Economics

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CHAPTER 7

Entrepreneur

A risk taker- you are an entrepreneur if you opening a business of your own or a franchise. EXAMPLES:

·       Ben and Jerry’s

·       Fred Smith’s story…Fred Smith wrote a paper in college. The assignment was to invent a plan for a business. He made the plan for Fed-Ex. The Professor gave him a C and said it would never work. It did work. Today the paper is framed in Fred Smith’s office.

FOUR ELEMENTS IN BUSINESS

1.     Expenses     2. Advertising     3. Receipts and Record Keeping     4. Risk

1.     Expenses: Costs, things that you have to pay for.

(1)  Inventory- all of the products you have to sell (Imagine how much it takes to stock Best Buy), insurance, rent, employees

2.     Advertising- Helping to sell a product or business

EXAMPLES:

·       Commercials, radio, tattoos, billboards, changing billboards, internet pop-ups, banners on airplanes, previews on movies, blimps, performers mention products, team sponsors, Nascar (all of the car, his uniform everything advertising), concerts, wall of baseball field, channel one…

·       Subliminal Advertising (now illegal) was popular in the 70’s. Putting one frame in a movie saying buy a coke, stuff like that.

·       Product Placement: inside movies (Reese’s pieces in E.T.),

·       Car Wraps:

3.     Receipts and record keeping- must keep good records and receipts to see if you are making money, know your net worth, and for government taxes

a)   ASSETS: What you owe (bills, mortgage)

EXAMPLES: house and what’s inside, cars, stocks, cd’s, retirement.

b)   Liability: What you own (what you have paid off)

EXAMPLES: examples include: home equity, college, loans, credit cards

c)    NET WORTH: How much money you are worth. Assets minus (vs.) Liability

·       (assets vs liabilities) what you own vs what you owe

You can have a negative net worth. Some people have a negative net worth after college-college loans make you negative. You have more assets than liability.

4.     Risk-risk your financial status and reputation

Sole Proprietorship: One Owner

ADVANTAGES	DISADVANTAGES
All profits are kept for yourself	Losses are not shared (you lose everything)
	Unlimited liability (responsibility)
	Personal assets are in play (bank can take your house)
Control of all decisions (you make all the decisions)	Owner not expert in all areas
Fewer government regulations	Very time consuming
	Hard to get loans
	Lack of longevity  (few businesses last a long time)