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Title: Entrepreneurship and Management


1
Entrepreneurship and Management
  • Luis Ortiz, Ph.D.
  • October 18, 2003
  • Economic Development Center

2
Agenda
  • Economic Development Center
  • Who we are and what we do
  • Facts and Statistics
  • Business Plan and Strategies
  • Market Research (data for Business Plan)
  • Management Skills
  • Questions and Answers (Survey and Evaluation)

3
Purpose of the Course
  • To create awareness of the resources
  • To provide guidance and orientation in the
    business development process
  • Business plans importance
  • Enhance our management skills

4
Where do I start?
So Many Hats!!!
Owner
  • Human Resources
  • Hiring/Firing
  • Training
  • Motivating
  • Product Service Development
  • Develop/Improve
  • Finance/
  • Accounting
  • Bookkeeping
  • Accounting
  • Credit
  • Sales
  • Prospect
  • Present
  • Close
  • Management
  • Plan/Prioritize
  • Organize
  • Direct/Control
  • Evaluate
  • Marketing
  • Study markets
  • Advertising
  • Promotion
  • Operations
  • Day-to-Day
  • Improve Procedures

5
We know BUSINESS is everything...
  • management
  • marketing
  • finance
  • accounting
  • economics
  • business law
  • International Business

Finance Small Business Taxes Bookkeeping Small
Business Loans/Financing Technology QuickBooks Int
ernet Marketing Building a Web Page International
Trade Doing business with Mexico Selling to
Maquiladoras Marketing Advertising
Selling Strategies Advertising Techniques
6
EDC Mission
  • Goal To Grow Businesses and Create Jobs
  • Designed To maximize business success by
    coupling financial programs with managerial and
    technical assistance
  • What drives EDC Seeing businesses succeed by
    Planning through well developed business plans
    and Seeking Professional Advisors, while avoiding
    the problems of staffing and understanding that
    years of education do not necessarily correlate
    with success.

7
The Nature of Goals
  • Write them down
  • The world has a funny habit of making room for
    those who know where they are going.

8
Entrepreneurial Spirit
  • Every 30 seconds of every day, someone somewhere
    in the United States starts a new business.
    Every 30 seconds someone stakes their money,
    their labor, their good name on the unshakable
    belief that they can make or provide something
    bigger, better, faster, or cheaper than the next
    person.

Facts and Statistics
9
BUSINESSES IN THE U.S.
  • There are more than 21,000,000 small business in
    the U.S. 16,000,000 have the owner as the sole
    employee. 5,000,000 have between 1 and 500
    employees.
  • Small businesses
  • employ 53 of the private workforce.
  • provide 47 of all sales receipts.
  • provide 55 of innovations.
  • account for 35 of federal contract dollars.
  • account for 28 of jobs in high technology
    sectors.
  • account for 51 of private sector output.

10
Entrepreneurial Spirit Seminar
  • In America today, smaller businesses, with fewer
    than 20 employees, create 98 of all new jobs.

11
How many small businesses opened? 1990
1995 1998Incorporate 647,675 768,180 790,569
New Firms 769,124 819,477 842,357
Source Dun and Bradstreet Corp. and U.S.
Department of Labor
12
How many small businesses closed?
1990 1995 1998Bankruptcies 63,912 50,516 53
,214Failures 60,746 71,194 71,811
(125,025)Terminations 837,511 863,699 849,839
Source Dun and Bradstreet Corp. and U.S.
Department of Labor
13
Business Dissolution Rates () all firms
franchises 1-4 jobs 5 or moreafter 2 yrs.
23.7 25.4 8.3 6after 4 yrs.
52.7 59.2 19.6 13.1after 6 yrs.
62.2 61.6 23.5 21.1after 8 yrs.
70.9 72.5 46.5 30
Source Dun and Bradstreet Corp. and U.S.
Department of Labor
14
Who Starts Businesses by Age Group
15
Characteristics Of Entrepreneurs
Entrepreneurial Personality
16
What makes an Entrepreneur?
  • ORGANIZED
  • CREATOR
  • IMPROVER
  • MANAGER (Plan, Staff, organize, and
    decision-making) Administer, maintain, control,
    short-term view, ask how and when, initiate,
    accept the status quo, do things right.
  • LEADER (control, motivate, charismatic)
    Innovate, develop, inspire, long-term view, ask
    what and why, originate, challenge the status
    quo, do the right things.
  • ---------------------
  • ENTREPRENEUR ! ! !

