Understand Economics, Career Planning, Information Management, and Communication Skills

COURSE: / Entrepreneurship I / UNIT A / Entrepreneurship Foundations
ESSENTIAL STANDARD: / 1.00 / B2 / 8% / Understand economics, career planning, information management, and communication skills.
OBJECTIVE: / 1.02 / B2 / Participate in career-planning to enhance job-success potential
Essential Questions:
·  What distinguishes an entrepreneur from a small business owner or manager?
·  What are the reasons that people pursue careers as entrepreneurs?
·  What personality traits are associated with successful entrepreneurs?
·  What skills are needed for entrepreneurial success?
·  How do we assess entrepreneurial potential?
·  What are the risks and disadvantages associated with entrepreneurship?
·  What are the trends and technological developments in entrepreneurship?
UNPACKED CONTENT
Competency 1.02-A
A.  Distinguish among entrepreneurs, small business owners, and managers
1.  Entrepreneur – an individual who undertakes the risk associated with creating, organizing, and owning a business
a.  Entrepreneurship – is the process of starting and operating one’s own business
b.  Venture – is a business undertaking involving risk
c.  Opportunity – is an idea that has commercial value
2.  Small Business Owner – the owner of a business that was generally started to create jobs for the owners and referred to as a “mom and pop” business
3.  Manager – an employee who coordinates people, processes, and other resources of a business in order for the business to achieve success
B.  Identify reasons that people pursue careers as entrepreneurs
1.  Being your own boss – this is the biggest reward of owning your own business – it gives you the freedom to make their own business decisions – they have the final word on all aspects of the operation
2.  Doing something you enjoy – a business venture normally begins with something that the entrepreneur enjoys doing – it might be a hobby or skill that they are good at doing – the entrepreneur gets satisfaction from creating or developing the hobby into a viable enterprise
3.  Having the opportunity to be creative – most people who works for someone else is following their procedures; while entrepreneurs create their own – entrepreneurs are able to shape a business in ways that employees cannot – this is true with new, daring or creative ideas – when an entrepreneur has a creative idea, they have the power to act on it
4.  Having the freedom to set your own schedule – even though entrepreneurs have demands on their time, they have the flexibility to determine their own schedule –they also have the options of working at home, at the business, or any other location that suits them
5.  Having job security – employees today are not guaranteed job security from their employers – businesses may relocate outside the United States and the employees are left with no company to work for – entrepreneurs control their own destiny – as long as the business is successful, they have a job
OBJECTIVE: / 1.02 / B2 / Participate in career-planning to enhance job-success potential
UNPACKED CONTENT
6.  Making more money – people who work for others are paid wages or a salary – if you work for a company and they do well, you may get a raise or a bonus – a business owner’s earnings are limited by the potential of the business
7.  Being recognized within the community – business ownership carries with it a certain amount of prestige – entrepreneurs have taken on a responsibility that involves hard work, daring, and know-how – entrepreneurs make an economic contribution to the community through their investment and creation of jobs
C.  Describe trends in entrepreneurship
1.  Internet businesses – new online businesses have emerged along with traditional businesses adding an online feature – online businesses have the potential to attract a huge number of customers because anyone with internet capabilities can shop at any time
2.  Service businesses – is one of the dominant types of businesses in the United States economy – even if a company sells a product, they also provide a service to the customers – most small businesses are service businesses – services are intangible things that businesses do for their customers to enhance our lives – examples include: insurance, sports and entertainment, tourism, banking, real estate, dry cleaning, fitness centers, and accountants/tax preparers
3.  Home-based businesses – this is a business that is conducted from the home – due to technology a home-based business can have an image that is just as professional as that of a large corporation
4.  Socially responsible nonprofit businesses – social entrepreneurs start a business in order to better society – they are focused on doing good – social entrepreneurs often form nonprofit organizations (the business owner makes a profit; but the profits must be kept within the business) – some nonprofits also can qualify to be tax-exempt – examples of nonprofits that support specific missions include feeding the hungry, community theatre groups, education-focused groups, and building homes
5.  Focus on technology – entrepreneurs who know how to use technology to improve their business processes create a strong competitive advantage and enjoy a greater chance of success – whether technology is a company’s product or it is used to increase productive, it is a critical component of any business strategy
6.  Outsourcing – is contracting with other companies for services – most common types of outsourcing is business-process outsourcing (accounting, human resources management, benefits, payroll, and finance functions) – benefits of outsourcing:
-  outsourcing allows greater efficiency, saving time and money
-  outsourcing decreases overhead investment or debt
-  outsourcing lowers regulatory compliance burdens
-  outsourcing allows companies to start new projects quickly
-  outsourcing makes companies more attractive to investors because it allows companies to direct more capital directly into money-making activities
7.  Strategic Alliances – one step beyond outsourcing is forming a partnership with another company – join with a larger company to purchase items in large quantities or help support a product – example: 3M produces tape and will look to smaller companies to provide the dispensers
8.  Corporate Ventures – is a new venture started inside a large corporation – large companies are finding that they must act like entrepreneurs to remain competitive – these are spin-off companies – the parent company supplies resources to the corporate venture get started – often the new corporate venture becomes an independent company
D.  Discuss risks and disadvantages associated with entrepreneurship
