Copyright © Cengage Learning. All rights reserved.5 | 1 Chapter Five Small Business,...

Copyright © Cengage Learning. All rights reserved. 5 | 1

Chapter Five

Small Business, Entrepreneurship,

and Franchises

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Learning Objectives

1. Define what a small business is and recognize the fields in which small businesses are concentrated.

2. Identify the people who start small businesses and the reasons why some succeed and many fail.

3. Assess the contributions of small businesses to our economy.

4. Judge the advantages and disadvantages of operating a small business.


Learning Objectives (cont’d)

5. Explain how the Small Business Administration helps small businesses.

6. Appraise the concept and types of franchising.

7. Analyze the growth of franchising and the advantages and disadvantages of franchising.

Chapter 5 Outline

– Small Business: A Profile• The Small-Business Sector• Industries That Attract Small Businesses• The People in Small Businesses: The Entrepreneurs• Why Small Businesses Fail

– The Importance of Small Businesses in Our Economy• Providing Technical Innovation• Providing Employment• Providing Competition• Filling Needs of Society and Other Businesses

– The Pros and Cons of Smallness• Advantages of Small Business• Disadvantages of Small Business

Chapter 5 Outline (cont.)

– Developing a Business Plan– The Small Business Administration

• SBA Management Assistance• SBA Financial Assistance

– Franchising• What Is Franchising?• Types of Franchising Arrangements• The Growth of Franchising• Are Franchises Successful?• Advantages of Franchising• Disadvantages of Franchising

– Global Perspectives in Small Business


Small Business: A Profile

• A business that is independently owned and operated for profit and is not dominant in its field

• SBA “smallness” guidelines

• Small-business sector


Industries that Attract Small Businesses

• Attractive small-business industry characteristics

• Industry categories where small businesses tend to cluster


The People in Small Businesses: The Entrepreneurs

• Why people go into business for themselves– The “entrepreneurial spirit”– The desire for independence– The desire to determine one’s own destiny– The willingness to find and accept a challenge– Personal background– Age– “Had enough” of working for someone else– High-tech opportunities, especially for teens– Losing a job and deciding to start a business– An idea for a new product– An opportunity presents itself


Why Some Entrepreneurs and Small Businesses Fail

• Lack of capital and cash-flow problems

• Lack of management skills

• Overexpansion


The Importance of Small Businesses in Our Economy

• Providing technological innovation

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The Importance of Small Business in Our Economy (cont’d)

• Providing employment

• Providing competition

• Filling needs of society and other businesses


The Pro and Cons of Smallness

ADVANTAGES DISADVANTAGES


Developing a Business Plan

• Business plan

• Three basic purposes

• Accuracy and realistic expectations are crucial


The Small Business Administration

• A governmental agency that assists, counsels, and protects the interests of small business in the U.S.

• SBA management assistance

• SBA financial assistance

– Regular business loans

– Small-business investment companies


Franchising

• Franchise

• Franchising

• Franchisor

• Franchisee


Types of Franchises

• manufacturer

• producer

• franchisor


Franchising (cont’d)

• The growth of franchising

• Are franchises successful?


Advantages of Franchising

TO THE FRANCHISOR

TO THE FRANCHISEE


Disadvantages of Franchising

TO THE FRANCHISOR TO THE FRANCHISEE


Global Perspectives in Small Business

• Growing interdependence of national and international economies as trade barriers diminish

• Instant communications shrinks distances and expands business opportunities

• The Internet is the favored strategy for growth for small businesses

• The SBA offers counseling on how and where to market overseas

• Small businesses must adapt to demographic and economic changes in the world marketplace

Copyright © Cengage Learning. All rights reserved.5 | 1 Chapter Five Small Business,...

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