06 – Entrepreneurship and Starting a Small Business

6-47

PowerPoint slide notes

PPT 6-1

Chapter Title

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.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-48

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?

Company: Art Fry, 3M, Post-It Notes

PPT 6-6

What Is Entrepreneurship?

WHAT is ENTREPRENEURSHIP?

6-6

• Entrepreneurship —

Accepting the risk of starting

and running a business.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-49

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.

This slide will help in starting the chapter discussion.

Students enjoy stories about how companies began.

Ask the students: Do you know of any interesting stories

about how some other businesses got started? (This can

also be assigned as a team project to generate a good dis-

cussion.)

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.

1. This slide shows the students that it’s never too

early to get started on your business ideas.

2. Ask the students, Can you think of other reasons

you might want to start a business right after

school? What are the potential downsides to start-

ing a business right away?

Chapter 06 – Entrepreneurship and Starting a Small Business

6-50

PPT 6-10

You’re Never Too Old to Be an

Entrepreneur 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.

1. This slide shows that in spite of popular belief

that all older Americans retire at a certain age,

many start their own businesses after leaving their

careers.

2. Ask the students, Can you think of reasons (other

than experience and funding) that older entrepre-

neurs are successful? Why do you think older

Americans want to start businesses at this age?

What are the downsides of starting a business

late?

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

6-51

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 Business 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.

1. Just because you’re still in school doesn’t mean

that starting a business is beyond your grasp.

Many students have turned their time in college

into an opportunity to create a business.

2. Ask the students, Have you had an idea for a

business? What triggered it? Why did you or did

you not pursue it further?

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

6-52

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.

PPT 6-18

Home-Based Business Growth

• Computer technology has leveled the playing

field.

• Corporate downsizing has led many to venture on

their own.

HOME-BASED BUSINESS

GROWTH

6-18

LO 6-1

• Social attitudes have

changed.

• New tax laws have

loosened restrictions on

deducting expenses for

home offices.

In the United States home-based businesses have experi-

enced growth due to a variety of reasons. One of the most

important reasons for the growth in home-based businesses

is that technology has made it easier for home-based busi-

nesses to compete against their larger competitors.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-53

PPT 6-19

Home-Based Business Isn’t Easy

HOME-BASED BUSINESS

ISN’T EASY

6-19

LO 6-1

• Getting new customers is difficult.

• Managing your time requires self-discipline.

• Work and family tasks are sometimes not

separated.

• Government ordinances may restrict your

business.

• Homeowner’s insurance may not cover

business-related claims.

PPT 6-20

Benefits of Home-Based Businesses

BENEFITS of HOME-BASED

BUSINESSES

6-20

LO 6-1

• Ability to start your business

immediately

• Minimal start-up capital needed

• No rent or excessive set-up

charges

• Comfortable working conditions

• Reduced wardrobe expenses

• No commuting

• Tax benefits

• Elimination of office politics

• Low risk for trial and error

1. This slide lists some of the benefits of a home-

based business.

2. Before showing this slide, have students work

alone, then with a partner, then with a group (do-

ing all three will help promote discussion of stu-

dents’ ideas) to see if they can come up with a list

of benefits of home-based businesses. Then reveal

the slide and have students compare their lists to

the slide.

PPT 6-21

Downsides of Home-Based Businesses

DOWNSIDES of HOME-BASED

BUSINESSES

6-21

LO 6-1

• Difficult to establish work

habits

• Limited support system

• Isolation

• Work space may be limited

• Clients may be uncomfortable

coming to your home

• Zoning restrictions

• Success is based 100% on

your efforts

1. This slide walks students through some of the

drawbacks of a home-based business.

2. Before showing this slide, have students work

alone, then with a partner, then with a group (do-

ing all three will help promote discussion of stu-

dents’ ideas) to see if they can come up with a list

of disadvantages of home-based businesses. Then

reveal the slide and have students compare their

lists to the slide.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-54

PPT 6-22

Think You’re Ready to Work from

Home?

Source:Entrepreneur,June2010.

THINK YOU’RE READY

to WORK from HOME?

6-22

Yes? No?

If I don’t know the answer, I can figure it out.

I’m hardworking, self-directed and disciplined.

I’m organized and can multitask.

I don’t mind working long hours or weekends.

I regularly set goals and measure progress.

I’m happy being alone.

I’m an excellent communicator.

I can create relationships with people I’ve never met.

I’m productive on my own.

My family and friends don’t expect me to be available

when I’m working at home.

LO 6-1

1. Running a business from home is hard work. Af-

ter discussing both the ups and downs of home-

based work, discuss this table with students.

2. Ask the students, What statements can you say

yes and no to? What do each of these statements

have to do with home business success? After

looking at this table, do you think you’d be ready

or want to work from home?

