Starting and Growing a Business


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Entrepreneurship Starting and Growing a Business

• Chapter 5

2
Chapter 5 Learning Goals

• Why do people become entrepreneurs and what are
  the different types of entrepreneurs
  
• Which characteristics do successful entrepreneurs
  share
  
• How do small businesses contribute to the U.S.
  economy
  
• What are the advantages and disadvantages facing
  owners of small businesses

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Chapter 5 Learning Goals (contd.)

• How does the Small Business Administration help
  small businesses
  
• What are the first steps to take if you are
  starting your own firm
  
• Why does managing a small business present
  special challenges for the owner
  
• What trends are shaping the small business
  environment

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Learning Goal 1

• Why do people become entrepreneurs and what are
  the different types of entrepreneurs
  
• People become entrepreneurs for
• The opportunity for profit
• Independence
• Personal satisfaction
• Lifestyle
• Types of entrepreneurs
• Classic entrepreneurs
• Multipreneurs
• Intrapreneurs

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• Entrepreneur
• person with vision drive and creativity
  willing to take the risk of starting a new
  business or of greatly changing the scope and
  direction of an existing firm

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Types of Entrepreneurs

• 1. Classic entrepreneurs
• people who start their own companies based on
  innovative ideas
  
• 2. Multipreneurs
• people who start a series of companies
• 3. Intrapreneurs
• people who apply vision and risk taking within a
  large organization

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Application of Intrapreneurship

• Intrapreneurship as a management strategy
• to encourage managers to invest more in and take
  ownership of their work
  
• by giving intrapreneurs 2 types of profit-share
• personal reward
• apply toward improving their departments

Source Entrepreneur Jan. 2000 p. 116
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Learning Goal 2

• Which characteristics do successful entrepreneurs
  share
  
• Successful entrepreneurs
• Are ambitious self-confident creative
  passionate energetic committed
  
• Are high achievers and moderate risk takers
• Have good interpersonal and communication skills
• Must have good managerial skills
• Possess technical knowledge

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Characteristics ofSuccessful Entrepreneurs

• 1. Personality
• ambitious independent self-confident
  risk-taking visionary creative energetic
  passionate committed
  
• 2. Managerial Ability
• 3. Technical Knowledge

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Learning Goal 3

• How do small businesses contribute to the U.S.
  economy
  
• Small Businesses
• Dominate the construction wholesale and retail
  fields
  
• Provided most new private-sector jobs created in
  the U.S. over the past decade
  
• Create about twice as many new goods and services
  as larger firms

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• Small Business
• business that is independently owned by an
  individual or small group of investors locally
  based and nondominant in its industry
  

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Learning Goal 4
Whatare the advantages and disadvantages facing

owners of small businesses

• Advantages
• Flexibility to respond to changing market
  conditions
  
• Can be efficiently operated
• Can serve specialized markets more profitably
  than large firms
  
• Provide higher level of personal service

• Disadvantages
• Limited managerial skill
• Difficulty in raising start-up and expansion
  capital
  
• Burden of complying with government regulation
• Major personal commitment required on the part of
  the owner

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Advantages of Small Business

• 1. Greater flexibility
• 2. More efficient operation
• 3. Greater ability to serve specialized markets
• 4. More personal service

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Disadvantages of Small Business

• 1. High need for managerial skill
• 2. Difficulty fund-raising
• 3. Burdensome government regulations
• 4. Extreme personal commitment from owner

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Signs of Overworking

• Unable to reduce amount of time working
• Forgetfulness
• Unable to delegate work to others
• Decreased ability to laugh
• Weight change
• People comment on working too hard
• Physical complaints

Source American Express Small Business Exchange
home3.americanexpress.com/smallbusiness
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Learning Goal 5

• How does the Small Business Administration help
  small businesses
  
• Provides guarantees of private lender loans for
  small businesses
  
• Offers a wide range of management assistance
  services
  
• Courses
• Publications
• Consulting
• Offers special programs for veterans minorities
  and women

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Help for Small Businesses

• Small Business Administration Government agency
  that helps people start and manage small
  businesses
  
• 1. Financial Assistance
• Small Business Investment Companies
• 2. Management Advice
• Business Development Library
• Volunteer consulting groups

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Learning Goal 6

• What are the first steps to take if you are
  starting your own firm
  
• Find an idea that satisfies a market need
• Choose a form of business organization
• Develop a formal business plan and use it to
• Analyze the feasibility of the idea
• Obtain both debt and equity financing

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Starting Your Own Business

• 1. Self-assessment
• 2. Choose to buy a small business or start from
  scratch
  
• 3. Find a business idea
• 4. Choose a business organization
• 5. Develop a Business Plan
• 6. Finance the business

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Contents of a Business Plan

• 1. Title Page Table of Contents
• 2. Executive Summary
• 3. Vision and Mission Statement
• 4. Company Overview
• 5. Detailed Plans for
• Products and/or Services Marketing Management
  Operating and Financing
  
• 6. Appendix of Supporting Documents

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Tips for a Good Executive Summary

• Write it after the rest of the business plan
• Polish it get feedback from others
• Include
• business idea financial features financial
  requirements current state of business
  principal owners major achievements
  
• Include
• industry statistics market research information
  that backs up your claims
  
• Keep it brief (1-3 pages) interesting

Source American Express Small Business Exchange
home3.americanexpress.com/smallbusiness
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Learning Goal 7

• Why does managing a small business present
  special challenges for the owner
  
• Owners are involved in all aspects of the firms
  operations at first
  
• Use of outside consultants allows owner to focus
  on planning strategy and day-to-day operations
  
• Owner must find and retain good employees
• Owner must monitor market conditions

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Managing a Small Business Issues

• 1. Using outside consultants
• certified public accounting outsourcing some
  business functions
  
• 2. Hiring and Retaining Employees
• Jim Day Chief Executive of Noble Drilling
  recognizes the importance of hiring people good
  for the job rather than people similar to
  oneself (Source Fortune Sept. 28 1998 p.
  254.)
• 3. Operating Internationally
• increased sales and higher profits

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Learning Goal 8

• What trends are shaping the small business
  environment
  
• Women and minorities are starting businesses at a
  faster rate than any other groups
  
• Women choose self-employment for lifestyle
  reasons and to overcome limited opportunities in
  large firms
  
• Minorities view business ownership as a way to
  overcome racial discrimination and economic
  hardship
  
• Special training programs and financial
  assistance help minorities and women
  
• Internet
• Makes it easier to open Web-based businesses

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Trends in Entrepreneurshipand Small Business

• Increase in home-based business
• More younger female and minority entrepreneurs
• More small businesses are started on the
  Internet
  
• The number of small businesses doing e-commerce
  increased from 150000 in 1997 to 850000 in 1999
  (Source International Data Corp./Entrepreneur
  Jan. 2000 p. 46)