1
The Contemporary Business World
Business
Essentials
6e
Ronald J. Ebert
Ricky W. Griffin
3
ENTREPRENEURSHIP, NEW VENTURES,
AND BUSINESS OWNERSHIP
© 2007 Prentice Hall, Inc.
All rights reserved.
PowerPoint Presentation by Charlie Cook
The University of West Alabama
LEARNING OBJECTIVES
After reading this chapter, you should be able to:
1. Define small business, discuss its importance to the
U.S. economy, and explain popular areas of small
business.
2. Explain entrepreneurship and describe some key
characteristics of entrepreneurial personalities and
activities.
3. Describe the business plan and the start-up decisions
made by small businesses and identify sources of
financial aid available to such enterprises.
4. Discuss the trends in small business start-ups and
identify the main reasons for success and failure
among small businesses.
© 2007 Prentice Hall, Inc. All rights reserved.
3–2
L E A R N I N G O B J E C T I V E S (cont’d)
After reading this chapter, you should be able to:
5. Explain sole proprietorships, partnerships, and
cooperatives and discuss the advantages and
disadvantages of each.
6. Describe corporations, discuss their advantages and
disadvantages, and identify different kinds of
corporations.
7. Explain the basic issues involved in managing a
corporation and discuss special issues related to
corporate ownership.
© 2007 Prentice Hall, Inc. All rights reserved.
3–3
What’s in It for Me?
By understanding the material discussed in this
chapter, you’ll be better prepared to:
1. Understand the challenges and opportunities
provided in new venture start-ups
2. Assess the risks and benefits of working in a new
business
3. Evaluate the investment potential inherent in a new
enterprise
© 2007 Prentice Hall, Inc. All rights reserved.
3–4
What Is a “Small” Business?
Small Business Defined
 A business that is independent (not part of a larger business)
and that has relatively little influence in its market.
 中小企業的定義：
製造業、營造業、礦業及土石採取業等三業，係以實收資本額在
新台幣8千萬元以下者，或經常雇用員工數未滿200人者為中小企
業；其餘行業則以前一年營業額在新台幣1億元以下者，或經常
雇用員工數未滿50人者為中小企業。
The Importance of Small Business in the U.S. Economy
 Job creation
 Innovation
 Contributions to big business
 Suppliers of specialized services and raw materials
 Sellers of larger firms’ products
© 2007 Prentice Hall, Inc. All rights reserved.
3–5
Popular Areas of Small-Business
Enterprise
Major small-business
industry groups:
 Services
 Retailing
 Construction
 Wholesaling
 Finance and insurance
 Manufacturing and
transportation
© 2007 Prentice Hall, Inc. All rights reserved.
3–6
FIGURE 3.2
Small Business by Industry
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3–7
Entrepreneurship
Entrepreneurship企業家精神
 The process of seeking businesses opportunities
under conditions of risk
Entrepreneur企業家
 One who accepts the risks and opportunities of
creating, operating and growing a new business
Small Business Owner
 Does not always have growth of the business as a
primary entrepreneurial goal
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3–8
Entrepreneurial Characteristics
Successful Entrepreneurs:
 are resourceful.
 are concerned for good customer relations.
 desire to be their own boss.
 can deal with uncertainty and risk.
 are open-minded.
 rely on networks, business plans, and consensus.
 have different views on how to succeed, to automate
a business, and when to rely on experience or
business acumen銳敏 .
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3–9
Starting and Operating a New Business
Crafting a Business Plan
 Conveys a description of the business strategy for
the new venture and how it will be implemented
 A business plan should address:
The entrepreneur’s goals and objectives
 The strategies that will be used to obtain them
 The implementation of the chosen strategies

Preparing a Business Plan
 Setting goals and objectives
 Sales forecasting
 Financial planning
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3–10
Starting the Small Business
Buying an Existing Business
 Less risk in purchasing ongoing, viable
business
Franchising經銷權
 Advantages
Proven business opportunity for franchisee
 Access to management expertise of
franchisor

 Disadvantages
Start-up costs for franchise purchase
 Ongoing payments to the franchisor
 Management rules and restrictions on the
franchisee

