Chapter 5

Entrepreneurship and
Small Business pp. 68-83
Chapter 5
Learning Objectives
After completing this chapter, you’ll be
able to:
1. Describe an entrepreneurship and a small
business.

2. List the advantages and disadvantages

of entrepreneurship.

continued
Introduction to Business, Entrepreneurship and Small Business Slide 2 of 56
Chapter 5
Learning Objectives
After completing this chapter, you’ll be
able to:
3. Recognize the advantages and
disadvantages of a small business.

4. Explain why small businesses may fail.

Introduction to Business, Entrepreneurship and Small Business Slide 3 of 56

Chapter 5
Why It’s Important
Entrepreneurs and small
businesses bring vital energy and
innovation to the economy.

The risks involved energize

entrepreneurs and small business
owners to become successful.
Introduction to Business, Entrepreneurship and Small Business Slide 4 of 56
Chapter 5
Key Words
entrepreneurship
virtual business or dot-com company
small business
entrepreneur
risk taker
profit

Introduction to Business, Entrepreneurship and Small Business Slide 5 of 56

Chapter 5
The Ins and Outs of
Entrepreneurship
Entrepreneurships and small
businesses are the majority of
business firms.

Introduction to Business, Entrepreneurship and Small Business Slide 6 of 56

Chapter 5
The Ins and Outs of
Entrepreneurship
An entrepreneurship is a business
started by someone who notices a
need for a product or service.

Introduction to Business, Entrepreneurship and Small Business Slide 7 of 56

Chapter 5
The Ins and Outs of
Entrepreneurship
A virtual business or a dot-com
company is a business that operates
on the Internet.

Introduction to Business, Entrepreneurship and Small Business Slide 8 of 56

Chapter 5
Online Finance
Some new Internet businesses are able to hire
people without paying them a salary. LENDX
Inc., based in San Francisco, Calif., serves as
an online financial hub for businesses
interested in leasing or buying equipment.
continued

Introduction to Business, Entrepreneurship and Small Business Slide 9 of 56

Chapter 5
When LENDX started, their first six employees
worked for shares of company stock only.
Analyze
Why would its employees work without a
salary?

Introduction to Business, Entrepreneurship and Small Business Slide 10 of 56

Chapter 5
Figure
5.1 ARE YOU ORIGINAL?
Below are traits of an entrepreneur. Rate yourself by choosing a
Take this quiz number that best describes you. At the end you’ll add up your
and see if you points to see how you fared (1 is the lowest, 5 is the highest).
would be a
good
entrepreneur.

Rate your score:

35-40 points = true entrepreneur
30-34 = willing to take risks and try something new
25 and under = you take fewer risks

Introduction to Business, Entrepreneurship and Small Business Slide 11 of 56

Chapter 5
The Ins and Outs of
Entrepreneurship
An entrepreneur is a person who
recognizes a business opportunity and
organizes, manages, and assumes the
risks of a business enterprise, with the
intent of increasing the market value of
the business.
Introduction to Business, Entrepreneurship and Small Business Slide 12 of 56
Chapter 5
The Ins and Outs of
Entrepreneurship
Entrepreneurs are take-charge, self-
directed people.
Often an entrepreneur is a risk taker,
or someone who likes to take risks.

Introduction to Business, Entrepreneurship and Small Business Slide 13 of 56

 Graphic Organizer
Chapter 5
Successful Entrepreneurs
Recognize Desire
opportunities achievement

Want to Have high

control energy
destiny

Successful
Entrepreneurs Take
Desire to risks
earn profit

Are Are
enthusiastic Have self- determined
confidence

Introduction to Business, Entrepreneurship and Small Business Slide 14 of 56

Chapter 5
Advantages of Entrepreneurship
There are many advantages to being
an entrepreneur, including:
• Satisfaction from taking a risk and
becoming a success
• Showing expertise and skills

continued
Introduction to Business, Entrepreneurship and Small Business Slide 15 of 56
Chapter 5
Advantages of Entrepreneurship
• Working from home
• Gaining profit
Profit is the money left over after a
business has paid all costs of
producing its goods or services.

Introduction to Business, Entrepreneurship and Small Business Slide 16 of 56

Chapter 5
Disadvantages
of Entrepreneurship
The disadvantages to being an
entrepreneur are:
• Long hours
• Total responsibility for the business
• Financial risks
Introduction to Business, Entrepreneurship and Small Business Slide 17 of 56
Chapter 5
Disadvantages
of Entrepreneurship
The main reason why entrepreneurships
fail is that they run out of money.

