Entrepreneurship

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

• ISBN13: 9780130971166
• ISBN10: 0130971162
• Edition: 4th
• Format: Paperback w/Disk
• Copyright: 2007-01-01
• Publisher: PRENTICE HALL

Summary

For courses in Entrepreneurship and Small Business Management. Many students have difficulty connecting business theory to starting a small business and writing a business plan. This concise and practical text/handbook combines the best of both study formats, demonstrating theory in realistic applications. While the book opens with the material commonly found in Entrepreneurship texts, the second half combines theory and background information in areas such as marketing theory, management topics, and financial recordkeepingand provides practical checklists to help students complete a business plan.

Table of Contents

Preface	xv
About The Authors	xix
Entrepreneurship Today	1	(13)
Key Points	1	(1)
Entrepreneurship in the United States	2	(4)
Industry Structure	2	(4)
Consequences for the Individual	6	(1)
The Global Scene	6	(3)
Entrepreneurship in a Changing Environment	9	(3)
Changes in Markets	9	(1)
New Markets	10	(1)
The Competitive Advantages of Small Business	10	(2)
Summary	12	(1)
Discussion Questions	12	(2)
Small Businesses and the Internet Economy	14	(9)
Key Points	14	(1)
The Economic Revolution	15	(1)
From Chaos to Consolidation	15	(1)
New Technology Orthodox Management	16	(1)
Small Businesses and the Internet Infrastructure	16	(2)
Traditional Small Businesses and the Internet	17	(1)
Internet Selling: A Complex Task	18	(1)
Just the Beginning	18	(2)
Summary	20	(1)
Discussion Questions	20	(3)
The Entrepreneur	23	(11)
Key Points	23	(1)
What Is Entrepreneurship?	24	(1)
Factors of Entrepreneurship	25	(5)
The Individual	25	(4)
Cultural Factors	29	(1)
Circumstances in Society	29	(1)
A Combination of Factors	29	(1)
Advantages and Disadvantages of Entrepreneurship	30	(2)
Advantages	30	(1)
Disadvantages	31	(1)
Summary	32	(1)
Discussion Questions	32	(2)
Women-Owned and Minority Owned Businesses	34	(16)
Key Points	34	(1)
Female Entrepreneurs	35	(5)
Motivation for Becoming an Entrepreneur	36	(1)
Company Size	36	(3)
Breaking the Tradition	39	(1)
Minority Entrepreneurs	40	(7)
African American	41	(2)
Asians and Pacific Islanders	43	(2)
Hispanic	45	(1)
American Indians and Alaska Natives	46	(1)
Summary	47	(1)
Discussion Questions	47	(3)
Family Businesses	50	(9)
Key Points	50	(1)
Advantages and Disadvantages	51	(1)
Entrepreneurial Couples	51	(3)
Bringing in the Children	54	(3)
The Succession Plan	55	(1)
Should the Company Be sold to an Outsider or Employees?	55	(1)
Active versus Inactive Family Members	56	(1)
Low Entry versus Delayed Entry	56	(1)
Hiring and Compensation Policy	56	(1)
Choosing a Successor from Active Family Members	57	(1)
Summary	57	(1)
Discussion Questions	57	(2)
Business Growth and The Entrepreneur	59	(8)
Key Points	59	(1)
Business Growth and Management Skills	60	(2)
Personnel Management	60	(1)
Financial Management	61	(1)
Matching the Company and the Entrepreneur	62	(1)
The American Dream/The American Nightmare	63	(1)
The Challenge of a New Business	63	(1)
The Loss of the Family Atmosphere	63	(1)
The Changing Role of the Entrepreneur	64	(1)
Options for Growth	64	(1)
Keep the Company Small	64	(1)
Rediscover the Entrepreneurial Spirit	64	(1)
Cash In	65	(1)
Summary	65	(1)
Discussion Questions	66	(1)
Home-Based Businesses	67	(10)
Key Points	67	(1)
The Rebirth of Cottage Industries	68	(1)
Reasons for Growth	68	(1)
Technology	68	(1)
Corporate Downsizing	69	(1)
Changing Lifestyles	69	(1)
A New Image	69	(1)
Personal and Family Considerations	70	(1)
Loss of Structure	70	(1)
Isolation	70	(1)
Long Hours with No Separation between Work and Home	70	(1)
Family Issues	71	(1)
Home-Based Franchises	71	(1)
Is Your Home-Based Business Legal?	72	(1)
Utilities, Insurance, and Taxes	73	(1)
The Growth Decision	74	(1)
Summary	74	(1)
Discussion Questions	75	(2)
New Product Development	77	(14)
Key Points	77	(1)
A High-Risk Venture	78	(1)
Strengths and Weaknesses of Small Companies	79	(1)
Developing a New Idea	79	(2)
Key Factors for Success	81	(1)
Choosing a Distribution Channel	82	(2)
