2. Learning Outcomes
1. Why do people become entrepreneurs, and what are the different
types of entrepreneurs?
2. What characteristics do successful entrepreneurs share?
3. How do small businesses contribute to the U.S. economy?
4. What are the first steps to take if you are starting your own
business?
5. Why does managing a small business present special challenges
for the owner?
6. What are the advantages and disadvantages facing owners of
small businesses?
7. How does the Small Business Administration help small
businesses?
8. What trends are shaping entrepreneurship and small-business
ownership?
8. Entrepreneurship
• What drives a person to take the risks associated with
entrepreneurship, and is this drive something that a
person is born with or can develop with education and
practice? In the beginning of Section 5.1, the feature
box Catching the Entrepreneurial Spirit declares Jack
Bonneau the “quintessential entrepreneur”. View both
the short video clip from IndieGoGo and the longer
TEDX presentation young Jack gave in 2018.
9.
10.
11. Entrepreneurship
1. Explain what could inspire the authors of your Introduction
to Business text to select an 11-year-old for the example
they provide to readers such as yourself of a successful
entrepreneur? Feel free to do additional research on Jack
himself or his company, Jack’s Stands & Marketplaces.
2. Could Jack’s entrepreneurial ventures at such a young age
be proof that entrepreneurs are “born rather than made”?
3. Should parents encourage their young children to follow
Jack’s path, or do you think this kind of success story is rare
and that’s why it’s so fascinating and inspiring?
12. The person who takes the risk of starting and
managing a business to make a profit is called a(n):
A. entrepreneur
B. venture capitalist
C. capitalistic adventurer
D. franchiser
E. ultra capitalist
Andy Yocom saw prime advertising space on the flags
on the golf course. He reasoned that any marketing
messages would get prominent attention if they were
placed on the flags since golfers focus on them when
they take their shots. As a result Yocom used his own
initiative and money to start Invision Golf Group Inc.
Yocom is an example of a(n):
A. entrepreneur
B. venture capitalist
C. capitalistic adventurer
D. franchiser
E. ultra capitalist
The difference between the small business owner and
the entrepreneur is that the entrepreneur:
A. manages the business
B. files taxes for the business
C. assumes the risk of the business
D. is responsible for the profits of the business
E. is accurately described by all of the above
An entrepreneur is a person who _____ a business.
A. finances
B. manages
C. locates
D. owns and operates
E. works for
13. When Art Baer read that Singapore would lift its ban on
chewing gum, he thought to himself, "There has to be a market
there." Baer, 26, knew if he was going to move beyond the
daydreaming stage, he had to move fast. After investing
$20,000 of his own money into developing a product he called
Impress Gum, Baer quit his job, flew to Singapore, talked to the
right people in the government, lined up a manufacturer, and
hired a marketing firm to promote his gum, which fights tooth
decay. Baer is an example of a(n) ______ entrepreneur.
A. growth-oriented
B. classic
C. opportunistic
D. risk-aversive
E. debt-based
_____ are entrepreneurs who start a series of companies.
A. Multipreneurs
B. Intrapreneurs
C. Multi-venturists
D. Multi-faceted venturists
E. Growth capitalists
When Suzanne Pogell wanted to learn to sail, but she
could find no one to teach her because men were the
ones who sailed, and women were their crew. She
finally convinced someone to teach her to sail, and
after mastering sailing, she started an all-woman
sailing school called Womanship. Pogell started small
and plans to stay small. She would be correctly called
a(n):
A. interpreneur
B. multipreneur
C. intrapreneur
D. growth entrepreneur
E. micropreneur
When Allison Logue found out her children were allergic to
corn, she started looking for sweets and starches that were
corn-free and was dismayed to find very few such products
on the market. As a result, she has started her own small
business to produce and market corn-free desserts. It is a
small market, and Logue plans to keep her business small.
Logue is an example of a(n):
A. interpreneur
B. multipreneur
C. intrapreneur
D. growth entrepreneur
E. micropreneur
14. 1. Why do people become entrepreneurs, and what
are the different types of entrepreneurs?
