Slide 1Slide 2Slide 3Cato Corner Farm Farmstead CheesesSmall Business, Entrepreneurship & FranchisingEntrepreneurship & Small BusinessSlide 7Slide 8Slide 9Slide 10Impact of Small BusinessSmall Business & InnovationSmall BusinessRetailing & WholesalingSmall Business – retailers/wholesalersSlide 16Slide 17Slide 18Small Business OwnershipAdvantages of Small Business OwnershipSlide 21Disadvantages of Small-Business OwnershipSlide 23Small-Business OwnershipSlide 25Starting the Small BusinessThe Business PlanForms of Business OwnershipFinancial ResourcesSlide 30Slide 31Slide 32Slide 33Starting a Small BusinessSlide 35Slide 36Slide 37Small-Business -- FranchisesEntrepreneurs – Going GreenThe Future for Small BusinessSlide 41Future for Small BusinessBig Businesses Acting “small”6-1Business in aChanging WorldMcGraw-Hill/IrwinCopyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.Chapter 6Small Business, Entrepreneurship, and Franchising26-36-4Cato Corner FarmFarmstead CheesesGreat demand for new, unique artisan cheeses. A mother-son operation in Connecticut is serving that need.6-5Small Business, Entrepreneurship & FranchisingBusiness students have many options upon graduation – some choose to start their own businesses, find employment in small businesses, or perhaps, join a franchise.Join a small business? Start my own business? Choices that you will be available to you.6-6Entrepreneurship & Small BusinessThe process of creating and managing a business to achieved desired objectives is our working definition for entrepreneurship.Entrepreneurship6-7Entrepreneurship & Small BusinessAbility to see emerging trends & create company that satisfies those consumer needs. (Dell Computers)Create new markets (Amazon.com)Improve or re-package existing products (Starbucks)Entrepreneurship & Entrepreneurs6-8Entrepreneurship & Small Business“Smallness” is relative. Defined, small business is any independently owned and operated business, not dominant in its competitive area, employing less than 500 people.What is a Small Business?6-9Entrepreneurship & Small BusinessThe Small Business Administration (SBA) is an independent agency of the federal government that offers managerial and financial assistance to small businesses. Supporting Small Business6-10Impact of Small Business6-11Impact of Small Business60-80% of all new jobs, annually, created by small business in the last 10 years.6-12Small Business & Innovation•Airplane•Audio tap recorder•Double-knit fabric•Fiber-optic examining equipment•Heart valve•Optical scanner•Personal computer•Soft contact lenses•Zipper55% of all innovations6-13Small BusinessRetailing and wholesaling, services, manufacturing and high technology are especially attractive to entrepreneurs.Industries that Attract Small Business6-14Retailing & WholesalingSelling directly to the consumer•Music stores•Sporting-goods shops•Dry cleaners•Boutiques•Drugstores•Restaurants•Hardware stores146-15Small Business – retailers/wholesalers•Annual sales $50 million•2007 #1 baby product in the nationThe “Boppy” www.boppy.com6-16Small Business•66% of the economy•Employs 70% of workforce•The Geek Squad – one-man service firm, 1994 Services6-17Small BusinessSmall business advantage over large firms –product customizationArtwork, clothing, jewelry, clothing, furnitureManufacturing6-18Small BusinessBusinesses that depend heavily on advanced scientific and engineering knowledge.•39% of high-tech jobs are in small businessHigh Technology6-19Small Business Ownership•Personal advantages•Business advantagesADVANTAGES6-20Advantages of Small Business OwnershipTraits Needed to Succeed in Entrepreneurship6-21Advantages of Small Business Ownership•Costs•Flexibility•Focus•Reputation6-22Disadvantages of Small-Business Ownership•High Stress Level•High Failure Rate•90% of all new businesses fail within the first 5 years•Undercapitalization•Lack of funds to operate a business normally6-23Disadvantages of Small-Business Ownership•Managerial Inexperience or Incompetence•Inability to Cope with Growth6-24Small-Business OwnershipTop Five Biggest Challenges, Concerns, and Goals of Small and Medium Businesses.6-25Small-Business OwnershipMost Common Mistakes Made by Startup Businesses6-26Starting the Small Business•Start with a concept or general idea•Devise a strategy to guide planning & development•Make Decisions•Form of ownership•Financial resources needed•Acquire existing business•Start a new business•Buy a franchise6-27The Business PlanBusiness Plan – a precise statement of the rationale for the business and a step-by-step explanation of how it will achieve its goals. Acts as a guide and reference document.•Explanation of the business•Analysis of competition•Income/Expense estimates6-28Forms of Business Ownership•Sole Proprietorship•Partnership•Corporation6-29Financial Resources•Provide your own personal capital (money)•Obtain capital (Financing options)6-30Financial ResourcesEquity Financing – selling or borrowing against the value of an asset (automobile, insurance policy, savings account) to obtain funds to operate a business.6-31Financial ResourcesVenture Capitalists– persons/organizations that agree to provide funding for a new business in exchange for an ownership interest or stock. Usually requires a sharing of ownership/control.6-32Financial ResourcesDebt financing– borrowing financial resources typically from a bank or lending institution The SBA (Small Business Administration) offers financial assistance to qualifying businesses.6-33Financial ResourcesLine of credit– an agreement by which a financial institution promises to lend a business a predetermined sum on demand.6-34Starting a Small BusinessDo I start from scratch?Do I buy an existing business?Do I buy a franchise?6-35A license to sell another’s products or to use another’s name in business, or bothFranchisingStarting a Small Business6-36Franchiser – the company that sells a franchise (e.g. Dunkin’ Donuts, McDonald’s, Jiffy Lube)Franchisee – the purchaser of a franchiseVisit the International Franchise AssociationFranchisingStarting a Small Business6-37Franchise – Advantages & DisadvantagesAdvantages DisadvantagesTraining & support Fees and profit sharingBrand name appeal Standardized operationsNational advertising Restrictions on purchasingFinancial assistance Limited product