Entrepreneurship

by Lambing, Peggy A.; Kuehl, Charles R.

• ISBN13: 9780132281744
• ISBN10: 0132281740
• Edition: 4th
• Format: Paperback
• Copyright: 2006-04-10
• Publisher: Pearson

Summary

This practical text first builds a solid conceptual foundation in the principles of entrepreneurship and then guides you through the creation of a business plan step-by-step. Detailed checklists walk you through the process of starting or buying a small business or franchise. You will be introduced to all types of start-ups including home-based, family, incorporated, and global businesses. You will also learn about the ups and downs of self-employment and how the entrepreneurial lifestyle can affect you and your family. Book jacket.

Author Biography

Peggy A. Lambing

University of Missouri - St. Louis

 

Charles R. Kuehl

University of Missouri - St. Louis

 

Peggy Lambing has experienced entrepreneurship from several perspectives—as
a business owner, as a small business consultant, and as an educator. She and her husband owned a
tool and equipment distributorship during the 1980s that was sold at a profit after five years. She
has provided small business consulting services for 18 years, specializing in helping entrepreneurs
obtain financing. In addition, she has taught entrepreneurship and small business management
classes at the University of Missouri–St. Louis since 1980 and has served as the director of the
university’s Small Business Institute program. She received her bachelor of science in business
admin- istration degree and a master’s degree in business from the University of Missouri– St.
Louis.
Charles R. Kuehl is a member of the management faculty at the University of Missouri–St. Louis. He
has published in various scholarly journals and is coauthor of Small Business: Planning and
Management, third edition. He received his baccalau- reate, master’s, and doctoral degrees from the
University of Iowa. His teaching and re- search areas include entrepreneurship, strategic
management, international business, and organizational behavior.

 

 

