1. Small Business Entrepreneurs:3
Small Business Entrepreneurs:
Characteristics and Competencies
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter 3 Objectives: Learn about entrepreneurial personality types
Learn the competencies of the successful entrepreneur
Discover the types of career paths entrepreneurs pursue
Understand the challenges of family business owners
Recognize the special nature of entrepreneurial teams
Gain insight into the challenges women and minority business owners face
Understand the situation of people who become business owners later in life
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3. Chapter 3 Focus on Small Business: Internet entrepreneur Laura Tidwell
The Entrepreneurial Personality:
Classic entrepreneur: Bill Gates, Sam Walton
Loner, socially isolated
Hard worker
Fast learner
Risk-taker seeking wealth
Laura Tidwell is the classic entrepreneur who succeeded through hard work and learning new skills.
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4. Chapter 3
Characteristics of entrepreneurs have changed through the years.
Details are shown over the next few slides.
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5. Chapter 3 1700’s-1950’s Original Classic Entrepreneur: Hard worker
Loner
Socially isolated
Fast learner
Wealth seeker
Risk taker
1700’s-1950’s
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6. Chapter 3 1950’s-1980’s Idea Person: Hard worker Loner (could team up)
Socially isolated
Fast learner
Fame seeker
Risk taker
1950’s-1980’s
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7. Chapter 3 1950’s-1980’s Small Business Owner: Hard worker Loner
Socially isolated
Average learner
Average income seeker
Risk averse
1950’s-1980’s
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8. Chapter 3 1950’s-1980’s Contemporary Classic Entrepreneur: Hard worker
Loner
Socially isolated
Fast learner
Wealth seeker
Risk taker
1950’s-1980’s
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9. Chapter 3 1980’s-Today Salesperson Entrepreneur: Hard worker
Team player
Socially connected
Fast learner (socially)
Average learner (technologically)
Acceptance seeker
Risk averse
1980’s-Today
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10. Chapter 3 1980’s-Today Managerial Entrepreneur: Hard worker
Team player
Socially connected
Fast learner
Wealth seeker
Risk averse
1980’s-Today
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11. Chapter 3 Entrepreneurial Competencies
Competencies: forms of business-related expertise
Basic business competency: understanding the organizational and business processes of a firm
Competencies are very important for small business owners
A competency is something you do well.
Our competency is your strength in business. Many times it takes the form of a hobby which later becomes a small business.
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12. Chapter 3 Key business functions: activities common to all businesses
sales, operations, accounting, finance, and human resources
Industry-specific knowledge: activities, skills, and knowledge, specific to businesses in an industry
Understanding dimple patterns for making golf balls
Chemistry involved in Heating and A/C work
Some functions are common to businesses.
But every industry has it’s own set of skills necessary to be successful.
A doctor’s office and a car mechanic both involve scheduling, selling a service, both have accounting and billing needs, both require employees. But the skills to be a successful doctor or successful mechanic are very different.
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13. Chapter 3
Resource competencies: the ability or skill of the entrepreneur at finding expendable components necessary to the operation of the business
Time
Information
Location
Financing
Raw materials
Expertise
There are some types of competencies which are skills, but not the mechanic or doctor’s skills needed to provide the specific service of the business.
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14. Chapter 3
Determination competencies: skill identified with the energy and focus needed to bring a business into existence
Opportunity competencies: skills necessary to identify and exploit elements of the business environment that can lead to a profitable and sustainable business
These competencies are essential to success for entrepreneurs.
Starting a new company takes much in terms of time, effort, and focus in order to become successful.
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15. Chapter 3 Professionalization
Professionalization: the extent to which a firm meets or exceeds the standard business practices for its industry
Standard business practice: a business action that has been widely adopted within an industry or occupation
Professionalization is key in a world with many fly-by-night operations.
Customers prefer to do business with a professional company.
Outward signs of being a professional company can be
Certification (ISO 9000)
Membership in the Chamber of Commerce
A clean professional website
Standard business practices become the norm in an industry.
Doctor’s see patients only 4 days per week
Retail stores open 7 days per week
Providing more than the standard in an industry is an outward sign of quality. Providing less leaves customers questioning whether you are a “real” company.
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16. Chapter 3
Expert business professionalization: a situation that occurs when all the major functions of a firm are conducted according to the standard business practices of its industry
These firms inspire the highest levels of trust among their customers.
Doctors
Insurance providers
Your level of professionalization has a direct affect on the level of trust you garner from customers, banker, suppliers, and others in your community.
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17. Chapter 3 Expert business professionalization:
Subcontractors: big firms require subcontractors to meet hundreds of corporate-dictated procedures
Franchises: corporate parents specify most of the procedures for the business’s operation
International quality certifications (ISO 9000): small businesses must write in full detail how they will ensure consistency and professionalism
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18. Chapter 3
Specialized business professionalization: founders or owners who are passionate about one or two of the key business functions, such as sales, operations, accounting, finance, or human resources
Specialized firms tend to generate moderate levels of trust among customers.
The owner’s passion receives the lion’s share of attention, consciously causing that area of expertise to exceed the standards of the industry.
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19. Chapter 3
Minimalized business professionalization: a situation that occurs when the entrepreneur does nearly everything in the simplest way possible
No systematic accounting
Personal sales
Street vendors, swap meets, art fairs
Very difficult to gain trust
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20. Chapter 3
There are many different types of entrepreneurs which will be discussed.
Some people start only one business in their life (I.e. Doctor’s office) and work their entire career there.
Others may make a habit out of starting and selling businesses.
