BMATWT 353 - Business of Building

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Lecture Outline - Understanding Entrepreneurship and Business Ownership


Opening Case: Jet Blue

Agenda

  1. Small Business
  2. Entrepreneurship
  3. Starting and Operating the Small Business
  4. Success and Failure in Small Business
  5. Non-corporate Business Ownership
  6. Corporations

I. Small business overview

Definition: Small Business - Independently owned and managed and does not dominate it's market.

A. Importance of small business to the U.S. economy

i. Job creation - 86% of All Businesses in US employ 20 or fewer people (BUT the total number of employees in this category only amount to 26% of the total workforce, 74% are employed in larger businesses.


ii. Innovation - SBA says 55% of all innovations come from small businesses.


iii. Importance to big business - They sell the production of big businesses, and they act as supplier to big business.

B. Areas of small business enterprise

  • Services - 38%
  • Retailing - 23%
  • Construction 10%
  • Others - 29%

 

C. Interior Design Firms - World Architecture, 2003

D. Pro Builder - Top 400 Contractors

2. Entrepreneurship

Definition: Entrepreneur - One who accepts both the risks and opportunities involved in creating and operating a new business venture

3. Starting and operating the small business

A. The Business Plan

Definition: Business Plan - The document that summarizes the business strategy for the proposed new venture and how that strategy will be implemented.

  • Goals and Objectives (operations, marketing)
  • Revenue forecasting
  • Financial Planning

B. Starting the Small Business

  1. Buying an existing business
  2. Starting from scratch

C. Financing the Small Business

  • Self funds
  • Friends and Family
  • Banks
  • Venture Capital
  • SBA programs

 

4. Success and failure in small business

  • 1999 - 151,000 Business start-ups,
  • 1999 - 73,000 business failures
  • Failure Rate is declining (better business/entrepreneurial training) SBA now estimates 40% will survive 6 years.

 

A. Trends

  • E-commerce
  • Down-sized big business employees
  • Minority and Women Owned Bus. Opportunities

B. Reasons for failure

  • Managerial incompetence, inexperience
  • Neglect (put in the hours 24/7)
  • Weak control systems (accounting)
  • Insufficient capital (underestimate costs, overestimate revenues)

C. Reasons for success

  • Hard work, drive, dedication
  • Market demand for product/service
  • Managerial competence
  • Luck

 

5. Non-corporate Business Ownership

Definition: Sole Proprietorship - business owned and operated by an individual who is responsible for all its debts.

Definition: Unlimited Liability - Legal principle where owners are responsible for paying off all debts of the business.

A. Sole proprietorships-advantages and disadvantages (Freedom, ease of organization vs. unlimited liability)

Definition: Partnership - Business with 2 or more owners who share in both the firm's operation and responsibility for debts..

B. Partnerships-advantages and disadvantages
(Ability to grow (add partners) vs. unlimited liability)

6. Corporations

Definition: Corporation - Business that is legally considered a separate entity from its owners. The corporation itself is responsible for debts, NOT the owners who are limited in loss only to their investment.

-advantages and disadvantages - limited liability vs. hostile take-over, complicated and costly startup reqirements, double taxation.

i. Public corporations
ii. Private corporations
iii. S corporations
iv. Limited liability corporations
v. Professional corporations
vi. Multinational corporations

Managing a corporation

A. Corporate governance

i. Stockholders
ii. Boards of Directors
iii. Officers

B. Special issues in corporate ownership

i. Joint ventures and strategic alliances
ii. Employee stock ownership plans
iii. Institutional ownership
iv. Mergers, acquisitions, divestitures, spin-offs

 

 

 

    
         

Produced and maintained by David T. Damery
Building Materials and Wood Technology
Department of Natural Resources Conservation
College of Natural Resources and the Environment
University of Massachusetts, Amherst.

    
Many of the materials created for this course are the intellectual property of the instructor. This includes, but is not limited to, the syllabus, lectures and course notes. Except to the extent not protected by copyright law, any use, distribution or sale of such materials requires the permission of the instructor. Please be aware that it is a violation of university policy to reproduce, for distribution or sale, class lectures or class notes, unless the faculty member has explicitly waived copyright. Copyright 2006, David T. Damery