Table of Contents

Preface	xv
About the Authors	xvii
Part I: Foundations of Entrepreneurship	1	(141)
Entrepreneurship Today	1	(14)
Learning Objectives	1	(12)
Entrepreneurship in the United States	2	(1)
Industry Structure	2	(3)
Consequences for the Individual	5	(2)
The Global Scene	7	(3)
Entrepreneurship in a Changing Environment	10	(1)
Changes in Markets	10	(1)
New Markets	11	(1)
The Competitive Advantages of Small Business	12	(1)
Small Business and the Business Plan	13	(1)
Summary	13	(1)
Discussion Questions	13	(2)
The Entrepreneur	15	(12)
Learning Objectives	15	(10)
What Is Entrepreneurship?	16	(1)
The Entrepreneurial Process	16	(1)
Factors of Entrepreneurship	17	(1)
The Individual	17	(4)
Cultural Factors	21	(1)
Circumstances in Society	22	(1)
A Combination of Factors	22	(1)
Advantages and Disadvantages of Entrepreneurship	23	(1)
Advantages	23	(1)
Disadvantages	23	(1)
The Entrepreneur and the Business Plan	24	(1)
Summary	25	(1)
Discussion Questions	25	(2)
Starting a New Business	27	(13)
Learning Objectives	27	(11)
Innovation and Entrepreneurship	28	(1)
Sources of Ideas	29	(1)
The Inside-Out Approach	30	(1)
The Outside-In Approach	31	(1)
Serendipity	32	(1)
The Rationale: Why the New Business Is Needed	32	(2)
The Obstacles: Barriers to Entering an Industry	34	(1)
The Method: How the New Business Will Be Established	35	(2)
The People: Who Will Be Involved?	37	(1)
The New Business and the Business Plan	38	(1)
Summary	38	(1)
Discussion Questions	39	(1)
Buying An Existing Business	40	(16)
Learning Objectives	40	(14)
Advantages of Buying a Business	41	(1)
Less Risk	41	(1)
Less Time and Effort Required	41	(1)
The Possibility of Buying at a Bargain Price	42	(2)
Disadvantages of Buying a Business	44	(1)
The Environment	44	(1)
Internal Problems	45	(1)
Departure of the Current Owner	46	(1)
Finding the Business	46	(1)
Businesses on the Market	46	(1)
Businesses Not on the Market	47	(1)
Determining the Price of a Business	48	(4)
The Negotiating Process	52	(1)
Price Versus Value	52	(1)
Sources of Power in Negotiations	53	(1)
Buying a Business and the Business Plan	54	(1)
Summary	54	(1)
Discussion Questions	54	(2)
Franchising and Other Alternatives	56	(18)
Learning Objectives	56	(17)
The Popularity of Franchising	57	(1)
Advantages for the Franchisee	58	(1)
Start-up Assistance	58	(1)
Basis for Judging Prospect of Success	58	(1)
Instant Recognition	58	(1)
Purchasing Power	58	(1)
Advertising Scope and Sophistication	59	(1)
Operational Improvements	59	(1)
Disadvantages for the Franchisee	59	(1)
Restrictions	59	(1)
Costs	59	(1)
Termination	60	(1)
Unrealistic Expectations	60	(1)
Evaluating the Franchise Option	61	(1)
You As a Franchisee	61	(1)
The Industry	62	(1)
The Franchisor	63	(5)
Franchising and the Law	68	(3)
Other Entrepreneurial Options	71	(1)
Business Opportunities	71	(1)
Manufacturer's Representative	72	(1)
Franchises and the Business Plan	72	(1)
Summary	73	(1)
Discussion Questions	73	(1)
Women-Owned and Minority-Owned Businesses	74	(10)
Learning Objectives	74	(7)
Female Entrepreneurs	75	(1)
Motivation for Becoming an Entrepreneur	75	(1)
Company Size	76	(1)
Breaking the Tradition	77	(1)
Women Entrepreneurs in Other Countries	78	(1)
Minority Entrepreneurs	78	(1)
African American Entrepreneurs	78	(1)
Asians and Pacific Islanders	79	(1)
Hispanic	79	(1)
American Indians and Alaska Natives	80	(1)
Obstacles and Opportunities	80	(1)
Women and Minority Entrepreneurs and the Business Plan	81	(1)
Summary	81	(1)
Discussion Questions	81	(3)
Home-Based Businesses	84	(9)
Learning Objectives	84	(7)
The Rebirth of Cottage Industries	85	(1)
Reasons for Growth	85	(1)
Increasing Use of the Internet	85	(1)
Recessions and Corporate Downsizing	85	(1)
Greater Concern for Family Issues	86	(1)
Improving Image of Home-Based Businesses	86	(1)
Advantages and Disadvantages of Home-Based Businesses	86	(1)
Advantages	86	(1)
Lower Wardrobe Costs	87	(1)
Flexible Hours	87	(1)
Disadvantages	87	(1)
Home-Based Franchises	88	(1)
Is Your Home-Based Business Legal?	88	(1)
Utilities, Insurance, and Taxes	89	(1)
The Growth Decision	90	(1)
The Home-Based Business in the Business Plan	91	(1)
Summary	91	(1)