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21. Chapter 3 Entrepreneurial Careers
Habitual entrepreneurs: owners for a lifetime, sometimes in one business, sometimes across several firms
No succession plan
Figure to keep working until they can no longer continue
A single practice doctor’s office is a habitual entrepreneur.
They work until they retire.
Kids don’t come in and take over the business when dad retires.
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22. Chapter 3
Growth entrepreneurs: lifetime owners whose goal is major success
If they top out with one business, they’ll start another growth-oriented company, often before they exit the first one
When they do retire, they tend to want to micro-manage their successors
Harvest entrepreneurs: owners with an exit plan
Work first in order to play later
Build one company at a time, sell it, enjoy the proceeds, and then start another
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23. Chapter 3 a) Spiral (Helical) entrepreneurs Question
What term describes entrepreneurs who alternate periods of growth and stability?
a) Spiral (Helical) entrepreneurs
b) Occasional entrepreneurs
c) Habitual entrepreneurs
d) Growth entrepreneurs
Answer: a
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24. Chapter 3
Spiral (helical) entrepreneurs: alternate periods of growth and stability
Driven by a need to balance family and business
The endgame strategy is scaling down the business
Occasional entrepreneurs: people who generally have another primary job
Fascinated by entrepreneurship and pursue it periodically
Classic part-time entrepreneur
Seasonal basis (doing taxes, or making Christmas wreaths)
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25. Chapter 3 Family Businesses
Family business: a firm in which one family owns a majority stake and is involved in the daily management of the business
1/3 of the Standard & Poor’s 500 are family owned and managed
Family businesses have all the facets of normal entrepreneurial firms but also have the emotional drama inherent in a family.
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26. Chapter 3 Example It’s All Relative
Robert Douglas Jr. graduated from Eckerd College with a political science degree and got his commercial pilot license worked as a flight engineer for a father-son airline business
Enjoying the family atmosphere, Robert Jr. decided to work for his father at The Black Dog Tavern Co. Inc.
A restaurant located at Martha’s Vineyard in Massachusetts
T-shirts famous for Ivy Leaguers
Example
It’s All Relative
Robert Douglas Jr. graduated from Eckerd College with a political science degree and got his commercial pilot license worked as a flight engineer for a father-son airline business
Enjoying the family atmosphere, Robert Jr. decided to work for his father at The Black Dog Tavern Co. Inc.
A restaurant located at Martha’s Vineyard in Massachusetts
T-shirts famous for Ivy Leaguers
Robert Jr., now CEO, says “it isn’t all milkshakes and cotton candy” coming back as the kid
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27. Chapter 3
Question
What percentage of U.S. businesses are small family businesses?
a) 4%
b) 25%
c) 71%
d) 39%
Answer: d
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28. Chapter 3
Family businesses make up over 1/2 of the businesses in the United States.
39% of businesses in the United States are small family businesses.
They employ 58% of America’s workforce.
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29. Chapter 3 Family Business Challenges
Role conflict: the kind of problem that arises when people have multiple responsibilities, such as parent and boss, and the different responsibilities make different demands on them
Whenever possible, make decisions based on business necessities.
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30. Chapter 3
Question
What is the term for the process of intergenerational transfer of a business?
a) Transition
b) Succession
c) Take-over
d) Acquisition
Answer: b
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31. Chapter 3 Family Business Challenges
Succession: the process of intergenerational transfer of a business
Lack of clear transition plan is the death knell
Answer is taking a professional approach
Only 5% of entrepreneurs can rely on family members to take over
One problem seen in successful family owned businesses is that the second generation may not be as passionate about, or as capable of, running the family business.
Many children who grow up with parents running a successful family business do not desire to work the weekends and late nights which were required to make the business successful.
Another issue is who is the successor? And where does that leave a child who chooses not to work in the family business? These issues will also be discusses later in the book.
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32. Chapter 3 Women and Minorities
Women-owned businesses are one of the fastest-growing sectors of all United States businesses
30% of all businesses are majority owned by women, with 18% equally owned by men and women
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33. Chapter 3 Example Girl Power
Women Presidents’ Organization brought together women entrepreneurs and elementary-age girls to teach financial literacy
Cash flow – financial game created for kids
“WPO members wanted to give back in a meaningful way that fit with our mission of accelerating and enhancing the growth of women-owned businesses”
Several girls already own a craft business and plan to create a board game
Call Cash flow an inspiration
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34. Chapter 3
Minority-owned businesses represent 11% of all United States businesses.
Growth rates
General Business 7%
Minority-owned 30%
Native-American/Alaskan 84%
African-American 26%
Hispanic 30%
Asian/Pacific Islander 30%
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35. Chapter 3 Access Problems Discrimination in financing:
Minority applicants were denied at twice the rate of whites.
Asian and Hispanic owners pay higher interest rates on their loans
Set asides: government contracting funds earmarked for particular kinds of firms, such as minority- or women-owned firms
While there are Government Set-asides for minority and women-owned firms, often these firms do not know they exist.
It is often helpful to network with other minority or female entrepreneurs and get advice on which banks were more helpful to them.
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36. Chapter 3
Late career entrepreneurs: people who begin their businesses after having retired or resigned from work in corporations at age 50 or older
Get advice
Take control over life
Networking
Keep personal finances out of the business
If starting a business late in life, it is essential to keep the money you have already amassed, safe.
Keep in mind, if you lose all your money in this venture, you will not have as much time to rebuild your personal security.
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37. Chapter 3 ? ? ?
Questions?
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