Factors Influencing the Distribution Decision	83	(1)
Obstacles to Securing Distribution Channels	83	(1)
Licensing	84	(1)
Legal Protection of New Products and Services	84	(4)
Patents	85	(1)
Copyrights	86	(1)
Trademarks	87	(1)
Trade Secrets	87	(1)
Summary	88	(1)
Discussion Questions	88	(3)
Global Business	91	(17)
Key Points	91	(1)
Exporting	92	(12)
The Current Situation	93	(2)
The Decision to Start Exporting	95	(1)
Developing an Export Plan	95	(3)
Getting Established in an International Market	98	(3)
Getting Paid	101	(1)
Government Assistance	102	(2)
Importing	104	(2)
Finding Products to Import	104	(1)
Getting the Goods into the Country	105	(1)
Selling the Goods	106	(1)
Summary	106	(1)
Discussion Questions	107	(1)
Starting A New Business	108	(13)
Key Points	108	(1)
Innovation and Entrepreneurship	109	(1)
Sources of Ideas	110	(3)
The Inside-Out Approach	111	(1)
The Outside-In Approach	112	(1)
Serendipity	113	(1)
The Rationale: Why the New Business is Needed	113	(2)
The Obstacles: Barriers to Entering an Industry	115	(1)
The Method: How the New Business Will Be Established	116	(2)
The People: Who Will Be Involved?	118	(1)
Summary	119	(1)
Discussion Questions	120	(1)
Buying an Existing Business	121	(15)
Key Points	121	(1)
Advantages of Buying a Business	122	(3)
Less Risk	122	(1)
Less Time and Effort Required	122	(1)
The Possibility of Buying at a Bargain Price	123	(2)
Disadvantages of Buying a Business	125	(2)
The Environment	125	(1)
Internal Problems	125	(2)
Departure of the Current Owner	127	(1)
Finding the Business	127	(2)
Businesses that are on the Market	127	(1)
Businesses that are not on the Market	128	(1)
Determining the Price of a Business	129	(4)
The Negotiating Process	133	(2)
Price Versus Value	133	(1)
Sources of Power in Negotiations	134	(1)
Summary	135	(1)
Discussion Questions	135	(1)
Franchising and Other Alternatives	136	(17)
Key Points	136	(1)
The Popularity of Franchising	137	(1)
Advantages for the Franchisee	138	(1)
Startup Assistance	138	(1)
Basis for Judging Prospect of Success	138	(1)
Instant Recognition	138	(1)
Purchasing Power	138	(1)
Advertising Scope and Sophistication	139	(1)
Operational Improvements	139	(1)
Disadvantages for the Franchisee	139	(2)
Restrictions	139	(1)
Costs	139	(1)
Termination	140	(1)
Unrealistic Expectations	140	(1)
Evaluating the Franchise Option	141	(6)
You as a Franchisee	141	(1)
The Industry	142	(1)
The Franchisor	143	(4)
Franchising and the Law	147	(3)
Other Entrepreneurial Options	150	(1)
Business Opportunities	150	(1)
Manufacturer's Representative	151	(1)
Summary	151	(1)
Discussion Questions	152	(1)
THE BUSINESS PLAN: INTRODUCTION	153	(8)
Key Points	153	(1)
What Is a Business Plan?	154	(1)
How Do Plans for Existing Businesses and Startups Differ?	154	(1)
What Is Included in the Business Plan?	154	(1)
Executive Summary	155	(1)
Executive Summary, Mission Statement, and the Business Environment	155	(6)
Mission Statement	156	(1)
The Business Environment	157	(4)
THE BUSINESS PLAN: MARKETING	161	(48)
Key Points	161	(1)
What Is Included in the Marketing Section?	162	(1)
What Is Your Product or Service?	162	(1)
Who Are Your Competitors?	163	(1)
Pricing	163	(11)
What Is Your Pricing Objective?	165	(1)
What Are Your Pricing Policies?	165	(1)
How Will You Determine Your Prices?	165	(1)
Industry Markups	166	(7)
Shipping Costs	173	(1)
Credit Terms to Customers	174	(2)
What Are Your Credit Policies?	174	(1)
The Industry and Your Competitors	175	(1)
The Customers	176	(1)
The Company's Cash Flow	176	(1)
Competitive Advantage	176	(2)
Market Segmentation	178	(5)
How Will You Segment Your Target Market?	178	(2)
Common Marketing Mistakes	180	(3)
Location	183	(9)
What Is Your Ideal Location?	183	(1)
Is Your Business Retail or Service?	184	(4)
Is Your Business a Manufacturing Firm?	188	(1)
Is Your Business a Wholesaling Operation?	189	(1)
Incubators	190	(1)
Common Location Mistakes	191	(1)
Promotion and Sales	192	(5)
What Types of Promotion Will You Use?	192	(1)
What Are Your Promotional Goals?	193	(1)
What Is Your Promotional Budget?	193	(1)
Sales and Direct Marketing	193	(3)
Sales Promotion	196	(1)
Advertising	197	(10)
What Type of Advertising Will You Use?	198	(1)
