Developing a

Business Mindset

Chapter 6 Business in
Entrepreneurship and
Small-Business Action 8e
Ownership Bovée/Thill
 Learning Objectives

1. Highlight the contributions small

businesses make to the U.S. economy.
2. List the most common reasons people start
their own companies, and identify the
common traits of successful entrepreneurs.
3. Explain the importance of planning a new
business, and outline the key elements in a
business plan.

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 Learning Objectives (cont.)

4. Identify the major causes of business

failures, and identify sources of advice and
support for struggling business owners.
5. Discuss the principal sources of small-
business private financing.
6. Explain the advantages and
disadvantages of franchising.

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 The Big World of Small Business

• Small business
 A company that is independently owned and
operated, is not dominant in its field, and
employs fewer than 500 people (although this
number varies by industry)

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 Economic Roles of Small Business

• They provide jobs.

• They introduce new products.
• They meet the needs of larger organizations.
• They inject a considerable amount of money
into the economy.
• They take risks that larger companies
sometimes avoid.
• They provide specialized goods and services.

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 The Impact of Small Business
Exhibit 6.1
on the U.S. Economy

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 The Impact of Small Business
Exhibit 6.1
on the U.S. Economy (cont.)

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 Characteristics of Small Businesses

• Most small firms have a narrow focus.

• Small businesses have to get by with limited
resources.
• Small businesses often have more freedom
to innovate.
• Entrepreneurial firms find it easier to make
decisions quickly and react to changes in the
marketplace.

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Factors Contributing to the Increase
in the Number of Small Businesses

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 The Entrepreneurial Spirit

• Entrepreneurial spirit
 The positive, forward-thinking desire to create
profitable, sustainable business enterprises

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 Why People Start Their Own Companies

• More control over their futures

• Tired of working for someone else
• Passion for new product ideas
• Pursue business goals that are important
to them on a personal level
• Inability to find attractive employment
anywhere else

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 Qualities Shared by Successful
Exhibit 6.2
Entrepreneurs

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Exhibit 6.3 Business Start-Up Options

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 Blueprint for an
Effective Business Plan

• Business plan
 A document that summarizes a proposed
business venture, goals, and plans for
achieving those goals

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 Blueprint for an
Effective Business Plan (cont.)

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 Blueprint for an
Effective Business Plan (cont.)

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Exhibit 6.4 Why New Businesses Fail

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 Government Agencies and
Not-for-Profit Organizations

• Small Business Administration

• Minority Business Development Agency
• SCORE
• U.S. Chamber of Commerce

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 Mentors and Advisory Boards

• Advisory board
 A team of people with subject-area expertise
or vital contacts who help a business owner
review plans and decisions

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 Print and Online Media

• www.entrepreneurship.org
• Inc. www.inc.com
• Business 2.0
http://money.cnn.com/magazines/business2
• Bloomberg BusinessWeek
www.businessweek.com/small-business
• Fortune and Money
http://money.cnn.com/smallbusiness

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 Social Networking
Exhibit 6.5
for Entrepreneurs

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 Business Incubators

• Business incubators
 Facilities that house small businesses and
provide support services during the
company’s early growth phases

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 Financing Options
for Small Businesses

• Seed money
 The first infusion of capital used to get a
business started
• Microlenders
 Organizations, often not-for-profit, that lend
smaller amounts of money to business
owners who might not qualify for conventional
bank loans

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 Financing Options
for Small Businesses (cont.)

• Venture capitalists (VCs)

 Investors who provide money to finance new
businesses or turnarounds in exchange for a
portion of ownership, with the objective of
reselling the business at a profit

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 Financing Options
for Small Businesses (cont.)

• Angel investors
 Private individuals who invest money in start-
ups, usually earlier in a business’s life and in
smaller amounts than VCs are willing to
invest or banks are willing to lend
• Initial public offering (IPO)
 A corporation’s first offering of shares to the
public

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 Financing Options
for Small Businesses (cont.)

• Crowdfunding
 Soliciting project funds, business investment,
or business loans from members of the
public

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 Financing Possibilities Over the
Exhibit 6.6
Life of a Small Business

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 The Franchise Alternative

• Franchise
 A business arrangement in which one
company (the franchisee) obtains the rights to
sell the products and use various elements of
a business system of another company (the
franchisor)

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 The Franchise Alternative (cont.)

• Franchisee • Franchisor
 A business owner  A company that
who pays for the licenses elements
rights to sell the of its business
products and use system to other
the business companies
system of a (franchisees)
franchisor

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 Advantages of Franchising

• Combines at least some of the freedom of

working for yourself with many of the
advantages of being part of a larger,
established organization
• Name recognition, national advertising
programs, standardized quality of goods and
services, and a proven formula for success

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 Disadvantages of Franchising

• Typically agree to follow the business format

• Little control over decisions the franchisor
makes that affect the entire system
• Don’t have the option of independently
changing your business in response to market
changes

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 Key Questions to Ask Before Signing a
Exhibit 6.7 Franchise Agreement

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 Applying What You’ve Learned

1. Highlight the contributions small

businesses make to the U.S. economy.
2. List the most common reasons people
start their own companies, and identify the
common traits of successful
entrepreneurs.
3. Explain the importance of planning a new
business, and outline the key elements in
a business plan.
Copyright © 2017 Pearson Education, Inc. 6-33
 Applying What You’ve Learned (cont.)

4. Identify the major causes of business

failures, and identify sources of advice and
support for struggling business owners.
5. Discuss the principal sources of small-
business private financing.
6. Explain the advantages and
disadvantages of franchising.

Copyright © 2017 Pearson Education, Inc. 6-34

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