Entrepreneurship: A business of your own
Vocabulary n Entrepreneur: a person who organizes and manages a business n Entrepreneurship: the organization and management of a business n Franchise: the right to market another company’s product or service n Small Business Administration (SBA): the prime source of information for would-be entrepreneurs
Vocabulary n Fraud: the act of deceiving or tricking n Commission: a percentage of sales paid to a salesperson n Zoning laws: regulate what types of business activities can be performed in certain areas n License: a certificate showing that you have permission to practice your occupation
Vocabulary n Fixed expenses: Bills that must be paid regularly in set amounts n Flexible expenses: vary from month to month n Assets: items you own n Liabilities: debts you owe
Vocabulary n Bookkeeping: Recording of income and expenses n Accounting: Analysis of the data you’ve recorded n Receipts: record of all money collected n Profit ratio: percentage of receipts that are profit n Break-even point: when income equals expenses
Entrepreneurship n n n Advantages You are your own boss Freedom to make your own decisions You get to keep all profits your company earns n n n Disadvantages As a business owner, you take on all responsibilities Many extra hours of work (at least 60 hrs per week) Emotional strain
Franchise Purchasing a franchise has several advantages. It allows the entrepreneur to buy a business with a proven track record of success. n As a franchise owner, you would also receive support from the franchiser n
Franchise Buying a franchise also has some disadvantages. n You need a lot of money for the initial investment. You also may have to pay ongoing fees to retain the right to use the company’s name n You may be required to follow company guidelines instead of your own. n
Franchise Some popular franchises are: n Subway n Mc. Donalds n Taco Bell n KFC n Jackson-Hewitt Tax Service n TCBY treats n Wendy’s
Buying an existing business Another opportunity open to some entrepreneurs is buying a business that is already existing n Buying an established business can eliminate much of the work and expense of starting a business. n
US Small Business Administration (SBA) Established 1953 n Provides financial, technical, and management assistance to help start, run, and enlarge a business n www. sbaonline. sba. gov n
Planning your own business What does it take to succeed? Optimism – you must believe in yourself & your business. n Self-starter – you must have initiative n
Planning your business Choosing a business – what is the best business for you? n Choosing a location – the importance fo location depends on the kind of business you have n Pricing your product or service – are you charging enough for your products or services? n
Legal and Financial Issues A number of legal and financial issues will affect you if you become an entrepreneur. n Zoning and licensing requirements must be met n Choose your business structure n
Business Structure n The three basic business structures- 1. Proprietorships Partnerships Corporations 2. 3.
Proprietorship Simplest type & most costly ($$$$) n You will be the sole owner n Gives you total freedom n Gives you total responsibility n
Partnership Share the business responsibility n You can borrow more money with two people n It can be difficult if you don’t get along with partner n The business could be jeopardized n
Corporation Easier time raising money n Have less risk to your personal assets n Costs more to set up n Higher taxes n
Obtaining Financing Use saved money (seed $) to finance your business n Apply for a loan n Use outside investors n
Applying for a loan n Business plan Record of fixed and flexible expenses Record of assets and liabilities
Comparing Annual Profits n Year 1 Income - $100, 000 Expense - $80, 000 Profit $20, 000 n Year 2 Income - $120, 000 Expense - $98, 000 Profit $22, 000 Profit ratio = 20, 000/100, 000 = 20% Profit ratio = 22, 000/120, 000 = 22%
Professional Assistance A lawyer can be one of your most valuable resources when starting a business n An accountant can help analyze his books and give advice about increasing profits n An insurance agent is another professional whose advice you should seek, protect your business against theft, fire, etc. n
Working from home Advantages Disadvantages n n Don’t have to pay rent Can handle home responsibilities during the day Certain tax advantages n n n Family concerns may disrupt your business Neighbors may object about a business next to their home Clients may feel its unprofessional Loneliness & isolation can be a possible hazard
FACTS IN REVIEW Name 3 sources of information about entrepreneurship. n What advantages does purchasing a franchise offer an entrepreneur? n List 4 personal factors an entrepreneur should possess to succeed. n
FACTS IN REVIEW What services are provided by the Small Business Administration (SBA)? n Name 2 advantages and disadvantages of working from home. n Which business structure is most costly for an entrepreneur to establish? n
FACTS IN REVIEW n n What is the purpose of a business license? Name 3 sources from which an entrepreneur might obtain financing to start a business How is profit ratio figured? Name 3 professionals that can assist an entrepreneur with the details fo starting and operating a business.
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