Chapter 5: Entreprenuership



Chapter 5: Entrepreneurship

Section 5:1 Rewards and Challenges of Entrepreneurship

Entrepreneurship: the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business

A venture is a new business undertaking that involves risk

Personal Characteristics of Entrepreneurs (Figure 5.1 - p.77)

• Persistent: willing to work until the job is done

• Risk-Taking: taking risks but not being reckless

• Self-confident: believe in themselves

• Restless: once goals are reached start looking for new challenges

• Goal-oriented: set and achieve goals

• Action-oriented: doers and not spectators

• Responsible: take responsibility for actions and decisions

• Self-demanding: high expectations

• Creative: new ways to solve old problems

• Independent: make your own success

• Inquisitive: conduct research and ask questions to solve problems

• Enthusiastic: energetic and passionate about pursuits

Small Businesses: businesses with fewer than 500 employees and serves a limited geographic area. In these businesses the owner usually manages every thing.

The Small Business Administration in a U.S. government agency that protects the interests of small businesses.

Internet Businesses: aka a virtual business or dot-com company. These ventures make shopping easier and more convenient for consumers. These businesses have the potential to attract a huge number of customers. Statistics show that businesses that use the Internet have grown more than 45 percent faster than those that do not use the Internet.

Rewards of Entrepreneurship

• Being the Boss: this is one of the main reasons a person becomes an entrepreneur

• Doing What You Enjoy: Something you like and do well

• Having the Opportunity to Be Creative: make your own procedures for doing things

• Building an Enterprise: most entrepreneurs have previously worked in related businesses before starting their own company. They must decide to buy an existing business or start a new one. Research is key.

One important choice is to choose the legal structure of the business (i.e. sole proprietorship, partnership, of corporation)

Reading Check p. 79

Other Reasons for Entrepreneurship

• Developing your own schedule

• Business can be run from home

• Entrepreneurs are rewarded for assuming risk

• Profits (Money)

Reading Check p.80

Challenges of Entrepreneurship

Getting Funds to Start the Business: most have to borrow money, which is often hard to get from traditional lending institutions because of the risk involved in new ventures

Being Fully Responsible for the Business: making sure everything gets done from sweeping the floors and paying the bills, to hiring employees and making repairs

Other Challenges for Entrepreneurs

• may feel alone or insecure about making the right decisions

• work long hours

• uncertain income

• about 4 out of 5 (80%) small businesses fail within the first five years because of poor management, financial planning and poor response to change

Impact of Small Businesses

More than 99% of U.S. business firms are small business and employ more than 50% of the workforce and generate more than half of the nation’s income. They are also the principal source (i.e. about 2/3) of new jobs.

After You Read 5.1 – p. 81

Section 5.2

The Business Plan: a written description of a new business venture that describes all aspects of the business and is not only used by the entrepreneur but also by potential investors and financing agencies.

Initial Steps in Setting up a Business

Checklist for Starting a Venture

• What will I produce?

• Who are my main competitors?

• Why is my product or service needed?

• How much will my product or service cost to produce?

• How many people will I need to run the business?

• What physical facilities will I need?

• What licenses, permits, or other legal documents do I need?

• How much money will I need to get started?

Reading Check p.83

Parts of a Business Plan

Executive Summary: a brief account of the key point contained in a business plan. No more than two pages and include the most important information from each section of the plan. Should open with a compelling story to persuade the reader that the business is going to succeed. Must be supported with evidence gathered through market research.

Management Team Plan: presents your qualifications and discuss how you will fill gaps in expertise. This may include hiring consultants.

Company Description: outline of the business to help investors understand the size, scope, and type of business. Also describes the opportunity and explains why the venture will succeed.

Product and Service Plan: nature of product or service should be clear and include potential spin-offs for when the business is more established.

Vision (scope & purpose) and Mission (specific aspirations) Statements: guiding principles by which the business functions.

Industry Overview: your research of the industry including trends and growth.

Market Analysis: your research about customer profile.

Competitive Analysis: advantage over competing businesses

Marketing Plan: explains how customers are made aware of your business and includes market niche, pricing, company image, marketing tactics, a media plan and a marketing budget.

Operational Plan: the business process or how the product or service will be made and delivered.

Organizational Plan: who runs the business and what is their philosophy.

Financial Plan: forecasts usually shown in financial statements.

Growth Plan: how the business will expand in the future.

Contingency Plan: identifies likely risks and ways to minimize the risks.

Cover Page, Title Page, Table of Contents, and Supporting Documents:

After You Read p.87



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