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ENTREPRENEUR EVALUATION WORKSHOP

Purpose

The purpose is to educate potential Business Owners on specific details

concerning entrepreneurship, so that they can intelligently decide if

entrepreneurship is for them.

What is Entrepreneurship

The definition of an Entrepreneur is: A Risk Taker

Running a business involves many different risks:

Unsteady Income: When it comes to Small Businesses; in most cases, the

Owner’s Income on a daily, weekly, bi-weekly or Monthly basis will be

directly related to how much Profit is made. (Revenue minus Expenses) In

some cases, where a Corporation has been formed, the Owner/President

may receive a regular Pay Check, but even that will eventually be subject to

change, based on Profitability. It is normal for Profitability to be very low, if

not negative when a business first starts. It is also normal for Profits to

fluctuate tremendously when a business first starts.

A. This Unsteady Income can put personal finances at risk, which

may affect a person’s ability to pay his Rent or Mortgage, Car

Payments and other bills.

B. The Business Owner may be required to downgrade the standard

of living for himself and his family.

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C. Past Due and Unpaid Bills, combined with a downgrade in living

standards can also result in additional stress that may impact

relationships between Husbands and Wives, Parents and Children,

etc.

Risk of Failure: It is important to note that roughly 95% of all businesses fail

within the first year. And 95% of at remaining 5% will fail within the first 5

years. What this means is that the likelihood of failure is significant. Failure

isn’t fun and can result in the following:

A. Business and/or Personal Bankruptcy

B. Loss of Real and Personal Property, due to unpaid bills

C. Severe stress on family members, children and marriage

D. Loss of respect from shallow friends and relatives

E. Damaged Pride, Low Self Esteem and in some cases, Mental

Depression

Causes of Failure:

A. Unprofitability: There could be a variety of reasons, which will be

discussed later.

B. Unrealistic Expectations: Examples: Profit expectations or Time

Expectations for success; maybe much more work required and

longer hours than expected or the realization that the Owner,

now, has more bosses than he had working a job (Clients or

Customers), etc.

C. Poor Time Management: Can result in priority tasks not being

accomplished in a timely manner, unsatisfied Customers,

reduction in quality time with family or neglect of family, etc.

D. Poor Administration: Bad Bookkeeping, inability to keep

paperwork organized or to stay up-to-date on Taxes, Licenses,

Registrations, Insurances and/or a host of other important things.

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E. Poor Customer Service: Poor Customer Service will normally lead

to a slow and gradual decline in business. Each Unsatisfied

Customer will likely bad mouth you to several other people, who

will choose to do business with your competition.

F. Poor Decision Making: Some people just don’t have good decision

making skills. Running a successful business is all about making

the correct decisions. Bad decisions can cost money, waste time

or result in dissatisfied Customers, etc.

G. Poor Sales & Marketing: Opening your Retail Doors or buying all

of the appropriate equipment to perform your service or properly

filing and registering your business, getting all of the appropriate

licenses, insurances, bonds, etc., don’t get you any paying

Customers. Sales & Marketing are normally required. This includes

Advertising (TV, Radio, Newspaper, Magazines, Flyers,

Networking, Social Networks, etc.). It also includes Marketing

Strategies designed to reach target people and/or businesses, by

taking specific approaches. This takes skill and sometimes a lot of

trial and error. Failure to get enough business will result in failure

of your business

H. Poor Preparation and Education: Will usually result in all sorts of

problems.

I. Bad Morals, Values & Ethics: A business must do ‘Good Business’.

It must do the ‘Right thing for the Customer’. Owners must treat

Employees with dignity, respect and make them feel valued and

important. Employees and Departments must do their jobs with

other Employees and Departments in mind. Any of the before

mentioned issues can drive a company into the ground.

(Discussion)

J. Other Causes of Failure: There are several other causes of

Business Failure, some of which are completely out of your

control, like Weather, Natural Disasters, Bad Economy,

Construction or just plain bad luck…

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Why take these risks? Because of the possibility of huge rewards:

Unlimited Income Potential: Small, few and far in between raises; Working

longer hours and Taking a second job are included in the options available

for a person who works for others to make more money. But working for

one’s self offers many more options and the income you could make isn’t

capped. This is one of the primary benefits of being Self Employed.

Being Your Own Boss: The ability to make your own decisions on how to

run things is a very satisfying feeling. However, this can be miss-leading, as

Customers and Clients are, technically, your Boss. So, in a certain respect,

you are your Own Boss, but in another respect, you still have people to

answer to.

Setting Your Own Schedule: This can be somewhat miss-leading, because,

as a Business Owner, you still have Customers and/or Clients who expect

things done on time, phone calls and e-mails to be returned in a timely

manner and scheduled appointments to be kept, etc. And Self Employed

People, especially when first going into business, tend to have to work

much longer hours. However, being your own boss does offer you much

more flexibility in setting meetings, appointments, work schedules, etc. This

is a huge benefit.

Job Security: This can also be miss-leading, because there are many things

that can drive a business out of business, many of them outside of the

Owners’ Control. However, you can be assured that you will not fire

yourself for being late, calling off or for almost any reason. However, keep

in mind that in situations where a Corporation is formed, your position

within that Corporation may be subject to the mindset of a Board.

