Business OrganizationChapter 5

Facts:• More than 3,000 new businesses are

started each week in the U.S.• According to the U.S. Small Business

Administration (SBA), over 50% of small businesses fail in the first year and 95% fail within the first five years.

Entre….what????Entrepreneurship-

The process of starting and managing your own business.

Entrepreneurs- The people who organize, manage, and take the risk of owning and operating a business.

What Does It Take?Anyone can be an entrepreneur! However, successful entrepreneurs usually have the following characteristics:

• Focused & Goal Oriented• Risk Takers• Set high personal goals• Independent• Have a high level of self-confidence• Creative

Preparing to be an Entrepreneur

Education• Most finish HS & have at

least one degree

• Take classes that develop:

– Academic abilities

– Technology skills

– An Understanding of business principles

Business Skills• EXPERIENCE!!!!

– Cooperative Education

– Internships

– FBLA & DECA

• Learn from mistakes

The Changing U.S. Job Market• Baby boomers dominate the workplace

– Began retiring in 2010

• Caucasians= 75% of workforce– Will drop to 70% by 2012– Increase in Hispanic, Asian & African-American

workers

• Women are becoming a larger portion of the workplace– By 2012, women will make up ½ of the workforce

Pressure on Employees

• Work longer hours– Less time with family

• Growing wage difference between upper management positions and entry level pay

• Less job security

• Increased education requirements

Business & The Economy

• The majority of U.S. businesses are small– 78% of businesses employee only themselves– 19% employee less than 20– Responsible for nearly half of the U.S. GDP

each year

Number of Employees in U.S. Businesses

none, 78%

1-19, 19%

20-99, 2%

100-9,999, 1%

over 10,000, 0%

none

1-19

20-99

100-9,999

over 10,000

Impact on a Community

• Pays wages/ employees

• Buys goods and services from other businesses

• Employees/owners need housing, food, etc

• Taxes are paid

• Large businesses often bring smaller businesses

The Success of a Business

It’s more than a product or service, it takes……

• Preparation

• Motivation

• Organization

• A clear purpose

The Success of a BusinessBusiness Plan- A written description of the

business idea and how it will be carried out, including all major business activities.

“The number one reason businesses fail is because they failed to make a business plan.”

~Entrepreneur Magazine

Fundamentals of a business plan

Mission Statement- a short, specific written statement of the reason a business exists and what it wants to achieve.

Goal- a precise statement of results the business expects to achieve.

Policies- guidelines used in making consistent decisions.

Procedures- descriptions of the way work is to be done. Provide guidance and direction to people working in the organization.

The organization of a businessOrganization Chart- a diagram that shows the

structure of an organization, classifications of work and jobs, and the relationships among those classifications.

President

VP of Finance VP of Operations VP of Marketing

National Sales ManagerSenior Accountant Chief Auditor

Other components….• Description of product or service• Legal form of business• Marketing plan• Analysis of the market• Analysis of competition• Credentials of the owner• Financial plan

Steps in Developing a Business Plan

• Gather and review information– Other business plans of similar businesses or

competitors

• Develop the “game plan”

• Write the plan

Show me the money….• Friends

– 1 in 5 invest in a friend

• Family– Over 50% borrow from family members– Family & Friends invest over $100 billion in new

businesses each year

• Work colleagues– 8% have borrowed from co-workers

Venture Capital- money provided by large investors to finance new products and new businesses that have a good chance to be very profitable.

• Loans from banks – Business plan often required

• Credit given by businesses (prod & serv)

Types of financingStart-up financing- the

amount of money needed to open the business. Includes the cost of buildings, equipment, inventory, supplies, licenses, etc.

Short-term financing- the money needed to pay for the current operating activities of a business.

Long-term financing- money needed for the main resources of a business such as land, buildings, and equipment.

Other help

Small Business Administration- a government agency that helps small business owners develop business plans and obtain financing and other support for their companies.

www.sba.gov

Can you do it????Primary Reasons Entrepreneurs Fail:

• Lack of adequate capital• Low sales/slow business

• Higher than expected expenses• Competitive pressure

• Too quick growth• A larger time commitment than realized