• CONCEPT CHECK
1. Describe several types of entrepreneurs.
2. What differentiates an entrepreneur from a
small-business owner?
3. What are some major factors that motivate
entrepreneurs to start businesses?
15.
16. Managerial Ability and Technical Knowledge
• Organize a company
• Develop operating strategies
• Obtain financing
• Manage day-to-day activities.
Interpersonal and communication skills
• Employees
• Customers
• Businesspeople
18. Table 5.5 Number of Employees, by Percentage of Established
Small Businesses
19. Which of the following is a characteristic of the
entrepreneurial personality?
A. Risk-aversion
B. Willingness to be a follower rather than a leader
C. Dependence on others
D. Dependence on others for motivation
E. Ambitious
All of the following are characteristics of an
entrepreneurial personality EXCEPT:
A. the willingness to take risks
B. creativity
C. problem solving skills
D. a high energy level
E. the willingness to be a follower rather than a
leader
Michael Bronner made a fortune in the direct
marketing business as the cofounder and CEO of
Bronner Slosberg Humphrey, a wildly successful
direct-marketing firm. His newest venture, Upromise
Inc., enlists some of America's largest corporations to
help families pay for college and is extremely
successful. Entrepreneur Bonner would more than
likely have which of the following characteristics?
A. Ambitious
B. Independent
C. Self-confident
D. Visionary
E. All of the above
20. 2. What characteristics do successful entrepreneurs
share?
• CONCEPT CHECK
1. Describe the personality traits and skills
characteristic of successful entrepreneurs.
2. What does it mean when we say that an
entrepreneur should work on the business,
not in it?
21. Small Business
• Independently owned
• Owned by an individual or a
small group of investors
• Based locally
• Not a dominant company in
its industry
Eligible for government
programs
In business at least five
years
Employ at least one, but
less than 50, employees
23. Small Business: Driving America's Growth
• What do small businesses contribute to the
economic growth of the USA, and how can
entrepreneurship be promoted, especially in
underserved communities?
• Table 5.4 in Section 5.3 provides a Snapshot
of Small-Business Owners. One of the
sources for this information is the Kaufmann
Foundation, which the late E.M. Kaufmann
set up in Kansas City, Missouri with the
mission to help promote small business
creation, particularly in underserved
communities.
24. Small Business: Driving America's
Growth
1. After watching this video, decide if both the
comprehensive presentation and lively panel discussion
that follows meets the stated goals of the 2019 State of
Entrepreneurship Address to discuss “how, together, we
can grow inclusive and empowering economies as we
explore the best ways to support the makers, the
doers, and the dreamers”?
25. 3. How do small businesses contribute to the U.S.
economy?
• CONCEPT CHECK
1. What are three ways small businesses can
be defined?
2. What social and economic factors have
prompted the rise in small business?
26. Getting Started
Find the Idea Choosing a Form of Business
Organization
Developing the Business Plan
• Keep up with small-
business trends
• Work in the industry
• Type of business
• Number of employees
• Capital requirements
• Tax considerations
• Level of risk involved
• Attracts appropriate loan
financing
• Minimizes the risks
involved
• Critical determinant in
whether a firm is succeeds
or fails.
A comprehensive business plan lets you run various “what if” analyses and operate your
business as a dry run
27. Table 5.8 Key Elements of a Business Plan
• Executive Summary
• Vision and mission statement
• Company overview
• Product and/or service plan
• Marketing plan
• Management plan
• Operating plan
• Financial plan
• Appendix of supporting documents
29. Financing the Business
Start-up funds from personal accounts, family and friends
Debt
Borrowed funds that must be repaid with interest
Equity
Sale of stock (i.e., ownership) in the business
Angel Investors
• Seed money
Venture capital
• Investment firms that specialize in financing small, high-
growth companies
30. Buy a Business
• Pay yourself and profit faster
• The groundwork has already been done
• You don’t need to use your own money to buy a business
• Make the seller of the business part of the deal
• Target Assets
“When one company purchases most or all of another company's
shares to gain control of that company. Purchasing more than
50% of a target firm's stock and other assets allows the acquirer
to make decisions about the newly acquired assets without the
approval of the company's shareholders.”
