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Part 1: The DynamicPart 1: The DynamicRole of Small BusinessRole of Small Business

1.1.Starting Your Small BusinessStarting Your Small Business2.2.Family-Owned BusinessesFamily-Owned Businesses3.3.Forms of Ownership of Small Forms of Ownership of Small

BusinessBusiness4.4.Maintaining Good Government Maintaining Good Government

Relations and Business EthicsRelations and Business Ethics

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Chapter 1Chapter 1

Starting Your Starting Your Small Small

BusinessBusiness

SW Productions/Getty Images

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Starting YourSmall Business

Business v. Small BusinessBusiness v. Small BusinessTrends, Challenges, Trends, Challenges,

Opportunities, & Opportunities, & Concerns of Small Concerns of Small BusinessBusiness

Characteristics of Characteristics of EntrepreneursEntrepreneurs

Ch

ap

ter

11

Ryan McVay/Getty Images

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Rapid SmallRapid SmallBusiness GrowthBusiness Growth

23 Million23 MillionEmploymentEmployment

o75% Of New Jobs75% Of New Jobs

o50% Of Private 50% Of Private EmploymentEmployment

o99% Of Employers99% Of Employers

97% Of Exporters97% Of Exporters

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Entrepreneurship TodayEntrepreneurship Today

Male- 1.9 Men Per WomanMale- 1.9 Men Per Woman

Ethnically DiverseEthnically Diverse

25-3425-34

Specialty ExpertiseSpecialty Expertise

$100 B For 3.5 M $100 B For 3.5 M Startup/Small BusinessesStartup/Small Businesses

Rim Light/PhotoLink/Getty Images

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Public FavorsPublic FavorsSmall BusinessSmall Business

Black EnterpriseBlack Enterprise- - http://www.blackenterprise.comhttp://www.blackenterprise.com

EntrepreneurEntrepreneurInc.Inc.Hispanic BusinessHispanic Business- -

http://www.hispanicbusiness.cohttp://www.hispanicbusiness.comm

Family BusinessFamily BusinessEntrepreneurial WomanEntrepreneurial WomanYour CompanyYour CompanyEtc.Etc. Royalty-Free/CORBIS

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Interest At SchoolsInterest At SchoolsCoursesCourses

o20 Years Ago- None20 Years Ago- None

oNow- HundredsNow- Hundreds

Ages 13-18 = Positive Ages 13-18 = Positive Potential Potential

Business CareerBusiness CareeroMales = 13%Males = 13%

oFemales = 10%Females = 10%

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EntrepreneurialEntrepreneurialStudent Organizations Student Organizations

Association of College Association of College EntrepreneursEntrepreneurs

University Entrepreneurial University Entrepreneurial AssociationAssociation

Students in Free Students in Free Enterprise - Enterprise - http://http://www.sife.orgwww.sife.org

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Self-Employment TrendSelf-Employment Trend

Increased Investor Increased Investor Interest Interest

Executives Taking Executives Taking Early Retirement Early Retirement

55% Want To Be Own 55% Want To Be Own Boss Boss

Technological Technological AdvancesAdvances

Photodisc Collection/Getty Images

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Attractive To All AgesAttractive To All AgesMore Than ½ Of Independent More Than ½ Of Independent

Workers In NYCWorkers In NYC

oCollege-EducatedCollege-Educated

o25- 40 Years Old25- 40 Years Old84% Of Entrepreneurs “Not 84% Of Entrepreneurs “Not

Worried About Future”Worried About Future”40% Have Management 40% Have Management

ExperienceExperience¼ Managed/Owned Business ¼ Managed/Owned Business

BeforeBefore

Doug Menuez/Getty Images

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Small Business?Small Business?Independent Independent

ManagementManagement

Capital/Ownership = Capital/Ownership = Few IndividualsFew Individuals

Operations Are LocalOperations Are Local

Business = Small But Business = Small But Competitors = LargeCompetitors = Large Hisham F. Ibrahim/Getty Images

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SBA DefinitionSBA Definition

“…“…a small business is a small business is one that is one that is

independently owned independently owned and operated and is not and operated and is not dominant in its field of dominant in its field of

operation.”operation.”

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Classification By SizeClassification By Size

<20 Employees<20 Employees Very SmallVery Small

20 - 9920 - 99 SmallSmall

100 – 499100 – 499 MediumMedium

500 Or More500 Or More LargeLarge

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ObjectivesObjectives

VentureVenture

1.1. ProfitProfit

2.2. GrowthGrowth

3.3. Quick SelloutQuick Sellout

Small/MicroSmall/Micro1.1. No New Or No New Or

Innovative Innovative ActivitiesActivities

2.2. Provide Provide Owner LivingOwner Living

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Most CommonMost CommonHome-Based BusinessesHome-Based Businesses

Source: Independent Insurance Agents of America

Personal Svcs.14%

Bus. Services

27%

Bldg. Trades31%

Financial & Real Estate

5%Sales & Distribution

10%

Arts/ Design Creative

13%

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Unique to Small BusinessUnique to Small Business