Discussion Questions	91	(2)
Family Businesses	93	(10)
Learning Objectives	93	(8)
What Is a Family Business?	94	(1)
Advantages and Disadvantages	94	(1)
Entrepreneurial Couples	94	(3)
Bringing in the Children	97	(1)
The Succession Plan	98	(1)
Should the Company Be Sold to an Outsider or Employees?	98	(1)
How and When Should the Company Be Transferred?	99	(1)
Active Versus Inactive Family Members	99	(1)
Low Entry Versus Delayed Entry	99	(1)
Hiring and Compensation Policy	100	(1)
Should There Be a Family Council and Advisory Board?	100	(1)
Choosing a Successor from Active Family Members	100	(1)
The Family Business and the Business Plan	101	(1)
Summary	101	(1)
Discussion Questions	101	(2)
New Product Development	103	(13)
Learning Objectives	103	(11)
A High-Risk Venture	104	(1)
Strengths and Weaknesses of Small Companies	105	(1)
Developing a New Idea	105	(2)
Key Factors for Success	107	(1)
Choosing a Distribution Channel	108	(1)
Factors Influencing the Distribution Decision	108	(1)
Obstacles to Securing Distribution Channels	109	(1)
Licensing	110	(1)
Legal Protection of New Products and Services	110	(1)
Patents	110	(2)
Copyrights	112	(1)
Trademarks	112	(1)
Trade Secrets	113	(1)
New Product Development and the Business Plan	113	(1)
Summary	114	(1)
Discussion Questions	114	(2)
Business Growth and the Entrepreneur	116	(9)
Learning Objectives	116	(7)
Business Growth and Management Skills	117	(1)
Personnel Management	117	(2)
Financial Management	119	(1)
Marketing	119	(1)
Matching the Company and the Entrepreneur	119	(1)
The American Dream/The American Nightmare	120	(1)
The Challenge of a New Business	120	(1)
The Loss of the Family Atmosphere	121	(1)
The Changing Role of the Entrepreneur	121	(1)
Options for Growth	122	(1)
Keep the Company Small	122	(1)
Rediscover the Entrepreneurial Spirit	122	(1)
Cash In	122	(1)
Growth and the Business Plan	123	(1)
Summary	123	(1)
Discussion Questions	123	(2)
Global Business	125	(17)
Learning Objectives	125	(15)
Exporting	126	(1)
The Current Situation	127	(2)
The Decision to Start Exporting	129	(1)
Developing an Export Plan	129	(3)
Getting Established in an International Market	132	(2)
Getting Paid	134	(1)
Government Assistance	135	(3)
Importing	138	(1)
Finding Products to Import	138	(1)
Getting the Goods into the Country	138	(1)
Selling the Goods	139	(1)
Global Business and the Business Plan	140	(1)
Summary	140	(1)
Discussion Questions	140	(2)
Part II: The Business Plan
THE BUSINESS PLAN	142	(113)
Introduction	142	(8)
Learning Objectives	142	(1)
What Is a Business Plan?	143	(1)
How Do Plans for Existing Businesses and Start-ups Differ?	143	(1)
What Is Included in the Business Plan?	143	(1)
Executive Summary	144	(1)
Executive Summary, Mission Statement, and the Business Environment	144	(1)
Mission Statement	144	(1)
The Business Environment	145	(5)
Marketing	150	(45)
Learning Objectives	150	(1)
What Is Included in the Marketing Section?	151	(1)
What Is Your Product or Service?	151	(1)
Who Are Your Competitors?	151	(1)
Pricing	152	(1)
What Is Your Pricing Objective?	153	(1)
What Are Your Pricing Policies?	154	(1)
How Will You Determine Your Prices?	154	(1)
Industry Markups	155	(3)
Shipping Costs	158	(4)
Credit Terms to Customers	162	(2)
The Industry and Your Competitors	164	(1)
The Customers	164	(1)
The Company's Cash Flow	164	(1)
Competitive Advantage	164	(2)
Market Segmentation	166	(1)
How Will You Segment Your Target Market?	166	(2)
Common Marketing Mistakes	168	(2)
Location	170	(1)
What Is Your Ideal Location?	170	(1)
Will Your Business Be Home-Based?	171	(1)
Is Your Business Retail or Service?	171	(3)
Is Your Business a Manufacturing Firm?	174	(1)
Is Your Business a Wholesaling Operation?	175	(1)
Incubators	176	(1)
Common Location Mistakes	177	(1)
Promotion and Sales	178	(1)
What Types of Promotion Will You Use?	178	(1)
What Are Your Promotional Goals?	179	(1)
What Is Your Promotional Budget?	179	(1)
Sales and Direct Marketing	179	(3)
Sales Promotion	182	(1)
Advertising	183	(1)
What Type of Advertising Will You Use?	184	(1)
Media	184	(4)
When Will You Advertise?	188	(3)
Marketing Online	191	(1)
Public Relations and Publicity	192	(1)