17
Why are you going into business?
  • Independence
  • Personal Fulfillment
  • Lifestyle Change
  • Respect
  • Money
  • Power
  • Socialized Power
  • Personalized Power
  • Reward
  • Coercive
  • legitimate
  • Expert
  • Referent

Source Maslow, 1943 French and Raven, 1959
Self Actualization
Esteem needs
Affection needs
Safety
Physiological
18
Entrepreneurial Spirit
In 1998, the average number of hours that
business owners worked per week was 64. ..
and it hasnt gotten any better. 10 years doing
what they own! Close 2-4 times before getting it
right! Success 25 w/o Business Plan 75 w/
Business Plan
19
Entrepreneurial Spirit
  • Owning your business can be a wonderful
    opportunity
  • To be your own boss.
  • To take charge of your financial future.
  • To work 7 days a week, 24 hours a day, with no
    pay check at the end.

20
10 Myths of Business Ownership
1. I can start living off the business
immediately. 2. Ill be my own boss. 3. Ill
get rich overnight. 4. I have nothing to lose
(OPM). 5. Will give me independence.
21
More Myths.
6. Will allow me time off any time I want. 7.
Will let me control the business. 8. Will make a
lot of money. 9. Will be easy to do. 10. Will be
easy to get funding for my great idea.
22
Three Way Fit
Personal Fit
Business Fit
Financial Fit
23
(No Transcript)
24
Five forces that impact every business
Potential Entrants
Threats of new entrants
Industry Competitors Competition Among
Existing firms
Bargaining power of customers
Bargaining power of suppliers
Suppliers
Customers
Threat of substitute products or services
Substitutes
Source Michael Porter, Harvard
25
Main Influences on the Mission and Goals of the
Business
External Environment
Internal Environment
Business Level Strategies
Business Level Strategy Implementation
Business Successes and Failures
Business Level Mission and Goals
Remote Environment
History and Inertia
26
Market Research (Data for the Business Plan)
27
Competitor Profile
  • Who are your major competitors?
  • What are the major strengths and weaknesses of
    each?
  • Where are they located?
  • How long have they been in business?
  • What are their business hours?
  • Who is their target market?
  • How heavy is their customer traffic?
  • What quality level are they offering?
  • What is their inventory level?
  • How many employees do they have?
  • How knowledgeable are their employees?
  • How many product lines do they have?
  • What about their suppliers?
  • What about their marketing?
  • Do you know of their plan for expansion?
  • Have any gone out of business lately?

28
Competitor Analysis
29
Personal Expenses
30
Operating Expense (Ongoing)
31
Start-Up Expenses (One Time)
32
What can a Business Plan do for you?
  • Reality Check
  • Businesss Resume
  • Timetable for operations
  • Modeling tool
  • Tracks progress

33
Attachments to the Business Plan
  • Tax Returns (Business Personal)
  • Resumes
  • Written Estimates
  • Personal Financial Statements
  • Contracts / Agreements
  • Org. Charts / Job Descriptions
  • Appraisals / Blue Prints / Floor Plans
  • Other Relevant Information

34
Ok, It is True,
  • Some Businesses have grown big without a formal
    Business Plan.
  • But
  • Times Have Changed.
  • Most of us are not as talented/lucky as the
    famous entrepreneurs.

35
The 5 Cs of Credit
  • Character
  • Capacity
  • Conditions
  • Collateral
  • Capital

36
ources of Capital, From Most Common to Least
Common
  • Personal Savings, Insurance, Retirement (0)
  • Family or Friends (2-7)
  • Suppliers
  • Personal Loans
  • Banks (10-16)
  • Private Investors (18-25)
  • Public Sources
  • Venture Capital (20-40)

37
What are lending officers looking for in the
business plan?
  • They want answers to the following
  • Is there clear evidence of market acceptance?
  • Is there a sufficient market for the
    product/service?
  • Do you have a single-minded focus on your
    opportunity?
  • Do you have any advantage over you competition?
  • Is the Management Team experienced and capable?
  • Are your financial projections REALISTIC.
  • Is the project compatible with the institutions
    lending policies and how will the loan be paid
    back?

38
Survival Strategies
  • Focus completely on satisfying the customer.
  • Study the success of others.
  • Gather and analyze management information
    regularly.
  • Continuous improvement involving everyone.
  • Embrace change with a positive attitude.

