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Business Organization
Chapter 5
Facts:
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More than 3,000 new businesses are
started each week in the U.S.
According to the U.S. Small Business
Administration (SBA), over 50% of
small businesses fail in the first year
and 95% fail within the first five
years.
Entre….what????
EntrepreneurshipThe process of starting and managing your
own business.
EntrepreneursThe people who organize, manage, and take
the risk of owning and operating a business.
What Does It Take?
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Anyone can be an entrepreneur! However, successful
entrepreneurs usually have the following characteristics:
Focused & Goal Oriented
Risk Takers
Set high personal goals
Independent
Have a high level of self-confidence
Creative
Preparing to be an Entrepreneur
Education
• Most finish HS & have at
least one degree
• Take classes that develop:
– Academic abilities
– Technology skills
– An Understanding of
business principles
Business Skills
• EXPERIENCE!!!!
– Cooperative
Education
– Internships
– FBLA & DECA
• Learn from mistakes
The Changing U.S. Job Market
• Baby boomers dominate the workplace
– Began retiring in 2010
• Caucasians= 75% of workforce
– Will drop to 70% by 2012
– Increase in Hispanic, Asian & African-American
workers
• Women are becoming a larger portion of the
workplace
– By 2012, women will make up ½ of the workforce
Pressure on Employees
• Work longer hours
– Less time with family
• Growing wage difference between upper
management positions and entry level pay
• Less job security
• Increased education requirements
Business & The Economy
• The majority of U.S. businesses are small
– 78% of businesses employee only themselves
– 19% employee less than 20
– Responsible for nearly half of the U.S. GDP
each year
Number of Employees in U.S. Businesses
100-9,999,
1%
20-99, 2%
1-19, 19%
over 10,000,
0%
none
1-19
20-99
100-9,999
none, 78%
over 10,000
Impact on a Community
• Pays wages/ employees
• Buys goods and services from other
businesses
• Employees/owners need housing, food, etc
• Taxes are paid
• Large businesses often bring smaller
businesses
The Success of a Business
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It’s more than a product or service, it
takes……
Preparation
Motivation
Organization
A clear purpose
The Success of a Business
Business Plan- A written description of the
business idea and how it will be carried out,
including all major business activities.
“The number one reason businesses fail is
because they failed to make a business plan.”
~Entrepreneur Magazine
Fundamentals of a business plan
Mission Statement- a
short, specific written
statement of the reason a
business exists and what
it wants to achieve.
Goal- a precise statement of
results the business
expects to achieve.
Policies- guidelines used in
making consistent
decisions.
Procedures- descriptions of
the way work is to be
done. Provide guidance
and direction to people
working in the
organization.
The organization of a business
Organization Chart- a diagram that shows the
structure of an organization, classifications of
work and jobs, and the relationships among
those classifications.
President
VP of Finance
Senior Accountant
VP of Operations
Chief Auditor
VP of Marketing
National Sales Manager
Other components….
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Description of product or service
Legal form of business
Marketing plan
Analysis of the market
Analysis of competition
Credentials of the owner
Financial plan
Steps in Developing a Business Plan
• Gather and review information
– Other business plans of similar businesses or
competitors
• Develop the “game plan”
• Write the plan
Show me the money….
• Friends
– 1 in 5 invest in a friend
• Family
– Over 50% borrow from family members
– Family & Friends invest over $100 billion in new
businesses each year
• Work colleagues
– 8% have borrowed from co-workers
Venture Capital- money provided by large
investors to finance new products and new
businesses that have a good chance to be
very profitable.
• Loans from banks
– Business plan often required
• Credit given by businesses (prod & serv)
Types of financing
Start-up financing- the
amount of money needed
to open the business.
Includes the cost of
buildings, equipment,
inventory, supplies,
licenses, etc.
Short-term financing- the
money needed to pay for
the current operating
activities of a business.
Long-term financingmoney needed for the
main resources of a
business such as land,
buildings, and equipment.
Other help
Small Business Administration- a
government agency that helps small
business owners develop business plans
and obtain financing and other support for
their companies.
www.sba.gov
Can you do it????
Primary Reasons Entrepreneurs Fail:
• Lack of adequate capital
• Low sales/slow business
• Higher than expected expenses
• Competitive pressure
• Too quick growth
• A larger time commitment than realized