Will You Sell Your Products Overseas?	193	(2)
Management and Personnel	195	(13)
Learning Objectives	195	(1)
What Are Your Qualifications to Operate This Business?	196	(1)
Have You Completed Job Descriptions?	196	(1)
Have You Established the Employees' Wage Rates?	197	(1)
What Benefits Will You Provide to Your Employees?	197	(1)
Have You Completed a Typical Work Schedule?	198	(1)
Have You Completed an Organizational Chart?	199	(1)
What Other Laws Will Affect Your Personnel Decisions?	200	(1)
Occupational Safety and Health Act	201	(1)
Title VII of the Civil Rights Act and the Age Discrimination in Employment Act	201	(1)
Americans with Disabilities Act	201	(1)
Immigration Laws	202	(1)
Family and Medical Leave Act	202	(1)
National Labor Relations Act and Taft-Hartley Act	202	(3)
Workers' Compensation	205	(1)
State Laws	205	(1)
Do You Have Employees or Subcontractors?	206	(2)
Start-Up Costs and Financing	208	(9)
Learning Objectives	208	(4)
How Will the Business Be Financed?	212	(1)
Debt Financing	212	(1)
Equity Financing	213	(3)
The Cost of Financing	216	(1)
Projected Financial Statements	217	(17)
Learning Objectives	217	(1)
Accounting Methods	218	(1)
Cash Basis	218	(1)
Accrual Basis	218	(1)
Completed-Contract Method	218	(1)
Balance Sheet	218	(1)
Assets	218	(1)
Liabilities	219	(1)
Equity	220	(1)
Opening-Day Balance Sheet	220	(2)
Projected Income Statement	222	(3)
Cash Flow	225	(2)
Case Study: The Travel School	227	(1)
Break-Even Point	228	(1)
What Is Your Break-Even Point?	229	(1)
Have You Identified Fixed and Variable Expenses?	229	(2)
What Is Your Contribution Margin?	231	(1)
Calculating the Break-Even Point	231	(1)
How Many Customers Are Needed to Break Even?	231	(3)
The Legal Section	234	(10)
Learning Objectives	234	(1)
What Form of Organization Will You Choose?	235	(1)
Sole Proprietorship	235	(1)
Partnership	236	(1)
Corporation	237	(1)
Limited Liability Company	238	(1)
Joint Venture	238	(1)
What Taxes Will Be Due?	239	(1)
Federal Taxes	239	(1)
State Taxes	239	(1)
Organizational Form and Income Tax	240	(1)
Sole Proprietorships	240	(1)
Partnerships	240	(1)
Corporations	241	(1)
What Other Legal Issues Need to Be Addressed?	241	(3)
Insurance	244	(5)
Learning Objectives	244	(1)
What Insurance Will You Need?	245	(1)
Workers' Compensation Insurance	245	(1)
Property Insurance	246	(1)
Liability Insurance	246	(1)
Earnings Insurance	247	(1)
Health, Disability, and Life Insurance	247	(2)
Suppliers	249	(3)
Learning Objectives	249	(1)
Who Will Be Your Suppliers?	250	(2)
Risks, Assumptions, and Conclusion's	252	(3)
Learning Objectives	252	(1)
What Are Your Uncontrollable Risks?	253	(1)
What Are Your Assumptions and Conclusions?	253	(2)
Part III: Case Studies in Entrepreneurship
CASE STUDIES	255	(38)
Online Auto Sales	256	(2)
Chasing Dreams That Can Become Reality	258	(1)
The Body Shop	259	(2)
Boston Chicken/Boston Market	261	(2)
A Family Affair	263	(1)
Ed's Auto Parts	264	(2)
Entrepreneurs in the Beverage Industry	266	(3)
Entrepreneurs in Space	269	(1)
Opportunities and Threats	270	(1)
Business Plan for One Hand Clapping Records	271	(9)
Business Plan for Fashion Footwear	280	(7)
Business Plan for The Noiz Vodka Bar	287	(6)
APPENDIX: SUMMARY OF BUSINESS PLAN CHECKLISTS	293	(15)
Using the Checklists	293	(1)
The Executive Summary	293	(1)
The Mission Statement	293	(1)
Analyze the Business Environment	294	(1)
Describe Your Product or Service	294	(1)
Analyze the Competition	294	(1)
Describe Your Pricing Strategies	295	(1)
Describe Your Credit Policy	296	(1)
Describe Your Competitive Advantage	296	(1)
Describe the Market Segmentation Method You Will Use	296	(1)
Describe Your Location	297	(1)
If Your Business Is Retail or Service	297	(1)
If Your Business Is a Manufacturing Plant	297	(1)
If Your Business Is a Wholesale Firm	298	(1)
Describe Your Promotional Plan	298	(1)
Identify Your Management and Personnel	299	(1)
Complete the Financial Section	300	(8)
Start-up Costs and Financing	300	(8)
Discuss Legal Considerations	308	(1)
Identify Insurance Requirements	308	(1)
Identify Suppliers	308	(1)
List Your Uncontrollable Risks	308	(1)
State Your Conclusion	308