Source Dan Taylor, Pres. Data Staar
Communications
39
The Business Plan
If you aim at nothing, you will hit it every
time -Theodore Roosevelt
40
Small businesses dont plan to fail
they fail to plan.
41
How to Start a Business
CASH
Total Project Cost
- Less Your Injection
Projected Amount Needed
42
How to Start a Business
Feasibility
The cost of reality (example)
10,000 Mo. Bus. Exp.
60,000 Working Capital 40,000 One Time Cost
100,000 two ways to see it Projected Amount
Needed
43
Financing
How to Start a Business
Supporting Documentation
  • A Business Plan
  • Monthly Set of Financial Projections
  • Income Statement
  • Cash Flow Statement
  • Balance Sheet
  • Breakdown of Loan request. How will you use the
    money?
  • Sources and Uses of equity capital (New business
    or additional injection)

44
Financing
How to Start a Business
Supporting Documentation
  • A Business Plan
  • Copies of any notes to be refinanced
  • Bids, proposals, estimates for
  • Capital equipment
  • Leasehold improvements
  • Construction

45
What is a Business Plan?
It is a document that convincingly demonstrates
that your business can sell enough of its product
or service to make a satisfactory profit and be
attractive to potential backers. It is a selling
document. It sells your business and its
executives to potential backers, from bankers to
investors to partners to employees. A short
written document that serves as a guide to your
future, provides direction and focus, and helps
you model your business and avoid
problems. Helps conceptualize business and set
reasonable and achievable goals. Attracts
lenders and investors. Provides an organized
view of your business.
46
Details research from the feasibility study,
management, sales, marketing, finances, etc... A
Business Plan, should attract YOU to the
business. A Business Plan, should attract
others into the business. A Business Plan gives
you confidence. A Business Plan improves your
chances of success. A Business Plan Provides a
road map for your business. Remember No one
can create your plan for you. Lenders are
interested in the strategies for reaching
financial projections. Show how you plan to set
your business apart from competitors. Identify
your market, offer evidence that customers for
your product or service exist. Develop realistic
financial forecasts (be sure to explain how they
were derived)
47
Key Elements of any Business Plan
1. Executive Summary/Introduction 2. Description
of Products/Services 3. Manufacturing
Operations Plan 4. Marketing Strategy and
Competitor Analysis 5. Sales Plan 6. Management
Plan 7. Financial Analysis The Length 8-15 pages
48
Attachments to the Business Plan
Tax Returns (Business Personal) Resumes Written
Estimates Personal Financial Statements Contracts
/ Agreements Org. Charts / Job Descriptions Apprai
sals / Blue Prints / Floor Plans Other Relevant
Information
49
The bottom line in Business
  • Employee relations
  • Communication
  • Networking
  • Differentiation/Innovation

50
Explaining the Employee Behavior Model
Three basic classifications of Employees 1)
Extra-Role Behavior Employees (OCB ) 2)
Contractual Agreement Employees () 3)
Sub-Optimal Employees (-)
51
Social Comparison
  • Equity / Social Capital
  • Inputs/Outputs () with comparison to referent
    others
  • Social exchange affects all areas of life
  • (guanxi inhwa fairness palanca)

52
Theoretical Model of Employee Work Behavior
Organizational Justice
Distribution of rewards Procedure of the
organization Interaction with co-workers
managers
OCB
Trust/commitment
Job Performance
Job Satisfaction
Pay Co-worker/managers Job itself Policy/advanceme
nt
SourceBateman Organ, 1983 Konovsky Pugh,
1994 Moorman, 1991 Organ, 1988
53
Explaining the Employee Behavior Model
  • Organizational Commitment (Morrison, 1994)
  • Develops over time w/ the organization
  • Disposition or Affect (Hartman et al. 1987)
  • Organizational Trust (Konovsky Pugh, 1994)
  • Develops over time w/ the organization and
    managers

54
Explaining the Employee Behavior Model
  • Job Satisfaction
  • (Iafffaldano Muchinsky, 1985 Locke, 1976
    Lagace, et al. 1993)
  • Work itself
  • Pay
  • Co-Workers
  • Advancement/Company Policy
  • Management
  • J S Affects/Correlates
  • employee absenteeism, turnover intent,
    organizational sabotage, organizational theft,
    stress, health, life satisfaction, and
    organizational commitment

55
Explaining the Employee Behavior Model
  • Organizational Justice - Equity Theory (Adams)
  • Distributive Justice (Homan, 1961)
  • the fairness of the allocation of the reward
  • Procedural Justice (Thibaut Walker, 1975)
  • procedure used in allocating resources
  • Interactional Justice (Bies Moag, 1986 Tyler
    Bies, 1990)
  • quality of treatment received from the manager

