Entrepreneurship:
n Entrepreneur: A person who takes the risks necessary to organize and manage a new business and receives the financial profits and non-monetary rewards. E.g. Edwin Land who developed Polaroid Camera.
n Intrapreneur: An entrepreneurial person employed by a corporation and encouraged to be innovative and creative. Example: 3M, Hewlett-Packard of USA
Traits/ Characteristics of Entrepreneur:
n Need for achievement: Strong desire for success.
n Low need to conform: Do what they really wish to.
n Persistence: Work hard, determinedly doing what is best for the business.
n High-energy level: Work long hours. 60- 80 hours a week. Since planning, organizing, direction, creating strategy and finding funds need more hours.
n Risk-taking tendency: People with strong desire for success tends to take risk.
Risks of Entrepreneurship:
n Business Risk - Entering into the business. Risk of potential failure.
n Financial Risk - Investing most, if not all, of financial resources.
n Career Risk - Leaving a secure job for a venture with a highly uncertain future.
n Family & Social Risk - Little time for family.
Reasons for failure:
n People jump into business too quickly.
n Shortage of funds - Realistic planning for the money needed.
n Failure to plan - A detailed business plan is necessary.
n Poor managerial qualities - Lack of ability to deal with people
Franchising:
n A system for selecting distribution of goods and services under a brand name through outlets owned by independent business owners.
n Franchise: The right to use a business name (e.g. Pizza Hut, McDonald’s) and sell its goods/ product and services in a specific geographical territory.
n Franchisee: The independent owner of a franchise outlet who enters into an agreement with a franchisor (parent company).
n Franchisor: The licensing company in the franchise agreement.
Elements of Franchising Business:
n A contractual agreement between the franchisee (person) and the franchisor (company).
n Branded goods or services.
n Operation by a business person for the purpose of earning profit.
n Monitoring by the franchisor, so that standard procedures and standardized products or services are used (the quality is maintained).
Advantages of owning a Franchise:
n Guidance – Managerial guidance from the franchisor.
n Brand Name – the right to use a nationally promoted brand name.
n Proven Product & method of operating the business.
n Financial Assistance.
Disadvantages of owning a Franchise:
n Costs – in the form of franchise fees and also paying the franchisor a percentage of the franchise’s profits (Royalty).
n External Control – loss of internal control over promotional activities, financial records, hiring, service producers, and managerial development.
n Weak Training Program (offered by some franchisors).
Small Business:
n One that is independently owned & operated and is not dominant in its field of operation.
What characterizes a Small Business?
n The criteria suggest that smallness depends on your point of view. A small business is one that is not dominant in its industry and that can be started with a moderate investment.
¨ Retailing and Services: The amount varies depending on the industry.
¨ Wholesaling: The maximum number of employees cannot exceed 500.
¨ Manufacturing: The business must have 250 or fewer employees.
¨ Special Trade Construction: The maximum amount of sales is $7 Million, regardless of industry.
What is INCUBATOR?
n It is a facility, office, shop, or location in which fledgling businesses can share space, costs, services, and information to grow their firms and become strong enough to leave and operate independently.
Small Business Administration (SBA):
n An independent agency of the federal government, Created in 1953 to protect the interests of small business owners. The agency provides help and support to small businesses. It provides loans and managerial assistance, if needed; encourages small businesses owned by minorities/ economically & socially disadvantaged. Also offers courses, information and training.
Small Business Opportunities/ Areas of Economy that Small Businesses are operating:
n Manufacturing: Almost 30% of all manufacturing companies are considered small. E.g. Printing shops, steel fabricating shops, clothing manufacturers, cabinet/ furniture shops and bakeries.
n Service: Intangible products that can not be physically possessed and that involve performance or effort.
¨ Business Services: Accounting firm, computer programmer, software writer etc.
¨ Personal Services: Beauty parlours, Barber shops, baby-sitter etc.
¨ Repair Services: Jewelry, Plumbing, Car fixing, Furniture and appliance repair etc.
¨ Entertainment & recreation services: Racetracks, Cinema Halls/ Theatres, amusement parks, golf courses and bowling alleys.
¨ Hotels & Motels.
n Wholesaling: Selling to other sellers (i.e. other retailers/ wholesalers/ industrial firms). These businesses serve as a link between manufacturers and retailers.
n Retailing: Selling goods to ultimate consumers/ users.
n Home-based business: Businesses in which an individual works or conducts activities from home. In USA
Small Business Start-Up:
Starting any business requires careful investigation and planning. A person can improve his/ her chances of success by taking the time to write a Business Plan.
n Business Plan: A written document that describes the business, the good or service, the consumers, the competition, the financing, and all activities necessary to enter business and make or sell a good or service.
n It is the game plan of the new business. It can also be used as a Prospectus, Proposal, or Blue Print or book.
n The business plan also serves to show banks or investors that the individual is organized, serious about the business, and willing to discuss all aspects of the business.
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