PPT 6-23

Online Business

ONLINE BUSINESS

6-23

LO 6-1

• Online sales reached

$262 billion in 2013,

about 8% of all retail

sales.

• All retail sales were up

2.5% in 2013. However,

online retail sales grew

13%.

It’s expected online sales will reach $370 billion by

2017.

PPT 6-24

Affiliate Marketing

AFFILIATE MARKETING

6-24

LO 6-1

• Affiliate Marketing — An online marketing strategy

in which a business rewards individuals or other

businesses for each visitor or customer the affiliate

sends to its website.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-55

PPT 6-25

Boosting Your Business’s Online Pres-

ence

Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.

BOOSTING YOUR BUSINESS’S

ONLINE PRESENCE

6-25

PhotoCredit:MarcWathieu

LO 6-1

• Establish an identity.

• Be easy to find.

• Steal good ideas and

make them your own.

• Look out for

opportunities.

• Remember other forms

of marketing.

• Be friendly!

1. Activity online, both in retail and marketing, con-

tinues to grow each year. It’s important that busi-

nesses (even the small ones!) have an online, us-

er-friendly presence.

2. This slide provides some guidelines to successful-

ly navigate the process of creating an online busi-

ness identity.

3. Ask the students, Do you have any other ideas of

important steps to take in creating an online per-

sonality for a business? Through Facebook? Twit-

ter? Ads on Pandora or Hulu?

PPT 6-26

Intrapreneurs

• Art Fry of 3M developed

Post-Its when he was

trying to mark pages of

his hymnal without

damage.

INTRAPRENEURS

6-26

LO 6-1

• Intrapreneur — A creative person who works as an

entrepreneur within a corporation.

• Intrapreneurs use a company’s existing

resources to launch new products for the

company.

In order to develop new ideas, engineers at Google are

allowed to work on projects that interest them for up to

20% of the time at work. The idea is to support creative

people and ideas in an effort to launch new products. This

work can be more motivating than working on someone

else’s ideas.

PPT 6-27

Government and Entrepreneurship

GOVERNMENT and

ENTREPRENEURSHIP

6-27

LO 6-1

• Immigration Act passed in 1990 created a

category of “investor visas” that encourage

entrepreneurs to come to the U.S.

• Enterprise Zones — Specific geographic areas to

which governments attract private business

investment by offering lower taxes and other

government support.

• Incubators — Offer new businesses low-cost offices

with basic services.

Small-business is the economic engine of the United

States economy. Due to the economic power of small–

businesses the government has used “investor visas,” en-

terprise zones and business incubators to encourage entre-

preneurship. A good website to further explore incubators

is http://www.nbia.org/.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-56

PPT 6-28

Test Prep

TEST PREP

6-28

• Why are people willing to take the risks of

entrepreneurship?

• What are the advantages of entrepreneurial

teams?

• How do micropreneurs differ from other

entrepreneurs?

• What does the government do to promote

entrepreneurship?

1. The primary reasons people are will to take the risk

of entrepreneurship are: (a) opportunity to share in

the American dream; (b) profit, the potential to

become wealthy and successful; (c) independence,

becoming you own boss; and (d) challenge, the desire

to take a chance.

2. Whereas an entrepreneur has to wear many hats and

take huge responsibility, a team allows members to

combine creative skills with production and

marketing skills right from the start. Having a team

can also ensure more cooperation and coordination

later among functions in the business.

3. Most entrepreneurs are committed to the quest for

growth in their business. Mircorpreneurs know they

can be content even if their companies never appear

on a list of top-ranked businesses. Many

micropreneurs are home-based businesses.

4. The government helps by creating enterprise and

promise zones, offering tax breaks, enacting the

JOBS Act (discussed further in Chapter 19), and “in-

vestor visas.”

PPT 6-29

Small Businesses

SMALL BUSINESSES

6-29

LO 6-2

• Small Business —

Independently owned and

operated, not dominant in its

field of operation and meets

certain standards of size.

• Businesses are “small” in

relation to other businesses

in their industries.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-57

PPT 6-30

Small-Business Statistics

SMALL BUSINESS STATISTICS

6-30

LO 6-2

• There are 28 million small businesses in the U.S.

• Of all nonfarm businesses in the U.S., almost

97% are considered small.

• Small businesses account for over 50% of the

GDP.

• Small businesses have generated 65% of new

jobs since 1995.

• About 80% of U.S. workers’ first jobs were in

small business.

The power of small business is immense. Students are

often shocked to see how small businesses contribute to

the U.S. economy.

PPT 6-31

Advantages of Small over Big

Business

ADVANTAGES of SMALL OVER

BIG BUSINESS

6-31

PhotoCredit:ElliotBrown

LO 6-2

• More personal customer service.

• The ability to respond quickly to opportunities.