Respect, Fame & Prestige: Most people respect the hard work and

commitment it takes to start and run your own business. It is truly a great

feeling to be able to confidently say “I make a good living by working for

myself.”

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Business Structures: There are several different ways to set your business up.

There are advantages and disadvantages to each. Here are a few examples:

Sole Proprietorship: The easiest and many times the least expensive

structure to establish, in-which offers limited Tax Advantages and usually

leaves the Owner holding Full and Sole Responsibility and Liability.

Partnership: Sometimes required when 2 or more parties bring something

different to the table, that is needed for success. In most cases, each party

will accept a certain percentage of Responsibility and Liability. Partnerships

can also be between companies and Corporations.

Corporation: A Corporation offers an Owner or Partners certain Tax

Benefits and a reduction in Individual Responsibility and Liability.

Others: Limited Liability Corporation; S-Corporation; C-Corporation are a

few other examples of Business Structures that each offer slightly different

advantages and disadvantages.

Credit: In most business, Credit is essential. It is required to purchase new tools

and equipment; merchandise to sell; materials for manufacturing or construction

or even to pay Employees on time. There are two basic types of Credit:

1. Personal Credit: Personal Credit, in most cases, is dictated by your Personal

Credit Report, which is supplied by three Credit Reporting Bureaus: Equifax,

Trans Union and Experian. They each offer you a universal Credit Score

called a FICO Score, which most business use to judge your Credit

Worthiness. Using your Personal Credit for Business Purchases and

Activities will usually leave you Personally Liable.

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2. Business Credit: Business Credit is separate from your Personal Credit and

does not have to be based on your Personal Credit Report. Businesses use

many different criteria when making credit decisions on other businesses.

The primary Credit Agency that offers Business Credit Reports is Dun &

Bradstreet. A Business Report and Profile offers many different Scores and

Ratings, Suits Liens and Judgments, Predictable Indicators, etc., that

businesses look for when deciding what Rates, Terms and Conditions to

offer a business. When possible, it is better to use Business Credit, instead

of Personal Credit.

Basic Business Economic Concepts

There are many Business Economic Concepts that are important to understand

when attempting to run a successful business. Here are just a couple examples:

The Law of Supply & Demand: This is a complex law that has a basic

premise; The Higher the Demand, the Lower the Supply, which means the

Higher the Price and vice-versa. (Discussion)

The Law of Diminishing Returns: This is a very complex law that applies in

many different circumstances. Here are just a couple:

A. Example: Three Factory Employees are able to manufacture;

clean, trim and pack a part; within a certain period of time;

thereby making X amount of parts per hour; which equates to X

amount of dollars per hour. Adding one more person will cost X

amount of dollars more per hour; but allow twice as many parts

to be made in that hour, thereby increasing profit. But adding one

more person, costs an additional hourly wage and people begin to

get into each others’ way, there by actually reducing profit.

Adding that final person produces a Diminishing Return.

(Discussion)

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B. Example: You purchase 10 of a certain product for sale by

Christmas Day, which you have calculate will make you $1,000.00

in the 10 days until Christmas. That is $100.00 per day on this

product. However, a snow storm rolls in and people don’t get out.

So you only sell 5 products by Christmas and are forced to lower

the price in order to sell the remaining within the next 10 days,

following Christmas. Instead of making $100.00 per day, you have

made much less per day, which is a Diminishing Return. The

amount you expected to make, per day, diminished as you went

beyond the anticipated amount of days to sell them all, therefore,

the amount you made per day, went down with each passing day.

And in this case, so did the Total Profit. (Discussion)

Video (s): The Videos on the list below are interchangeable and can be added to

or subtracted from. Each video can be inserted anywhere within the Workshop

that feels appropriate, at the time.

ZIG ZIGLAR (I really hate my job!)

http://www.youtube.com/watch?v=0XC_Fkg0UIQ

FAILURE LEADS TO SUCCESS:

http://www.youtube.com/watch?v=_tjYoKCBYag&feature=player_embedd

ed

Millionaire Ex-Con: http://www.youtube.com/watch?v=7Vin5Lo7oEQ

(Disclaimer for Atheists and Non-Christians)

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Activity

The team will pretend to start and run a business for 1 year. Trainer (Myself, until

suitable individual is trained) will play Devil’s Advocate and guide the activity.

Below, is a list of steps that the team will follow:

1. Pick a business to run, that is not too simplistic, yet not to complex

2. Discuss with family

3. Find a suitable location

4. Decide on a Business Structure

5. Make any necessary agreements with Partners, etc.

6. Price any tools, equipment, etc., that are needed

7. Write a Business Plan

8. Apply for a Grant

9. Start business

10. Overcome a few hurdles and obstacles

11. Decide rather to stay in business at the end of the year or fold

Role Model

A successful Business Owner, who looks like the Students, comes from where they

come from and who have faced the same challenges that they face, yet who has

become successful, will talk to and interact with them as motivation and as a

reality check.

Food and Interaction

Food and interaction is a great time to mingle with and interact with the Students;

Information gathering, attitude checking and feeling out individuals. This is a great

time to get a feel for who really has what it takes to be a successful Business

Owner.

Copyright © 2011 ‘Unlimited Education’/D-Source Enterprises, on Saturday, January 29, 2011