31. Risky Business
Some common
causes of business
closure include
the following:
Economic factors
Financial causes
Lack of experience
Personal reasons
35. How to Write a Business Plan
• As mentioned in Section 5.4, the planning
process is one of the most important steps to
complete before starting a business. View
the video from the Young Entrepreneurs
Forum and compare the 11 elements
described in the video to the Key Elements of
a Business Plan from Table 5.8 in your text.
36. How to Write a Business Plan
1. What similarities and differences did you notice? Why wouldn’t the
concept of the Business Plan (B Plan) be universally explained by most
sources?
2. Would it make sense, then, for an entrepreneur to verify specifically
what essential components of a business plan were needed for the
particular audience this B Plan was intended, such as a bank, other
financial institution, angel investor or venture capitalist? For example,
consider FUBU mentioned in Exhibit 5.5, which eventually received a
significant investment from Samsung. What do you think would have
been the most important information that Samsung executives wanted
to see from FUBU management before they wrote a $30 million check?
37. Once Arnold Patel had decided he wanted to quit working as
a Web designer for a large advertising agency and go into
some kind of business for himself, he did a self-assessment,
which indicated that he had an entrepreneurial spirit. His
next step will be to:
A. determine where the funding will come from
B. look for customers
C. create a business plan
D. find the idea for his business
E. choose a form of business organization
Hannah Li wants to quit her job as a legal secretary and
start her own small business. She knows that she will
be successful if she can find the right idea. Where can
Li look for ideas for her new business?
A. Problems she noticed in her old job
B. Her interest in the history of Asian art
C. Suggestions from her family
D. Other businesses in other regions of the country
E. All of the above
Mark Ghermizian had quit his job and was looking to start a
small business so he could be his own boss. When he read
that people spend up to fifteen minutes every day staring at
a bathroom stall door, he decided he would find advertisers
who wanted to pay to have their advertising messages on
bathroom stall doors. Since he has his idea, Ghermizian’s
next step is to:
A. determine if he has the right personality to run a business
B. choose a form of business organization
C. create a name for his business
D. get financing for his new business
E. create prototype ads
A _____ is a formal written statement that describes in
detail the idea for a new business and how it will be
carried out.
A. mission statement
B. vision
C. business plan
D. statement of purpose
E. venture plan
38. Which of the following elements does NOT typically appear
in a well-prepared business plan?
A. qualifications of the owners
B. names of all employees
C. description of the product or service
D. financial plan
E. an analysis of the market
A common use of business plans is to:
A. comply with SEC regulations
B. persuade lenders and investors to finance the
venture
C. persuade customers to buy the new product or
service
D. use as a recruitment tool
E. showcase innovative factors to production to make
the company a success
The two forms of business financing are _____ (borrowed
funds) and _____ (ownership funds).
A. credit; leverage
B. equity; debt
C. debt; equity
D. equity; leverage
E. debt; credit
Once the business plan is finished, the next step is to:
A. choose a business format
B. locate customers
C. create a promotional campaign
D. find financing for the business
E. buy all fixed assets needed to operate business
39. _____ financing is a form of business financing
consisting of borrowed funds that must be repaid
with interest over a stated time period.
A. Credit
B. Debt
C. Equity
D. Monetary
E. Venture
_____ financing is a form of financing consisting of
funds raised through the sale of stock in a
business.
A. Credit
B. Debt
C. Equity
D. Monetary
E. Venture
Jill Hansom borrowed $40,000 from a credit union to
start a company that makes and sells peach salsa.
Hansom used _____ financing.
A. debt
B. liquid
C. equity
D. venture
E. entrepreneurial
_____ are individual investors or groups of experienced
investors who provide funding for start-up businesses.
