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Chapter 7 Entrepreneurship and Starting a Small Business

Entrepreneurship
accepting the challenge of starting and running a business
Entrepreneurial ventures differ from small businesses in four ways:
1) Amount of wealth creation
2) Speed of wealth creation
3) Risk
4) Innovation
Six Reasons People Take The Entrepreneurial Challenge
1) New Idea, Process, or Product – Some entrepreneurs are driven by a firm belief that they can produce a better product, or current product at a lower cost
2) Independence – Many entrepreneurs simply do not enjoy working for someone else
3) Challenge – Many people thrive on overcoming challenges
4) Family Pattern – Some people grow up in families who have started their own businesses
5) Profit – it can be profitable, an upside not found in employment
6) Immigration – Programs have existed that allow investment immigration
Entrepreneurial Attributes
1) Self-directed
2) Determined
3) Action-Oriented
4) Highly Energetic
5) Tolerant of Uncertainty
6) Able to Learn Quickly
Micro-enterprises
A small business with fewer than 5 employees
– Many are home-based businesses
Intrapreneurs
Creative people who work as entrepreneurs within corporations
Business Establishment
– Has at least one paid employee
– Annual sales revenue of $30,000, or is incorporated
– Has filed a federal corporate income tax return at least once in the previous three years
Causes of Small Business Failure
1) Underpricing or overpricing goods or services
2) Underestimating how much time it will take to build a market
3) Attempting to do too much business with too little capital
4) Starting with too much capital and being careless in its use
5) Going into business with little or no experience
6) Not allowing for setbacks and unexpected expenses
7) Extending credit too freely and too rapidly
8) Failing to keep complete, accurate records
Ways to get into your first business venture
1) Start your own company
2) Buy an existing business
3) Buy a franchise unit
Inherit/take over a family business
Functions of business in small-business setting:
1) Planning your business
2) Financing your business
3) Knowing your customers (marketing)
4) Managing your employees (human resource development)
5) Keeping records (accounting)
Business Plan
A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s)
Sources of Funds for a Small Business
1) Supplier Credit
2) Personal Savings
3) Retained Earnings
4) Business credit cards
5) Personal loans, credit cards, lines of credit
6) Leasing
7) Loans from friends and relatives
8) Government lending agencies
9) Angel investment
Angel Investors
Private individuals who invest their own money in potentially hot new companies before they go public
Market
People with unsatisfied wants and needs who have both the resources ad the willingness to buy

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