56
Explaining the Employee Behavior Model
  • OCB defined (Dennis Organ, 1988)
  • Better way to address performance
  • Actions by organizations members that exceed
    the formal requirements of their job
  • Go beyond the formal requirements
  • Discretionary in nature
  • Not directly recognized by the organization
  • (Bateman Organ 1983 Organ, 1988 Organ
    Konovsky, 1989)

57
Explaining the Employee Behavior Model
U.S. forms of OCB Example
Altruism Helping coworker with a project (new machine) Switching vacation dates with another employee
Conscientiousness Never missing a day of work Coming to work early or staying late if needed
Civic Virtue Attending voluntary meeting and functions Reading memos, email, etc to keep up with the organizations new information (sharing it with others)
Sportsmanship Not finding fault with the organization Making do without complaints
Courtesy Turning the other cheek to avoid unnecessary problems
58
Explaining the Employee Behavior Model
  • OCBs in a Chinese cultural setting
  • Protecting company resources
  • Caring for the organizations resources
  • Do not abuse the organizations policies
  • Interpersonal harmony
  • Uses power in an inappropriate manner
  • Takes and seeks undeserved credit
  • Farh, Earley, and Lin, 1997

59
Explaining the Employee Behavior Model
  • OCBs in a Mexican cultural setting
  • Protecting company resources
  • Caring for the organizations resources
  • Do not abuse the organizations policies
  • Interpersonal harmony
  • Uses power in an inappropriate manner
  • Takes and seeks undeserved credit
  • Altruism
  • Helping coworker with a project (new machine)
  • Switching vacation dates with another employee
  • Civic Virtue
  • Attending voluntary meeting and functions
  • Reading memos, email, etc to keep up with the
    organizations new information (sharing it with
    others)
  • Courtesy
  • In everyday interactions
  • Loyalty
  • To the immediate manager and then to the
    organization
  • Development Learning Teaching
  • Desarrollo personal growth for the benefit of
    the organization

Ortiz 1999 2000
60
Organizational Behavior Research
  • Three types of dispositions/affect
  • Employees response to equity situations
  • Entitled Individuals
  • (work outputs gtinputs to work)
  • Equity Sensitive Individuals
  • (work outputs inputs to work)
  • Benevolent Individuals (-)
  • (work outputs lt inputs to work)
  • (Hartman et al. 1987)

61
Old and the new
  • Production Orientated
  • Minimize defects
  • Autocracy/paternalism
  • Centralized control/ decisions
  • Business Strategy as short term
  • Work organization promotes alienation hiding
    information
  • People as expendable/ exchangeable parts
  • Market (relationship) Orientated
  • Eliminate source of defects
  • Democracy / Humanism
  • Decentralized control/decisions
  • Business Strategy as long term
  • Work organization promotes learning commitment
    collaboration
  • People as resources to be developed

62
Positive manager and leader characteristics
  • Experience
  • Empathy (understanding others situation)
  • Relationship (long-term)
  • Fairness (unbiased)
  • You MUST learn From the mistakes of others! You
    cant possibly live long enough to make them all
    yourself
  • (Sam Levenson 1911-1980)

63
Managerial ImplicationsRecommendations
  • These recommendations are viewed as important in
    this investigation
  • 1) have an open house once a year
  • 2) gain subordinates trust by showing them that
    you are buena gente
  • 3) motivate employees with that which they value
  • 4) use the diversity that you are given to gain
    new ways to achieve more
  • 5) pursue organizational citizenship behavior
    from all employees
  • 6) make a conscious effort to show the
    organizations fairness (unbiased)
  • 7) continue educating your workforce
  • 8) walk the floor if possible once a day
  • 9) effort and trying to speak at the
    employee/customer is valued

64
The bottom line in management
  • Fairness
  • Equity
  • Expectation
  • Communication
  • Feedback

65
Effective meetings
  • Follow these 12 steps to more efficient and
    effective meetings
  • Prepare a meeting agenda.
  • Distribute the agenda in advance.
  • Consult with participants before the meeting.
  • Get participants to go over the agenda.
  • Establish specific time parameters.
  • Maintain focused discussion.
  • Encourage and support participation of all
    members.
  • Maintain a balanced style.
  • Encourage the clash of ideas.
  • Discourage the clash of personalities.
  • Be an effective listener.
  • Bring proper closure.

66
Useful Websites for Businesses
  • www.allbusiness.com
  • www.businessplan.com
  • www.intranet.com
  • www.agillion.com
  • www.bizjournals.com
  • www.sba.gov
  • www.nmsbdc.org
  • www.lvsmedc.org
  • edc.nmhu.edc
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