Introduction to Business, Entrepreneurship and Small Business Slide 18 of 56

Chapter 5
Fast Review

1. What are some characteristics of

entrepreneurs?

2. What are three advantages of an

entrepreneurship?
continued
Introduction to Business, Entrepreneurship and Small Business Slide 19 of 56
Chapter 5
Fast Review

3. What are some disadvantages of

an entrepreneurship?

4. What is the main reason that

entrepreneurships fail?

Introduction to Business, Entrepreneurship and Small Business Slide 20 of 56

Chapter 5
Small Business:
What You Need to Know
The Small Business Administration
(SBA) defines a small business as an
independently owned business that
usually has the owner as its manager.

Introduction to Business, Entrepreneurship and Small Business Slide 21 of 56

Chapter 5
Small Business:
What You Need to Know
A small business serves a limited
geographic area, employs fewer than
500 people, and is not dominant in its
industry.

Introduction to Business, Entrepreneurship and Small Business Slide 22 of 56

Chapter 5
Small Business:
What You Need to Know
Small businesses employ more than
50 percent of the total workforce in the
United States.

Introduction to Business, Entrepreneurship and Small Business Slide 23 of 56

Chapter 5
Small Business:
What You Need to Know
Small businesses generate more than
half the nation’s income.
They are the principal source of new
jobs.

Introduction to Business, Entrepreneurship and Small Business Slide 24 of 56

Chapter 5
Making an Ethical
Decision
1. Are all employees—even those in small
businesses—entitled to job benefits?
2. If you were an employee, what kind of
benefits would you want?
continued
Introduction to Business, Entrepreneurship and Small Business Slide 25 of 56
Chapter 5
Making an Ethical
Decision
3. If you were an employer, what benefits
would you want to offer and why? What
other job “perks” could you offer your
employees that would not directly cost
money?

Introduction to Business, Entrepreneurship and Small Business Slide 26 of 56

Chapter 5
Small Business:
What You Need to Know
Small businesses account for about 38
percent of jobs in high technology.

Introduction to Business, Entrepreneurship and Small Business Slide 27 of 56

Chapter 5
Figure
5.2 SMALL BUSINESS EMPLOYMENT IN THE UNITED STATES

There are 25
million small
businesses in the
United States.

Which three types

of small
businesses
provide the most
jobs?

Introduction to Business, Entrepreneurship and Small Business Slide 28 of 56

Chapter 5
Advantages of Small Business
Some of the advantages of owning a
small business are:
• Being the boss
• Offering services large companies
cannot offer
• Ease of formation
Introduction to Business, Entrepreneurship and Small Business Slide 29 of 56
Chapter 5
Disadvantages of Small Business
When you’re a small business owner,
you’re responsible for decisions.
You often work long hours and have
great financial responsibility.

Introduction to Business, Entrepreneurship and Small Business Slide 30 of 56

Chapter 5
Disadvantages of Small Business
About four out of five small businesses
fail in their first five years.

Introduction to Business, Entrepreneurship and Small Business Slide 31 of 56

Chapter 5
Disadvantages of Small Business
Small business owners may mistake
the freedom of being in business for
oneself for the liberty of working or not.

Introduction to Business, Entrepreneurship and Small Business Slide 32 of 56

Chapter 5
Disadvantages of Small Business
A small business may underprice or
overprice goods or services.
Going into business with little or no
experience may result in the business
closing.

Introduction to Business, Entrepreneurship and Small Business Slide 33 of 56

Chapter 5
Disadvantages of Small Business
The following are three specific
reasons why a small business might
not work:

continued
Introduction to Business, Entrepreneurship and Small Business Slide 34 of 56
Chapter 5
Disadvantages of Small Business
Why a small business might not work:
1. Effect of Change
Consumers’ tastes change. If
flexibility and change are not part of
the business, then it’s likely to fail.

