Chapter 9 - Global Entrepreneurship and Small Business Management

Entrepreneurs

Risk taker who operates a business.

Economic and social benefits of small businesses:

- Creators of new products

- Major source of jobs

- Provide Personal Service

- Brings together resources needed for a company to get started

Small Business

independently owned and operated business that does not dominate an industry.

Types of Entrepreneurial Business:

1. Agriculture, Mining, and Extracting

2. Manufacturing Companies

3. Wholesalers (Intermediaries) - Buys from manufacturer and sells to other businesses. Ship products to retailers.

4. Retailers - sells directly to consumers

5. Service Companies - sell to consumers and to businesses

Future Growth for Small Business Entrepreneurs:

1. health care services

2. retailing and food-service companies

3. environmental business

4. training and education

5. personal services (child care, financial planning, entertainment, recreation)

6. commercial services

Home-Based Businesses

1. due to technology

2. over 5 million in US, 2 million in Canada

telecommuting benefits:

1. Businesses save money-less office space

2. Retain talented employees

3. Workers save time and energy from travel

Self Employment advantages:

- independence

- pride of ownership

- feeling of accomplishment

- confidence

- satisfaction

Self Employment Disadvantages:

- time commitment

- uncertain income

- possible loss of investment

- burn-out

Successful Entrepreneur qualities:

- risk taker

- self confident

- hard working

- experienced

- enjoyment

- creative

- business knowledge

- goal oriented

- desire for adventure

SMART GOALS:

S- specific

M- measurable

A- agreed upon

R- realistic

T- time constrained

SMART GOAL EXAMPLE:

I want to be raise my grade by 5% by the end of this semseter.

What is a business plan used for?

1. to attract new investors

2. a blueprint for company activites

Major activities of every business:

- Marketing

- Finance

- Production

- Human Resources

- Information Systems

Parts of a Business Plan:

1. business description

2. organizational structure

3. marketing activities

4. financial planning

5. production activities

6. human resource activies

7. information needs

Budget

a financial tool that estimates a company's funds and its plan for spending those funds.

What are the three types of Analyze Costs?

1. Start-up Costs

2. Variable Costs

3. Fixed Costs

Start-up Costs

Continuing expenses-on-going

Variable Costs

Change in proportion to the level of production

Fixed Costs

DO NOT CHANGE.

What is a breakeven point?

number of units a business must sell to make a profit of zero.

Loss

sales below breakeven point

Profit

Sales above breakeven point

Gross Profit

difference between the cost of an item and the price for which the business can sell the item.

2 Sources of Funds

Equity Funds and Debt Funds

Equity Funds

Business Funds obtained from the owners of a business.

Debt Funds

Business funds obtained by borrowing

Cash Flow

inflow and outflow of cash

What is inflows from?

sales

Outflows

operating expenses

Cash Flow Statement

Reports current sources and amounts of cash inflows and outflows.

Production management

factors of production are combines to create goods and services

EX: Extracting, Wholesaler, Retailer, Consumer.

Human Resources Management Labor

most important factor of production

EX: hire needed employees, train employees, reward, recognize, retain, etc.

Information Management

Identify information needs

Obtain the information

Organize the information

Distribute Reports

Update Data Files as needed

A business sells 1,000 printers for $150,000. If the printers costed $90 each, what is the total gross profit?

$150,000 - ($90 x 1,000 printers) = $60,000

If the fixed costs total is $500,000 and the gross profit on each unit of sales is $20, how many units must the company sell before it begins to earn a profit?

$500,000/20=25,000

A business has total fixed costs of $200,000, and it sells its product for $1,000 but it costs $600 to manufacture each unit. How many units must the company sell to break even?

Gross Profit per unit: $1,000-$600=$400

$200,000/$400= 500 units

A company's balance sheet shows assets of $500,000 and liabilities of $300,000. What is the company's owner's equity?

$500,000-$300,000 = $200,000 Owner's Equity

A company wants to make a profit of $20,000. It has a fixed cost of $100,000, a unit selling price of $20 and a unit cost of $10. How many units must it sell?

Gross Profit per unit: $20-$10 = $10

Breakeven point: $100,000/$10 gross profit = 10,000 units

$20,000 profit/$10 unit costs = 2,000 units

10,000 breakeven units + 2,000 units = 12,000 units sold to make profit of $20,000

A company has cash flow of 1,500,000, sales revenue of 1,000,000, and operating expenses of $845,000. What is the company's profit?

1,000,000 sales revenue - $845,000 operating expenses = $155,000 profit