Understanding business 11th by mchugh nickels chap006

CHAPTER 6

Entrepreneurship
and
Starting a
Small Business

McGraw-Hill/Irwin

Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.


LEARNING OBJECTIVES

1. Explain why people take the risks of
entrepreneurship; list the attributes of successful
entrepreneurs; and describe entrepreneurial teams,
intrapreneurs, and home- and web-based
businesses.
2. Discuss the importance of small business to the
American economy and summarize the major
causes of small-business failure.
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LEARNING OBJECTIVES

3. Summarize the ways to learn about how small
businesses operate.
4. Analyze what it takes to start and run a small
business.

5. Outline the advantages and disadvantages small
businesses have in entering global markets.

6-3


PRUDENCIO UNANUE
Goya Foods

• Goya Foods has provided for
Hispanic families for over 75
years.
• Unanue, a Spanish
immigrant, opened a small
grocery store in 1936.
• Still family-owned, Goya now
employs over 3,500 and
sells more than 1,500
products.

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NAME that COMPANY
While I was an employee at a big company, I
developed a product that has become a staple
on most office supply lists. I needed something
to mark the pages of a hymnal without falling out
or damaging the book. What started as a simple,
yellow piece of paper with a new adhesive

evolved into many different versions – now there
are Super Sticky, recycled, Pop-Up and
electronic versions of my inventions.

Who am I, who did I work for, and what did I invent?

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WHAT is ENTREPRENEURSHIP?

• Entrepreneurship -Accepting the risk of starting
and running a business.

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NOTABLE ENTREPRENEURS
• French immigrant Élruthère Irènèe du Pont de
Nemours started Du Pont in 1802.
• David McConnell borrowed $500 from a friend to
start Avon.
• George Eastman started Kodak with a $3,000
investment in 1880.
• Jeff Bezos started Amazon.com with investments
from his family and friends.
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EARNING while LEARNING

• Jeremy Young – Developed a prepaid laundry
service for students at his university.

• Jessica Mah – Started InternshipIn that helps
students find high-quality internships.

• Zach Workman – Launched Punch, an all-natural
energy drink.

• John Goscha – Created her one-of-a-kind jewelery
company, Tramonti, during her freshman year.
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YOU’RE NEVER TOO YOUNG
to be an ENTREPRENEUR
Four reasons to start your business right away:
1. You don’t have a mortgage or kids to take care of.
2. You can survive on little funds and work long hours.
3. No disruption to your career path. It hasn’t started yet!
4. Use your alma mater for resources.

Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.

6-9


YOU’RE NEVER TOO OLD to be
an ENTREPRENEUR EITHER!
• The highest rate of

entrepreneurship activity is in
the 55-64 age group!
• Since 1996, older Americans
have opened businesses at
a higher rate than 20-34 year
olds.
• Older entrepreneurs have
greater experience and more
financial resources.
Source: U.S. News and World Report, www.usnews.com, accessed October 2014.

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WHY TAKE the RISK?

LO 6-1

• Opportunity
• Profit
• Independence
• Challenge

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BIG TIME PROFIT

LO 6-1

• Michael Dell could buy 1,100
new laptops for every
student at the University of
Texas at Austin!
• Dietrich Mateschitz could
buy himself a can of Red Bull
every day for the next 11
million years!
• Liliane Bettencourt could buy
a box of L’Oreal hair color for
every woman in the world!
Source: Forbes, www.forbes.com, accessed November 2014.

Photo Credit: Emran Kassim

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WHAT DOES IT TAKE to be an
ENTREPRENEUR?

LO 6-1

• Self-directed
• Self-nurturing
• Action-oriented
• Highly energetic
• Tolerant of uncertainty
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FIVE STEPS to STARTING YOUR
BUSINESS in SCHOOL

LO 6-1

1. Find a problem or need.
2. Zero in on specifics.
3. Do research on
campus, test products
with students.
4. Move forward with your
ideas. Don’t wait!
5. Sacrifice.
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.

6-14


An IDEA is a
GOOD OPPORTUNITY IF…

LO 6-1

• It fills customers’ needs.
• You have the skills and resources to start a
business.
• You can sell the product or service at a
reasonable price and still profit.
• You can get your product or service to customers

before the window of opportunity closes.
• You can keep the business going.
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ENTREPRENEURIAL TEAMS

LO 6-1

• Entrepreneurial team -- A
group of experienced people from
different areas of business who
join to form a managerial team
with the skills to develop, make
and market a new product.

• An entrepreneurial team
(Steve Jobs, Steve Wozniak
and Mike Markkula) was key to
Apple’s success.
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MICROPRENEURS

LO 6-1

• Micropreneurs -- Entrepreneurs willing to accept
the risk of starting and managing a business that
remains small, lets them do the work they want to do,

and offers a balanced lifestyle.

• About half of U.S. micropreneurs are home-based
business owners – writers, consultants, video
producers, architects, bookkeepers, etc.
• Nearly 60% of home-based micropreneurs are
men.
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HOME-BASED BUSINESS
GROWTH

LO 6-1

• Computer technology has leveled the playing
field.
• Corporate downsizing has led many to venture on
their own.
• Social attitudes have
changed.
• New tax laws have
loosened restrictions on
deducting expenses for
home offices.
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HOME-BASED BUSINESS
ISN’T EASY

LO 6-1

• Getting new customers is difficult.
• Managing your time requires self-discipline.
• Work and family tasks are sometimes not
separated.
• Government ordinances may restrict your
business.
• Homeowner’s insurance may not cover
business-related claims.
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BENEFITS of HOME-BASED
BUSINESSES
•

Ability to start your business
immediately

•

Minimal start-up capital needed

•

No rent or excessive set-up
charges

•

Comfortable working conditions

•

Reduced wardrobe expenses

•

No commuting

•

Tax benefits

•

Elimination of office politics

•

Low risk for trial and error

LO 6-1

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DOWNSIDES of HOME-BASED

BUSINESSES
•

Difficult to establish work
habits

•

Limited support system

•

Isolation

•

Work space may be limited

•

Clients may be uncomfortable
coming to your home

•

Zoning restrictions

•

Success is based 100% on

your efforts

LO 6-1

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THINK YOU’RE READY
to WORK from HOME?

Source: Entrepreneur, June 2010.

LO 6-1

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ONLINE BUSINESS

LO 6-1

• Online sales reached
$262 billion in 2013,
about 8% of all retail
sales.
• All retail sales were up
2.5% in 2013. However,
online retail sales grew
13%.
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AFFILIATE MARKETING

LO 6-1

• Affiliate Marketing -- An online marketing strategy
in which a business rewards individuals or other
businesses for each visitor or customer the affiliate
sends to its website.

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BOOSTING YOUR BUSINESS’S
ONLINE PRESENCE

LO 6-1

• Establish an identity.
• Be easy to find.
• Steal good ideas and
make them your own.
• Look out for
opportunities.
Photo Credit: Marc Wathieu

• Remember other forms
of marketing.
• Be friendly!

Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.

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