If being an entrepreneur is so great, why doesn’t everyone do it? Because of the intense competition business owners are fighting for the consumers dollars. The prospective entrepreneur should consider the costs and risks. The risks include
1.  Working long hours – long hours are the norm for entrepreneurs, especially during the start-up period – during start-up survival depends on making wise decisions and not relying on paid help, so the responsibilities are left to the entrepreneur – many entrepreneurs work 7 days a week from the time the business opens until close
2.  Having an uncertain income – business owners make more money than employees; but only when the business is good and making money – if a business is bad then earnings can be low or nonexistent – most businesses do not make a profit right away – most business owners put the profits back into the business so that it can grow – business owners do not get a paycheck or benefits such as health insurance and time off for vacations
3.  Being fully responsible – the owner of a business is responsible for more than just decision making; they must make sure everything get done – there is no one else to take care of tasks such as sweeping the floors, paying bills, making repairs or other tasks in the business – the success or failure of the venture rests entirely on the owner
4.  Risking one’s investment – the biggest risk is the possibility of losing one’s investment – the investment is the amount of money a person puts into their business as capital – capital includes the buildings, equipment, tools, and other goods needed to produce a product or the money used to buy these things – employees do not risk losing money – before an entrepreneur can earn money they have to get the venture up and running
E.  Identify reasons that business start-ups often fail
The overall cause of business failure is lack of control on the part of the entrepreneur. Never leave total control of your business to your employees even if they are professionals. Remember, professionals are only there to advise you on what to do. The final decision lies in your hand as the entrepreneur and business owner.
1.  High Debt Ratio - the first cause of business failures you must watch out for is high debt ratio. This is the measurement of the percentage of total dollars in a business that is provided by creditors. You are looking at what you owe your creditors in comparison to what the business owns in assets. If you owe your creditors $59,000 and your assets (what the business owns) are $106,000 then your debt ratio is 55.6%. This means that 55.6% of what you own would have to be sold off to pay your creditors.
2.  High level of mismanagement -The second cause of business failures is high level of mismanagement. If your key staff lacks professionalism, then your business is in trouble. Since your staff are in charge of running the day to day affairs of your business, their professionalism should not be compromised for anything.
3.  Unexpected resignation of staff -The third to watch out for is the unexpected resignation of staff from sensitive position. This can really pose a threat to your business so you must be prepared for it. In business, poaching is really a factor to deal with. Big companies are always poaching good employees away from other companies by enticing them with improved salaries and incentives.
4.  Inadequate Inventory - Another factor that leads to small business failures is inadequate stock or inventory. If you have inadequate stock either for production or for your customers, your business is bound for failure. Also; if you stock too much inventory, you are still bound to fail because you are tying down working capital.
5.  Selling products below cost price - The fifth cause of business failures is the sales of goods and services below cost price. Sometimes in business, cash crunch, fierce competition or economic factor make businesses sell their goods below cost price and this can ruin your business.
6.  Dwindling working capital - Dwindling working capital is also a cause of business failures and you must watch out for. Depreciating working capital may be as a result of unnecessary expenditure, too much inventory and weak cash flow management on the part of the entrepreneur.
7.  Consistent negative cash flow - The seventh factor that could lead to business failure is consistent negative cash flow. Cash flow is to a business what blood is to humans. No business can survive without strong cash flow management. A solution to negative cash flow is to hire a professional accountant to keep a keen eye on the cash flow.
8.  Declining Profit - Declining Profit, if not handled properly can cause business failure. If there is a down turn in profit margins due to competition or deflation, your business could be negatively affected. A solution to declining profit is to increase your sales volume so you can make more profit on turnover or better still; diversify.
9.  Loss of market share - Loss of market share is the ninth cause of most business failures. If you observe you are losing your market share due to either competition, new technology, innovation or trend, then this is a sign that your business is on the verge of been liquidated.
The only prevention to loss of market share is to keep your ears to the ground for any new industrial trend, technology or innovation. You must also keep an eye on your competitor and be quick to act and adapt to any positive or negative industrial change or once again; you can diversify.
10. Inability to secure operational capital - Lastly, your inability to secure funds from financial institutions could lead to business failure. Raising capital is one of the most difficult tasks in business. But it is often said that “where there is a will, there is a way.” If financial institutions refuse to assist you financially, you have to turn to other sources of funds.
G. Explain skills needed for entrepreneurial success
1. Communication skills – person-to-person, telephone, and written communication skills – also need listening skills to build positive relationships – do accurate work
2. Math skills – they use basic math skills to budget, keep records, make decisions and calculations, and put together financial statements
3. Problem-solving skills – they need to be able to come up with logical ideas to solve problems – solving problems requires creativity and thinking skills
4. Technology and computer skills – computer skills are essential in almost any business – the ability to understand and use technology is also essential
5. Decision-making skills – they must be able to choose the best option from among many – good decision makers know their values and are good at predicting the consequences of actions