PPT 6-32

Business Failures Are Lower Than the

Reports Because . . .

BUSINESS FAILURES are LOWER

THAN the REPORTS BECAUSE…

6-32

LO 6-2

• Owner closing a business

to start another is reported

as a “failure.”

• Changing forms of

ownership is reported as a

“failure.”

• Retirement is reported as

a “failure.”

Chapter 06 – Entrepreneurship and Starting a Small Business

6-58

PPT 6-33

They Did What?

Source:WorldFeaturesSyndicate.

• Tommy Hilfiger – First store went bankrupt

• Milton Hershey – First confectionery failed

• H.J. Heinz – Company went bankrupt six years after

start

THEY DID WHAT?

Famous Business Failures

6-33

LO 6-2

• Walt Disney – First film company

went bankrupt

• Henry Ford – First two car

companies failed

• L.L. Bean – Almost went bankrupt in

first year

1. Starting a successful new business is never easy

and many famous entrepreneurs failed at their

first and subsequent attempts.

2. Ask the students, How can a business failure ac-

tually be a positive experience? (While failure is

never a goal, it often gives the entrepreneur an

invaluable experience. There is an old adage,

Learn from your mistakes.)

3. Ask the students, If your first business failed,

would you try again? Why or why not?

4. How can businesses survive such poor perfor-

mances? (Determination and passion of the own-

ers and founders plays a big role.)

PPT 6-34

Causes of Small Business Failures

CAUSES of SMALL BUSINESS

FAILURES

6-34

LO 6-2

PPT 6-35

Increasing Small Business Successes

INCREASING SMALL BUSINESS

SUCCESSES

6-35

LO 6-2

Chapter 06 – Entrepreneurship and Starting a Small Business

6-59

PPT 6-36

Learning about Small Business

LEARNING ABOUT

SMALL BUSINESS

6-36

LO 6-3

• Learn from Others – Investigate your local

colleges for classes on small business and

entrepreneurship; talk to and work for successful

local entrepreneurs.

• Get Some Experience – Gain three years

experience in the field; then start a part-time small

business.

• Take Over a Successful Firm – Serve as an

apprentice and eventually take over once the owner

steps down.

PPT 6-37

Should You Stay or Should You Go?

SHOULD YOU STAY or

SHOULD YOU GO?

6-37

Suppose you worked in a company for two years and

you see signs of it faltering. You and a coworker

have ideas about how to succeed and are

considering quitting to start your own company.

• Should you approach other coworkers about working for

your new venture?

• Will you try to lure your old boss’s customers?

• What are the alternatives?

• What are the consequences?

• What is the most ethical choice?

PPT 6-38

Major Business Functions

MAJOR BUSINESS FUNCTIONS

6-38

LO 6-4

• Planning

• Financing

• Knowing customers

• Managing employees

• Keeping records

Starting a business is when the real work begins. It is im-

portant that entrepreneurs understand the major business

functions such as planning, financing, understanding your

customer, managing employees and keeping good records.

Many entrepreneurs create business plans which may in

part outline the major business functions.

Chapter 06 – Entrepreneurship and Starting a Small Business

6-60

PPT 6-39

Business Plans

BUSINESS PLANS

6-39

LO 6-4

• Business Plan — A detailed written statement that

describes the nature of the business, the target

market, the advantages the business will have over

competition, and the resources and owners

’

qualifications.

• A business plan forces potential owners to be

specific about what they will offer.

• A business plan is mandatory for talking with

bankers or investors.

The business plan is the entrepreneur’s road map to suc-

cess. While a well-designed business plan will not guar-

antee success, the lack of one may lead to failure. To bor-

row money or to seek investors, a business plan is a must.

PPT 6-40

Writing a Business Plan

• A good plan takes a long time to prepare.

• A good executive summary catches interest and

tempts potential investors to read on.

WRITING a BUSINESS PLAN

6-40

LO 6-4

• Getting the plan into

the right hands is

almost as important

as getting the right

information in it.

PPT 6-41

A Family Affair

Source:BloombergBusinessweek,www.businessweek.com,accessedNovember2014.

A FAMILY AFFAIR

What to Consider Before Starting a Family Business

6-41

LO 6-4

• Clarify Expectations – What will each person

contribute?

• Discuss Work/Family Boundaries – What is the

line that separates work from personal relationships?

• Develop Good Communication – Agree about

types of decisions you’ll make jointly and on your own.

• Clarify Long-Term Intentions – Discuss how long

everyone will work full time and goals for the business.

• Have an Escape Hatch – Have a Plan B.

1. This slide illustrates what needs to be considered

before starting a business with family members.

2. Communication and the establishment of clear

expectations are the keys to making a family

business work.

3. Ask the students: Why do family businesses need

extra care?