Introduction to Business, Entrepreneurship and Small Business Slide 35 of 56

Chapter 5
Disadvantages of Small Business
Why a small business might not work:
2. Managerial Skills Needed
A small business owner must have
multiple skills including:
• Financing
• Employee relations
continued
Introduction to Business, Entrepreneurship and Small Business Slide 36 of 56
Chapter 5
Disadvantages of Small Business
Managerial Skills Needed
• Production
• Customer Relations

Introduction to Business, Entrepreneurship and Small Business Slide 37 of 56

Chapter 5
Disadvantages of Small Business
Why a small business might not work:
3. Inadequate Financial Planning
Starting with little money, spending
carelessly, borrowing money without
planning, and forgetting about taxes
and insurance may result in a
failure.
Introduction to Business, Entrepreneurship and Small Business Slide 38 of 56
Chapter 5
Fast Review
1. How does the Small Business
Administration (SBA) define a small
business?

continued
Introduction to Business, Entrepreneurship and Small Business Slide 39 of 56
Chapter 5
Fast Review
2. Give an example of a service that
a small business may offer that a
large company cannot offer.

continued
Introduction to Business, Entrepreneurship and Small Business Slide 40 of 56
Chapter 5
Fast Review
3. Which is more difficult to form: a
large business or a small business?

4. Give examples of special skills that

a small business owner needs.
continued
Introduction to Business, Entrepreneurship and Small Business Slide 41 of 56
Chapter 5
Fast Review
5. List two financial reasons that small
businesses fail.

Introduction to Business, Entrepreneurship and Small Business Slide 42 of 56

Chapter 5
Preparing for Your Own
Business
A business plan is a written
description of a new business venture
that describes all aspects of the
business.

Introduction to Business, Entrepreneurship and Small Business Slide 43 of 56

Chapter 5
Checklist for Starting a Venture
Some questions to consider before
starting your own business are:
• What will I produce?
• Who are my main competitors?
• Why is my product needed?
continued
Introduction to Business, Entrepreneurship and Small Business Slide 44 of 56
Chapter 5
Checklist for Starting a Venture
• How much will my product cost to
produce?
• How many people will I need to run
the business?
• What physical facilities will I need?

continued
Introduction to Business, Entrepreneurship and Small Business Slide 45 of 56
Chapter 5

Introduction to Business, Entrepreneurship and Small Business Slide 46 of 56

Chapter 5
Checklist for Starting a Venture
• What licenses, permits, or other legal
documents do I need?
• How much money will I need to get
started?

Introduction to Business, Entrepreneurship and Small Business Slide 47 of 56

Chapter 5
Parts of a Business Plan
The essential parts of the business
plan are:
• Summary
• Company description
• Products and services
continued
Introduction to Business, Entrepreneurship and Small Business Slide 48 of 56
Chapter 5
Parts of a Business Plan
• Marketing plan
• Legal plan
• Management and operating plan
• Financial plan

Introduction to Business, Entrepreneurship and Small Business Slide 49 of 56

Chapter 5
Business Building Blocks
Elements of a Business Plan
1. The summary is a one- to three-page
overview of the plan.
2. The company description explains the
type of company.

continued
Introduction to Business, Entrepreneurship and Small Business Slide 50 of 56
Chapter 5
Business Building Blocks
Elements of a Business Plan
3. Describe products or services in the
products and services section.
4. The marketing plan describes your
customers and your competition.
5. A legal plan points out how you will
organize your company. continued
Introduction to Business, Entrepreneurship and Small Business Slide 51 of 56
Chapter 5
Business Building Blocks
Elements of a Business Plan
6. The management plan and operating
plan detail the company’s key
personnel.
7. Complete a financial plan.

continued
Introduction to Business, Entrepreneurship and Small Business Slide 52 of 56
Chapter 5
Business Building Blocks
Tips for Writing an
Effective Business Plan
• Be brief and relevant.
• Don’t inflate the importance or
possible success of your business.
• “Write short and be honest,” is a good
rule of thumb.
Introduction to Business, Entrepreneurship and Small Business Slide 53 of 56
Chapter 5
Fast Review

1. What is a business plan?

2. Name the essential elements of a

business plan.

Introduction to Business, Entrepreneurship and Small Business Slide 54 of 56

Chapter 5

What makes a person an

entrepreneur?
What makes a company
successful?
continued continued
Introduction to Business, Entrepreneurship and Small Business Slide 55 of 56
Chapter 5

Introduction to Business, Entrepreneurship and Small Business Slide 56 of 56

Chapter 5

Identify some reasons why a small

business might be hard to manage.
What are some benefits of
selling online?
Introduction to Business, Entrepreneurship and Small Business Slide 57 of 56
End of Chapter 5
Entrepreneurship and Small Business