A. Angel investors
B. Entrepreneurial capitalists
C. Opportunity entrepreneurs
D. Equity entrepreneurs
E. Venture entrepreneurs
40. Angel investors:
A. are most interested in investing in businesses that
are well-established
B. are another name for bank loan officers who are
responsible for funding start-up businesses
C. provide equity financing to a business by loaning the
business money at a low interest rate
D. provide funding for start-up businesses
E. provide debt financing to a business by buying stock
within the company
Who provides the start-up financing for the majority of
new small businesses?
A. the business owner and his or her family and friends
B. the Small Business Administration (SBA)
C. the local bank
D. venture capitalists
E. finance companies
. Venture capital:
A. is another name for the principal which a business
borrows from a bank
B. includes all the money the owner of the business
invests in his or her new enterprise
C. is borrowed money invested in start-up businesses and
provided by the Small Business Administration
D. gives the investor no voice in how the company in
which he or she has invested will operate
E. is financing obtained from investment firms that
specialize in financing small, high-growth companies
Jeff Arnold and Reggie Bradford created WebMD, an Internet
provider of health care information. Early in the
development of this high-growth company, Arnold and
Bradford attracted a group of investors who provided them
with money needed to acquire other Internet companies
with similar missions. The investment group is called:
A. entrepreneurial capitalists
B. equity entrepreneurs
C. angel investors
D. investment counselors
E. consulting owners
41. 4. What are the first steps to take if you are starting
your own business?
• CONCEPT CHECK
1. How can potential business owners find new
business ideas?
2. Why is it important to develop a business
plan? What should such a plan include?
3. What financing options do small-business
owners have? What risks do they face?
42. Managing a Small Business
Using Outside
Consultants
• CPA
• Attorney
• Marketing
• Employee benefits
• Insurance
Hiring and Retaining
Employees
• Creative to find new
employees
Going Global With Exporting
Export Management Companies (EMCs)
handle aspects of exporting
• Finding customers
• Billing,
• Shipping,
• Helping the company comply with
foreign regulations
43. International trade specialists that buy goods at a
discount from small businesses and resell them
abroad are called:
A. business trade unions
B. export management companies
C. domestic channel members
D. commission house brokers
E. export trading companies
One way to ease the burden of managing a business is
to:
A. keep minimal inventory on hand
B. only operate the business 20 hours a week
C. do all the work yourself and hire no employees
D. hire outside consultants
E. sell a service instead of a tangible product
Marc Adler is the owner of Macquarium, a
multimillion-dollar communications company that
does everything from video productions to creating
Web sites to public relations campaigns. Macquarium
has done this sort of work for BellSouth and SnapOn
Tools. Even though these companies could have
prepared their videos and created their Web sites in-
house, these tasks were:
A. outsourced
B. supplied outside normal channels
C. autonomous productions
D. seen as conflicting with the mission statements of
the companies
E. supplied as part of a relational marketing strategy
Export management companies:
A. work on flat fees per month
B. only do consulting work
C. form joint ventures with small exporting businesses
D. handle all aspects of exporting, for a percentage fee
of the business
E. import as well as export
44. 5. Why does managing a small business present
special challenges for the owner?
• CONCEPT CHECK
1. How does the small-business owner’s role
change over time?
2. How does managing a small business
contribute to its growth?
3. What are the benefits to small firms of doing
business internationally, and what steps can
small businesses take to explore their options?
45. Small Business, Large Impact
• Small businesses continue to thrive in the United
States for a variety of reasons.
1.Independence and a better lifestyle
2.Personal satisfaction from work
3.Best route to success
4.Rapidly changing technology
5.Major corporate restructuring and downsizing
6.Outsourcing
7.Small businesses are resilient
47. Which of the following is a reason why small business
thrives in the United States?
A. guaranteed profits
B. regular working hours
C. an aversion to success
D. the ability to avoid outsourcing
E. rapidly changing technology
Which of the following is NOT one of the advantages of
owning a small business?
