Chapter 7 Flashcards
Benefits of becoming an Entrepreneur:
- Greater Financial Success
- Independence
- Flexibility
- Challenge
- Survival
Entrepreneurial Characteristics:
- Vision
- Self-Reliance
- Energy
- Confidence
- Tolerance of Uncertainty
- Tolerance of Failure
What are the Personal Resources of an Entrepreneur?
- Loans
- Angel Investors
- Venture Capital
Loans
Getting commercial loans for a new venture can be tough
Banks are hesitant to fund a business that doesn’t have a track record
Only 20% of new business owners launch with commercial loans
Angel Investors
Wealthy individuals who invest in promising start-up companies to make money for themselves(share of ownership).
Venture Capital
Firms fund high-potential new companies in exchange for a share of ownership, which can sometimes be as high as 60%.
Only tiny fraction of new businesses receive any venture capital money.
Opportunities for Small Business:
- Market Niches
- Personal Customer Service
- Lower Overhead Costs
- Hire fewer managers and fewer specialized employees. - Technology
- Tech allows people to use online tools such as amazon/ebay and whatnot to be the sole employee of their business not having to do much work.
Threats for Small Business:
- High Risk of Failure
- Odds of failure improve drastically after the crucial 4 year mark - Lack of Knowledge and Experience(of how to run a business)
- Too little Money
- Bigger Regulatory Burden
- Complying with federal regulations can be overwhelming for small firms - Higher Health Insurance Costs
- Tough to offer coverage to small company employees due to small health plans being costly
Tools for Business Success:
- Gain Experience
- Getting around 3 years of working experience under someone else in an industry teaches you what does not fly in your industry with low risk - Develop network
- Staying longer than 3 years can make you too comfortable to leave - Learn from others
- Educate Yourself
- Access SBA Resources
- SBA offers a number of resources beyond money.
- Sba.gov, provides a wealth of information from industry-specific statistics to general trends, to updates on small business regulations. - Develop a Business Plan
- Usually 25 to 50 pages long, takes about 6 months to write
Factors that affect entrepreneurship rates in countries:
- Per-Capita Income
- Opportunity Costs
- Cultural/Political Environment
Per-Capita Income
- In-low income countries, high percentage of entrepreneurs start their own business because they simply have no other options
2, Necessity Entrepreneurship declines in higher-income countries
Opportunity Costs
Entrepreneurship rates are low in countries with high employment protection
Cultural/Political Environment
- Extensive & complex regulations can hinder entrepreneurship by raising daunting barriers
- Less regulations increase the entrepreneurship rate
