Chapter 5: Entrepreneurship

Rewards and Challenges of Entrepreneurship

Entrepreneurship

An entrepreneur is a person who recognizes a business opportunity and organizes, manages, and assumes the risks of starting and operating a business.
Entrepreneurship is the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business.
Creating and running a business venture requires a variety of skills. * A venture is a new business undertaking that involves risk.
Most entrepreneurs have similar characteristics. * These traits include leadership, decision-making, self- discipline, planning, and people skills.
The SBA is a U.S. government agency that protects the interests of small businesses.
It defines a $small business$ as an independently owned business that usually has the owner as its manager. * A small business serves a limited geographic area and employs fewer than 500 people.
Many entrepreneurs open virtual businesses. * A $virtual business$ or $dot-com company$ is a business that operates on the Internet.
Online businesses have the potential to attract a huge number of customers

Rewards of Entrepreneurship

People become entrepreneurs for a number of reasons besides making money. * Being the boss, doing what they enjoy, and using their creativity are just a few.
Many successful entrepreneurs work in a related business before starting their own company.
Most U.S. businesses are sole proprietorships, which means they are owned and operated by one person.
Another form of business is a partnership. * A partnership is owned and run by two or more people.
A corporation has many owners. * Corporations are run by a chief executive officer, who answers to a board of directors.

Challenges of Entrepreneurship

One of the biggest obstacles in starting a business is obtaining financing.
Business owners are responsible for more than just decision making.
Duties include handling financial records as well as training employees.
Entrepreneurs also face the challenge of feeling alone and insecure about making the right decisions

The Impact of Small Businesses

More than 99 percent of U.S. firms are small businesses.
Small businesses employ more than 50 percent of the U.S. workforce.
A majority of them are one-person operations that generate more than half the nation’s income.
Small businesses are also the principal source of new jobs.
Some estimate that two-thirds of all new jobs are generated by small businesses.

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The Business Plan

Initial Steps in Setting up a Business

If your market research shows that your business has the potential to succeed, then develop a business plan. * A business plan is a written description of a new business venture that describes all aspects of the business
A checklist is a good way to organize your thinking when you begin planning your own business.
Entrepreneurs should keep these questions and their answers in mind as they develop and write their business plan. * 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?

Parts of a Business Plan

There are 16 essential parts of a business plan * The $executive summary$ is a brief account of the key points contained in a business plan * The management team plan presents your qualifications and those of any partners you might have. * The description of the firm provides an outline of the business. * Describe the product or service you want to offer. * You should note the unique features of the product or service and possible spin-offs. * The vision and mission statements section states the guiding principles by which a business functions * A $vision statement$ establishes the scope and purpose of a company and reflects its values and beliefs. * A mission statement expresses the specific aspirations of a company, the major goals it will try to reach. * The industry overview presents your research of the industry. * Market analysis presents research about your customer profile * Competitive analysis indicates how the proposed business has an advantage over its competitors. * A marketing plan discusses how a company makes its customers aware of its products or services * The operational plan includes the business processes that result in production and delivery of the product or service. * Organizational plan looks at the people who will run the firm as well as management’s philosophy * Financial plan presents forecasts for the business. * Data are usually shown in financial statements. * The growth plan looks at how the business will expand in the future. * The contingency plan looks at likely risks to the business, such as lower-than-expected sales and emergencies that might affect it. * The cover page should include the company’s name, address, phone number, Web site and e-mail addresses, and logo. * The title page follows the cover page. It includes the company name; the names, titles, and addresses of the owners; the date the plan was submitted; and the name of its preparer. * The table of contents details the components of the business plan. * Supporting documents include exhibits and other information relevant to the business.