INTRODUCTION TO

BUSINESS CHAPTER 6
Entrepreneurship and Business Planning

Copyright by Paradigm Publishing, Inc.

Copyright by Paradigm Publishing, Inc.
Creating a New Business
 Online Resources for Creating a Business
 Yahoo!’s Small Business site (http://
smallbusiness.yahoo.com)
 American Express (http://americanexpress.
com/smallbusiness)
 Small Business Administration (http://
www.sbaonline.sba.gov)
 Quicken Small Business (http://www.quicken.
com/small_business)

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 Creating a New Business
 Pros and Cons of Being an Entrepreneur
 Pros
 May possibly earn large profits.

 Be your own boss.

 No fear of being mistreated or fired.

 Work in a business you created and will be directly

rewarded for.
 Cons
 Possibly large losses and may lose entire investment.

 Income is tied to how well business is run.

 Lose source of income if business fails.

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 Assessing Market Conditions
 Demand
 Competition
 Market share: a firm’s sales as a proportion of
the total market
 Competition within segments
 Segments: subsets of a market that reflect a specific
type of business and the perceived quality
 Labor conditions
 Regulatory conditions

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Assessing Market Conditions
New business ideas are
commonly created in
response to shifts in
consumer preferences.
When gas prices
increased substantially,
consumers shifted their
demand away from gas
guzzlers and toward fuel-
efficient cars.
Manufacturers of fuel-
efficient hybrid cars
capitalized on anticipating
the shift in consumer
demands.

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Assessing Market Conditions
Effects of Market Conditions on a Firm’s Performance

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Developing a Competitive Advantage
 Produce Products Efficiently
 Produce Higher-Quality Products
 Using the Internet to Create a Competitive
Advantage
 Advantages of a Web-Based Business
 Expenses of a Web-Based Business
 Using SWOT Analysis to Develop a
Competitive Advantage

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Developing the Business Plan
 Business Plan: detailed description of the
proposed business.
 Competitive Advantage???
 Assessment of the Business Environment
 Economic Environment
 Industry Environment
 Global Environment

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Developing the Business Plan

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Developing the Business Plan
When developing a plan
for a new business or
the restructuring of an
existing business, an
entrepreneur commonly
asks for input from
employees or other
business associates.

IT IS A TEAM EFFORT

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 Developing the Business Plan
Once a business plan is
created, the entrepreneur may
present the idea to investors
who may be willing to invest
equity in the business.
Alternatively, the entrepreneurs
may present the business plan
to commercial banks in an
attempt to obtain business
loans to finance the business.

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Developing the Business Plan
Impact on a Firm’s Earnings

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Risk Management by
Entrepreneurs
One of the most common
entrepreneurial ideas is to open
a retail clothing store that sells
clothes produced by other
entrepreneurs. While many
clothing stores have become
very successful, others have
failed. Perhaps the primary
reasons for failure are poor
planning and unrealistic
expectations.

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Risk Management by Entrepreneurs
 Reliance on One Customer
 Reliance on One Supplier
 Reliance on a Key Employee
 Hedging against Losses Resulting from a Key
Employee’s Death
 Hedging against the Illness or Loss of a Key
Employee
 Exposure to E-risk

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Insurance Required for Business
Project
 Research health care cost for full-time
workers.
 Over 50% of start ups will offer medical
insurance benefits.
 It is an expensive addition to personnel
costs.
 Liability, Key Man, and other insurance is
also needed, but for purposes of this plan
we will only require medical.