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3–11
Starting the Small Business (cont’d)
Questions to Be Answered:
 Who and where are my customers?
 How much will those customers pay for my product?
 How much of my product can I expect to sell?
 Who are my competitors?
 Why will customers buy my product rather than the
product of my competitors?
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3–12
Financing the Small Business
Personal Resources
Loans from Family and Friends
Bank Loans
Venture Capital Companies
Small-Business Investment Companies (SBICs)
Minority Enterprise Small-Business Investment
Companies (MESBICs)
SBA Financial Programs
 Guaranteed loans and immediate loans programs
 Management advice (SCORE and SBDCs)
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3–13
Trends in Small-Business Startups
Emergence of
E-commerce
Crossovers from
Big Business
Opportunities for
Minorities & Women
Global
Opportunities
Better
Survival Rates
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3–14
Reasons for Failure and Success
Failure
 Poor management
 Neglect
 Weak control systems
 Insufficient capital
Success
 Hard work, drive魄力幹勁 ,
and dedication奉獻
 Market demand
 Managerial competence
 Luck!!!
© 2007 Prentice Hall, Inc. All rights reserved.
3–15
Noncorporate Business Ownership
Forms of Legal Ownership
 Sole proprietorship: Owned and operated by one
person
 Partnership: Sole proprietorship multiplied by the
number of partner-owners
 Corporation
Choice of Ownership Form
 Based on the entrepreneur’s needs/desires for
control, ownership participation, financing sources,
and appropriateness of the chosen form for the
industry in which the firm will compete
© 2007 Prentice Hall, Inc. All rights reserved.
3–16
Sole Proprietorships
Advantages:
 Freedom
 Simple to form
 Low start-up costs
 Tax benefits
 Formation of
cooperatives
© 2007 Prentice Hall, Inc. All rights reserved.
Disadvantages:
 Unlimited liability: Owners
are responsible for all debts of
a business
 Limited resources
 Limited fundraising
capability
 Lack of continuity
3–17
Partnerships
Advantages:
Disadvantages:
 More talent and
 Unlimited liability for
money
 More fundraising
capability
 Relatively easy to
form
 Limited liability for
limited partners
 Tax benefits
general partner
 Disagreements
among partners
 Lack of continuity
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3–18
Alternatives to General Partnerships
Limited Partnership
 Allows for limited partners who invest money but are liable for
debts only to the extent of their investments
 Must have at least one general (or active) partner, who is
usually the person who runs the business and is responsible for
its survival and growth
Master Limited Partnership
 Organization sells shares (partnership interests) to investors on
public exchange. Investors are paid back from profits
 The master partner retains at least 50 percent ownership and
runs the business, while minority partners have no management
voice
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3–19
Cooperatives
Combine the freedom of sole proprietorships
with the financial power of corporations
Groups of sole proprietorships or
partnerships agree to work together for their
common benefit
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3–20
Corporations
Corporation
 “An artificial being, invisible, intangible, and existing
only in contemplation of the law”
Corporations May:
 Sue and be sued
 Buy, hold, and sell property
 Make and sell products
 Commit crimes and be tried and punished for them
© 2007 Prentice Hall, Inc. All rights reserved.
3–21
Corporations
Advantages:
 Limited liability: The
owners’ responsibility for
the debts of a business is
limited to their investment
in a business
 Continuity
Disadvantages:
 Double taxation of
dividends
 Fluid control
 Complicated and
expensive to form
 Stronger fundraising
capability
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3–22
Types of Corporations
Closely Held (Private) Corporation
Publicly Held (Public) Corporation
Subchapter S Corporation
Limited Liability Corporation (LLC)
Professional Corporation
Multinational (Transnational) Corporation
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3–23
Managing a Corporation
Corporate Governance
 The roles of shareholders, directors, and other
managers in corporate decision making and
accountability
 Corporate governance is established by the firm’s
bylaws and involves three bodies:
Stockholders (shareholders): Investors who buy
ownership shares in the form of stock
 The board of directors: Group elected by stockholders to
oversee corporate management
 Corporate officers: Top managers hired by the board to run
the corporation

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3–24
Stockholders: Owners of Corporations
Stock: A share of ownership in a corporation
Dividends: Profits distributed among
stockholders
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3–25
Special Issues in Corporate Ownership
Joint Ventures and Strategic Alliances:
 Strategic alliance: Two or more organizations
collaborate on a project for mutual gain
 Joint venture: Partners share ownership of a new
enterprise
Employee Stock Ownership Plans
 Allows employees to own a share of the corporation
through trusts established on their behalf
Institutional Investors
 Control enormous resources and can buy huge
blocks of stock
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3–26
Special Issues in Corporate Ownership (cont’d)
Mergers, Acquisitions, Divestitures, and SpinOffs:
 Merger: Two firms combine to create a new
company
 Acquisition: One firm buys another outright
 Divestiture: Strategy whereby a firm sells one or
more of its business units
 Spin-off: A firm sells part of itself to raise capital
© 2007 Prentice Hall, Inc. All rights reserved.
3–27
KEY TERMS
acquisition
board of directors
business plan
chief executive officer (CEO)
closely held (or private)
corporation
cooperative
corporate governance
corporation
divestiture
double taxation
employee stock ownership plan
(ESOP)
entrepreneur
© 2007 Prentice Hall, Inc. All rights reserved.
entrepreneurship
franchise
general (or active) partner
general partnership
institutional investor
joint venture
limited liability
limited liability corporation (LLC)
limited partner
limited partnership
master limited partnership
merger
multinational (or transnational)
corporation
3–28
K E Y T E R M S (cont’d)
officers
professional corporation
publicly held (or public) corporation
S corporation
small business
Small Business Administration
(SBA)
Small Business Development
Center (SBDC)
small-business investment
company (SBIC)
sole proprietorship
spin-off
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stockholder (or shareholder)
strategic alliance
tender offer
unlimited liability
venture capital company
3–29