Business a changing world 7e by ferrell chap006

Business in a Changing WorldChapter 6 Small Business, Entrepreneurship, and Franchising... Small Business, Entrepreneurship & FranchisingBusiness students have many options upon graduati

Business in a Changing World

Chapter 6

Small Business, Entrepreneurship, and Franchising

Cato Corner Farm

Farmstead Cheeses

Great demand for new, unique artisan cheeses

A mother-son operation in Connecticut is

serving that need.

Small Business, Entrepreneurship & Franchising

Business 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.

Entrepreneurship & Small Business

The process of creating and managing a

business to achieved desired objectives is

our working definition for entrepreneurship.

Entrepreneurship

Entrepreneurship & Small Business

Ability to see emerging trends & create company that

satisfies those consumer needs (Dell Computers)

Create new markets (Amazon.com)

Entrepreneurship & Entrepreneurs

Entrepreneurship & 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

What is a Small Business?

Entrepreneurship & Small Business

The Small Business Administration (SBA) is

an independent agency of the federal

government that offers managerial and

Supporting Small Business

Impact of Small Business

Impact of Small Business

60-80% of all new jobs, annually, created by

small business in the last 10 years.

Small Business & Innovation

Small Business

Retailing and wholesaling, services,

manufacturing and high technology are

especially attractive to entrepreneurs.

Industries that Attract Small Business

Retailing & Wholesaling

Selling directly to the consumer

Small Business – retailers/wholesalers

•Annual sales $50 million

•2007 #1 baby product in the

nation

The “Boppy” www.boppy.com

Small Business

Small business advantage over large firms –

product customization

Manufacturing

Small Business

Businesses that depend heavily on advanced

scientific and engineering knowledge.

•39% of high-tech jobs are in small business

High Technology

Small Business Ownership

•Personal advantages

•Business advantages

ADVANTAGES

Advantages of Small Business Ownership

Traits Needed to Succeed in

Entrepreneurship

Advantages of Small Business Ownership

•Costs

•Flexibility

•Focus

•Reputation

Disadvantages 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 normally

Disadvantages of Small-Business Ownership

•Managerial Inexperience or Incompetence

•Inability to Cope with Growth

Small-Business Ownership

Top Five Biggest Challenges, Concerns, and Goals of Small and Medium Businesses.

Small-Business Ownership

Starting the Small Business

• Form of ownership

• Financial resources needed

• Acquire existing business

• Start a new business

• Buy a franchise

The Business Plan

Business 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 estimates

Forms of Business Ownership

•Sole Proprietorship

•Partnership

•Corporation

Financial Resources

•Provide your own personal capital (money)

•Obtain capital (Financing options)

Financial Resources

Equity Financing – selling or borrowing

against the value of an asset (automobile,

insurance policy, savings account) to obtain

funds to operate a business.

Financial Resources

that agree to provide funding for a new

business in exchange for an ownership

Financial Resources

Debt financing – borrowing financial

resources typically from a bank or lending

institution The SBA (Small Business

Administration) offers financial assistance to

Financial Resources

Line of credit – an agreement by which a

financial institution promises to lend a

business a predetermined sum on demand.

Starting a Small Business

Do I start from scratch?

Do I buy an existing business?

Do I buy a franchise?

A license to sell another’s products or to use another’s name in business, or both

Franchising

Starting a Small Business

Franchiser – the company that sells a franchise (e.g

Dunkin’ Donuts, McDonald’s, Jiffy Lube)

Franchisee – the purchaser of a franchise

Visit the International Franchise AssociationFranchising

Starting a Small Business

Franchise – Advantages & Disadvantages

Advantages Disadvantages

Training & support Fees and profit sharing Brand name appeal Standardized operations National advertising Restrictions on purchasing Financial assistance Limited product line

Proven products Possible market saturation Greater chance for success Less freedom in decisions

Small-Business Franchises

Fastest Growing & Hottest New Franchises

Entrepreneurs – Going Green

Eco-responsible entrepreneurial companies – viable new products utilizing recycling in

some way Recycline – products from

recycled materials.

The Future for Small Business

•Demographic Trends

•Boomers, echo boomers (millennials), Generation Y

•Immigrants (12% of U.S population)

The Future for Small Business

•Technological & Economic Trends

•Internet usage continues to increase

•Increase in service exports

•Economic turbulence

Future for Small Business

Top Large U.S Cities for Entrepreneurs

Big Businesses Acting “small”

Common Approaches

1.Large firms emulate smaller ones to improve bottom line 2.Downsizing or rightsizing

3.Acting small from inception – Southwest Airlines

4.Intrapreneurs – individuals in large firms who take

responsibility for the development of innovations within the organization