A. flexibility
B. efficiency of operation
C. ability to serve specialized markets
D. avoidance of taxes
E. personal service
Kirby Frigo has opened a dog grooming business. Frigo,
like other small business owners, probably will experience:
A. guaranteed profits
B. short work hours
C. interest-free loans
D. burdensome government regulations
E. relief from taxation
All of the following are examples of disadvantages
associated with the ownership of a small business
EXCEPT:
A. burdensome government regulations
B. fund-raising difficulty
C. being your own boss
D. extreme personal commitment
E. limited management skill
48. 6. What are the advantages and disadvantages facing
owners of small businesses?
• CONCEPT CHECK
1. Why are small businesses becoming so
popular?
2. Discuss the major advantages and
disadvantages of small businesses.
49. The Small Business Administration
• How does the SBA support small business
growth in the USA, and what specific
resources does the SBA offer to help with
Business Plans?
• Section 5.7 details several ways the Small
Business Administration (SBA) provides
assistance to small businesses, including
start-ups and established organizations. In
2019, the SBA updated their business plan
page to offer two different options, a
traditional and a lean startup plan.
50. The Small Business Administration
Government agency
Helps people start and manage small businesses
Helps small business owners win federal contracts,
speaks on behalf of small business
Private lenders to qualified small businesses that
cannot obtain financing
Assistance for Women, Minorities, Veterans
51. Service Corps of
Retired Executives
(SCORE)
• Executives in these programs
use their business
backgrounds to help small
business owners.
• The SBA offers free online
resources and courses for
small business owners
52.
53. The Small Business
Administration
1. What are the main differences between the lean
startup plan and the traditional version (See Section
5.4)?
2. Which kinds of business ventures do you think would
be better suited to each kind of Business Plan?
54. The _____ is an agency of the federal government that
offers both managerial and financial assistance to
small businesses.
A. Business Incubator Agency
B. Federal Aid Program
C. Business Welfare Administration
D. Small Business Administration
E. Council for Small Business
Hawaiian-born Jon P. Farmer is the founder of Kolopua
Hawaii LLC, a company that markets Pure Hawaiian Air.
Bottles of Pure Hawaiian Air contain air that smells like
the floral bouquet that greets tourists as they get off the
plane in Hawaii. Which of the following federal agencies
should Farmer contact if he needs management
assistance?
A. Business Incubator Agency
B. Federal Aid Program
C. Business Welfare Administration
D. Small Business Administration
E. Council for Small Business
The Small Business Administration (SBA) offers a broad
range of aids to small businesses. They include:
A. guarantees on loans made by private lenders
B. entrepreneurial ideas
C. employee recruiting, hiring, and firing
D. the elimination of sales and employee taxation for the
first three years of operation
E. all of the above
Privately owned and managed _____ are licensed by the
SBA and provide long-term financing for small businesses.
A. Small Business Development Centers
B. Service Corps of Retired Executives
C. Small Business Investment Companies
D. Angel Capital Electronic Networks
E. Active Corps of Executives
55. Which of the following is a trend that is changing the
face of entrepreneurship and small business
ownership?
A. stagnant demographics
B. entrepreneurial diversity
C. decreased use of overseas bundling
D. an increase in the number of corporate mergers and
acquisitions
E. all of the above
In the management assistance area, the Small Business
Administration (SBA) provides all of the following EXCEPT:
A. free college credit courses in management
B. toll-free advice numbers
C. training and educational programs
D. counseling by business development officers
E. free publications on business topics
The Small Business Administration (SBA):
A. helps people start and manage small businesses
B. is a privately-owned company
C. is a financial institution
D. does not have a Web site
E. is accurately described by all of the above
56. 7. How does the Small Business Administration help
small businesses?
• CONCEPT CHECK
1. What is the Small Business Administration
(SBA)?
2. Describe the financial and management
assistance programs offered by the SBA.
57. Trends in Entrepreneurship and Small-Business
Ownership
Demographic, social, and technological trends
Small-business activity leads to continued
strong overall economic growth
Baby boomer entrepreneurs
Minorities
How Far Will You Go to Get Rich
San Francisco, New York Metro, Silicon Valley,
and New England