Media	198	(5)
When Will You Advertise?	203	(2)
Marketing Online	205	(2)
Public Relations and Publicity	207	(2)
THE BUSINESS PLAN: MANAGEMENT AND PERSONNEL	209	(14)
Key Points	209	(1)
What Are Your Qualifications to Operate This Business?	210	(1)
Have You Completed Job Descriptions?	210	(1)
Have You Established the Employees' Wage Rates?	211	(1)
What Benefits Will You Provide to Your Employees?	212	(1)
Have You Completed a Typical Work Schedule?	212	(1)
Have You Completed an Organizational Chart?	212	(1)
What Other Laws Will Affect Your Personnel Decisions?	212	(7)
Occupational Safety and Health Act	213	(1)
Title VII of the Civil Rights Act and the Age Discrimination in Employment Act	214	(1)
Americans with Disabilities Act	215	(1)
Immigration Laws	215	(1)
Family and Medical Leave Act	216	(1)
National Labor Relations Act and Taft-Hartley Act	216	(1)
Workers' Compensation	216	(3)
State Laws	219	(1)
Do You Have Employees or Subcontractors?	219	(4)
THE BUSINESS PLAN: STARTUP COSTS AND FINANCING	223	(10)
Key Points	223	(4)
How Will the Business Be Financed?	227	(6)
Debt Financing	227	(2)
Equity Financing	229	(1)
The Cost of Financing	230	(3)
THE BUSINESS PLAN: PROJECTED FINANCIAL STATEMENTS	233	(18)
Key Points	233	(1)
Accounting Methods	234	(1)
Cash Basis	234	(1)
Accrual Basis	234	(1)
Completed-Contract Method	234	(1)
Balance Sheet	234	(3)
Assets	234	(1)
Liabilities	235	(1)
Equity	236	(1)
Opening-Day Balance Sheet	237	(1)
Projected Income Statement	238	(1)
Cash Flow	239	(5)
Case Study: The Travel School	244	(1)
Break-Even Point	244	(7)
What Is Your Break-Even Point?	246	(1)
Have You Identified Fixed and Variable Expenses?	246	(2)
What Is Your Contribution Margin?	248	(1)
Calculating the Break-Even Point	248	(1)
How Many Customers Are Needed to Break Even?	248	(3)
THE BUSINESS PLAN: THE LEGAL SECTION	251	(10)
Key Points	251	(1)
What Form of Organization Will You Choose?	252	(4)
Sole Proprietorship	252	(1)
Partnership	252	(2)
Corporation	254	(1)
Limited Liability Company	255	(1)
Joint Venture	256	(1)
What Taxes will be Due?	256	(1)
Federal Taxes	256	(1)
State Taxes	257	(1)
Organizational Form and Income Tax	257	(1)
Sole Proprietorships	257	(1)
Partnerships	258	(1)
Corporations	258	(1)
What Other Legal Issues Need to Be Addressed?	258	(3)
THE BUSINESS PLAN: INSURANCE	261	(6)
Key Points	261	(1)
What Insurance Will You Need?	262	(5)
Workers' Compensation Insurance	262	(1)
Property Insurance	263	(1)
Liability Insurance	263	(1)
Earnings Insurance	264	(1)
Health, Disability and Life Insurance	264	(3)
THE BUSINESS PLAN: SUPPLIERS	267	(4)
Key Points	267	(1)
Who Will Be Your Suppliers?	268	(3)
THE BUSINESS PLAN: RISKS ASSUMPTIONS AND CONCLUSION	271	(4)
Key Points	271	(1)
What Are Your Uncontrollable Risks?	272	(1)
What Are Your Assumptions and Conclusions?	272	(3)
CASE STUDIES	275	(30)
Online Auto Sales	276	(2)
Entrepreneurs in the Beverage Industry	278	(3)
The Growth and Problems of Wired Ventures, Inc.	281	(1)
The Body Shop	282	(2)
Boston Chicken/Boston Market	284	(2)
Hometown Videos, Inc.	286	(1)
A Family Affair	287	(1)
Ed's Auto Parts	288	(2)
Sheila's Software, Inc.	290	(3)
Wash-n-Go Self-Service Car Wash Business Plan	293	(12)
APPENDIX: SUMMARY OF BUSINESS PLAN CHECKLISTS	305	(18)
Using the Checklists	305	(1)
The Executive Summary	305	(1)
The Mission Statement	306	(1)
Analyze the Business Environment	306	(1)
Describe Your Product or Service	307	(1)
Analyze the Competition	307	(1)
Describe Your Pricing Strategies	308	(1)
Describe Your Credit Policy	308	(1)
Describe Your Competitive Advantage	309	(1)
Describe the Market Segmentation Method You Will Use	309	(1)
Describe Your Location	309	(1)
If Your Business Is Retail or Service	309	(1)
If Your Business Is a Manufacturing Plant	310	(1)
If Your Business Is a Wholesale Firm	310	(1)
Describe Your Promotional Plan	310	(2)
Identify Your Management and Personnel	312	(1)
Complete the Financial Section	313	(1)
Startup Costs and Financing	313	(7)
Discuss Legal Considerations	320	(1)
Identify Insurance Requirements	321	(1)
Identify Suppliers	321	(1)
List Your Uncontrollable Risks	321	(1)
State Your Conclusion	321	(2)
Index	323

