Students will be able to:
- Recognize that there are costs and benefits associated with starting a new business.
- Assign their own values to each of the identified costs and benefits in order to determine whether or not to take risk of starting a new business.
- Identify steps necessary to plan and start a new business.
In this economics lesson, students will calculate risks associated with starting a new business.
Start class with prompting them with the following questions:
- Have you ever thought about what it would take in order to start your own business?
- What steps/items would you need to consider about starting a new business?
Give students 3-4 minutes to compile a list of responses. Possible responses include: money, advertising, idea/product, passion, willingness to take a risk, education, hard work, time, location. After time is up, create a class list on the board of student responses and lead a discussion.
Lead a class discussion to introduce the concepts of cost-benefit analysis. Discussion points include:
- Benefit: Monetary or non-monetary gain received because of an action taken or a decision made.
- Cost: The effort, loss, or sacrifice necessary to achieve or obtain something.
Model what it looks like to weigh the costs and benefits. Ask students to respond to the following prompt: What do you think are some benefits (pros/rewards) and costs (cons/risk) of starting your own business? Possible responses include: Benefits – make money, create business doing what you love, help others, be your own boss, choose who works with you, feels good when successful, set your own schedule; Costs – time, risk of failing, uncertainty of future, lose money, lack of knowledge about business/unsure.
Create a T-chart. Emphasize that if your benefits outweigh your costs than you should start a new business; however, if costs outweigh the benefits than you should not start your own business. Reiterate that each idea that the class has written down points towards a potential risk or cost and a potential reward or benefit. People who are considering going into business for themselves must weigh the costs against the benefits to decide if their idea is worth the effort. This is called a cost/benefit analysis. Discussion points include:
- Pros: what someone is going to gain or a reward from a decision, in economics this is called benefits
- Cons: what someone is going to lose or a risk from a decision, in economics this is called costs.
Emphasis that if your benefits outweigh your costs than your should start a new business; however, if costs outweigh the benefits than you should not start your own business. Reiterate that each idea that the class has written down points towards a potential risk or cost and a potential reward or benefit. People who are considering going into business for themselves must weigh the costs against the benefits to decide if their idea is worth the effort. This is called a cost/benefit analysis.
Use PBS’s BizKids Resource series to learn about what it takes to start a business and answer the questions provided on the worksheet. Students should work with a partner and require a computer with headsets to watch a series of several short videos about kids/teens that have started their own business on BizKids Business Profile Videos. Distribute a copy of the BizKids Video Worksheet to each student. Students should look up videos with their partner and answer the questions on the worksheet. Students are also required to take notes on the skills the kids needed and the lessons they learned in getting started in business. As an alternative, videos can be played for entire class. Lead a discussion over the worksheet to check for understanding and allow for more in depth discussion of the skills that may be necessary to start a business. Use the discussion points below:
- Buttons by Jordan, episode # 406: Describe Jordan’s saving strategy. He has a 50/50 savings strategy. 50% is reinvested in his business )short-term savings strategy) and 50% is saved in his college fund (long-term savings strategy).
- Big Quil Enterprises, episode # 213 The three girls in Big Quil Enterprises relied on mentors to help them with many aspects of their business. What did these mentors teach them? A restaurant owner taught them how to fry oysters, another mentor showed them how to make change and a third mentor showed them how to tell which oysters were filled with sand instead of meat.
- Bikery, episode #507 Why is math important in running a business? You need to use math to calculate your profit, hourly earnings, and sales revenue.
- Gothard Sisters, episode #403 What did the sisters do before purchasing their new equipment? The sisters do extensive research on the best quality equipment, such as the best wireless system and violins.
- What are some things that all of these teen entrepreneurs have in common?They love what they do and they are responsible.
- What are some of the things the teen entrepreneurs say are most important in starting a business? Research, and planning, having savings strategy, finding mentors.
Have students complete Balancing Act. Within this activity, students should choose their favorite video from the previous activity and use that product to help weigh the costs and benefits in this activity. Using the knowledge and skills they learned from all of the videos, students should then identify the costs and benefits they need to be considered as if this was their personal business. Collect the worksheets upon student completion.
Students will complete the All In Business Formative Response worksheet. Collect student work. Look for examples of student understanding about the risks they would take and the things they would have to consider in order to structure a sound business.
Have students work in groups or individually. Explain the following:
The first decision you need to make is whether you will be in business on your own or in a partnership with someone else. Choose a partner or work individually. Now it’s time to build your plan. Research how to start your business plan by reading The Complete, 12-Step Guide to Starting a New Business from the Entrepreneur. Also,visit TeenBusiness: Entreprenuers Overview to review the section to help you become an entrepreneur. Your goal is to create an outline or mind-map to start getting your ideas out on paper.
Printed copies of the article and sections may be provided or students can complete their research via the web on a computer.