Encourage Innovation & Encourage Innovation & FlexibilityFlexibility

Close Relationship With Close Relationship With Customers/CommunityCustomers/Community

Force Large Firms To Be Force Large Firms To Be CompetitiveCompetitive

Provide Employees Provide Employees Learning ExperienceLearning Experience

Develop Risk TakersDevelop Risk TakersNew EmploymentNew EmploymentGreater Employee Job Greater Employee Job

SatisfactionSatisfaction

Royalty-Free/CORBIS

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Problems ForProblems ForSmall BusinessSmall Business

Recession/Current EconomyRecession/Current EconomyRetirement/TransitionRetirement/TransitionCapital/FinancingCapital/FinancingUnexpected GrowthUnexpected GrowthSuccessionSuccessionInadequate FinancingInadequate FinancingInadequate ManagementInadequate ManagementGovernment Government

Regulations/PaperworkRegulations/Paperwork

Royalty-Free/CORBIS

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Challenges ToChallenges ToSmall BusinessSmall Business

Exploding TechnologyExploding Technology

Occupational/Industry Occupational/Industry Shifts Shifts

oReinventionReinvention

oReengineeredReengineered

oDownsizing/RightsizingDownsizing/Rightsizing

GlobalGlobal

Chad Baker/Ryan McVay/Getty Images

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Declining Job TypesDeclining Job Types

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Why Start AWhy Start ASmall Business?Small Business?

72%

10%

10%

8%

Independence

Control

Satisfaction

Other

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Why To Not StartWhy To Not StartA Small Business?A Small Business?

12%23%

22%17%

17%

Long Hours

Taxes

Risk

Responsibility

Other

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Job SatisfactionJob Satisfaction

0%

10%

20%

30%

40%

50%

60%

70%

Self-Employed Working For Others

GreatBritain

U.S.

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Objectives OfObjectives OfSmall Business OwnersSmall Business Owners

Achieve IndependenceAchieve Independence

Additional IncomeAdditional Income

Help FamiliesHelp Families

Products Not AvailableProducts Not Available

Ryan McVay/Getty Images

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Checklist ForChecklist ForAspiring EntrepreneursAspiring Entrepreneurs

Passion Not Passion Not MoneyMoney

Something Something You KnowYou Know

PatiencePatienceMentorMentorFundingFunding

Cash ManagerCash Manager

Build SalesBuild Sales

Don’t RushDon’t Rush

Wary Of Bad Wary Of Bad

Advice/SuppliersAdvice/Suppliers

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Business ObjectivesBusiness Objectives

ServiceService

ProfitProfit

SocialSocial

GrowthGrowth

Mesh ObjectivesMesh ObjectivesNick Rowe/Getty Images

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Characteristics OfCharacteristics OfSuccessful OwnersSuccessful Owners

+Desire Desire IndependenceIndependence

+Strong Sense Of Strong Sense Of InitiativeInitiative

+Personal/Family Personal/Family MotivationMotivation

+Quick/Concrete Quick/Concrete ResultsResults

+Able To React Able To React QuicklyQuickly

+Dedicated To Dedicated To BusinessBusiness

+Enter Business Enter Business By Chance By Chance And/Or DesignAnd/Or Design

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Successful SmallSuccessful SmallBusiness ManagementBusiness ManagementAdequate MarketAdequate MarketSufficient CapitalSufficient CapitalRecruit EffectivelyRecruit EffectivelyTimely InformationTimely InformationCope With Government Cope With Government

RegulationsRegulationsExpertiseExpertiseFlexibleFlexible

Ryan McVay/Getty Images

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Personal AnalysisPersonal Analysis

ValuesValues

Mental AbilitiesMental Abilities

AttitudesAttitudesMel Curtis/Getty Images

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Where AreWhere Arethe New Jobs?the New Jobs?

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Factors AffectingFactors Affecting Industry/BusinessIndustry/Business

1)1)EconomicsEconomics

2)2)TechnologyTechnology

3)3)LifestyleLifestyle

4)4)Political/LegalPolitical/Legal

5)5)DemographicsDemographics Royalty-Free/CORBIS

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Ideas ForIdeas ForSmall BusinessSmall Business

Career Career CounselingCounseling

CateringCatering Computer & Computer &

Office Machine Office Machine RepairRepair

Day CareDay Care EducationEducation

Financial Financial PlanningPlanning

Home HealthHome Health MarketingMarketing Senior Fitness & Senior Fitness &

RecreationRecreation Specialized Specialized

DeliveryDelivery

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SmallSmallBusiness ConcernsBusiness Concerns

Poorly Planned GrowthPoorly Planned GrowthLoss Of IndependenceLoss Of IndependenceThreat Of FailureThreat Of Failure

oDiscontinuanceDiscontinuance

oTypesTypes• FormalFormal• Personal/InformalPersonal/Informal

Jim Arbogast/Getty Images