Excerpts

Life as an entrepreneur is a very challenging but rewarding career choice. Within recent years, the number of individuals who have chosen this option has increased substantially because changes in the marketplace have created both displacement and opportunities. The "downsizing" of many large corporations has caused massive layoffs at the same time that changes in technology and consumer behavior have generated new business opportunities. Many former corporate executives have chosen to start a business, not because it has guaranteed them financial success but because it has given them more control over their careers. In addition, a few executives who survived the initial cutbacks chose to leave on their own terms before they were targeted in the next round of layoffs. Rapid improvements in technology have also helped fuel the increase in small business. Technological changes have made it much easier to start a homebased business. This has appealed to many people who are trying to balance family and business concerns. Many entrepreneurial couples have emerged, their marriages and careers intertwined. Finally, the increasing demand for services (including day care, home maintenance, and auto repair) has created a market for entrepreneurs who are able to meet these needs. Services cannot be mass-produced. Entrepreneurs have established businesses to service the customer on an individual basis. THIS BOOK The decision to start a business has a substantial impact on both the life and family of the entrepreneur. This book is divided into several parts to help the entrepreneur make the necessary decisions that should be made only after careful consideration and planning. Part 1 provides background information and includes topics such as the role of small business as an economic force, family-owned businesses, and the effect of the company's growth on the entrepreneur's satisfaction. There are also separate chapters on starting a business, buying an existing business, and franchising. Part 2 is a detailed approach to writing a business plan. Each section of the business plan is carefully explained to lead the entrepreneur through the planning process. At the end of the text, the Appendix provides a step-by-step approach to writing a business plan. The text also includes authentic cases to provide examples of situations that other entrepreneurs have faced. Their experiences and decisions are excellent learning tools for those who are just beginning the entrepreneurial process. Finally, the book also includes a business plan for a self-service car wash. Readers are encouraged to review the plan and identify its strengths and weaknesses. SUPPLEMENTARY MATERIALS This book includes an easy-to-access template on CD-Rom. The CD follows the format outlined in the Appendix and is designed to simplify the task of business plan writing. The template can be used to complete the projects in this book or any similar business task. The information on the CD can be run with major software programs produced by Microsoft or Corel corporations and can be quickly translated to other platforms. A full set of instructor's materials is also available. CHANGES IN THE THIRD EDITION The third edition contains many changes, additions, and updated information. The new material includes: recent research concerning the decision to become an entrepreneur a chapter on small businesses and the Internet economy an updated chapter reflecting the changes in women-owned and minority owned businesses current information on new-product development, licensing, recent changes in patent law, and patent searches on the Internet a new case based on an actual entrepreneur's home-based venture a new complete feasibility study for a "Wash-n-Go" car wash