SMALL BUSINESS MANAGEMENT Chapter 2 The Small Business Decision American Apparel Java Nook Pet Safe Ideas Bright Lights

CHAPTER OBJECTIVES  1. To discuss the advantages and disadvantages of small business ownership as a starting point in making the small business decision.  2. To review the personal and organizational attributes of a successful small business owner.  3. To explain the reasons some businesses succeed and others fail.  4. To discuss entrepreneurial development in large business.  5. To identify the differences between an entrepreneur and a manager.

The Small Business Decision  Personal Evaluation Self evaluation exercise

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Advantages of Small Business Ownership  More personal contacts with people Customers, suppliers, employees etc  Independence But must answer to ………..  Skill Development  Potential Financial Rewards  Challenge  Enjoyment

Rewards of Entrepreneurship

Disadvantages of Small Business Ownership  Risk  Stress  Need for Many Abilities  Limited Financial Rewards  People Conflicts  Time Demands Java nook

Entrepreneur Defined  A person who starts and/or operates a business.  All active owner-managers and second generation members of family owned firms and owner-managers which buy out founders of existing firms.  Also includes salaried managers of larger corporations who have a flair for innovation and risk.

Demographic Characteristics of Entrepreneurs Parents owned business – Foreign parents – High school degree or less – College or more – Age 31 and under – Age 40 or more –

Personality Characteristics Required by Successful Entrepreneurs  Achievement Orientation  Risk Taking  Independence, Self Confidence, Self Assurance  Innovativeness  Strong Verbal and Numerical Skills  Selling Skills

Personality Characteristics Required by Successful Entrepreneurs (cont)  Problem Solving Abilities  Strategic Planning  Perseverance American Apparel

The Small Business Decision  Organizational Evaluation Small Business Successes Small Business Failures

Small Business Successes  Alertness to Change –  Ability to Attract and Hold Competent Employees –  Staying Close to the Consumer --

Small Business Successes  Thoroughness with Operating Details  Ability to Obtain Needed Capital  Effective Handling of Laws, Rules, and Regulations

Small Business Failures  Bankruptcies – 11,000/year  Business just closing doors Many more  Why the failure Life cycles  55% operate after 3 years External - Internal – finance etc

Entrepreneurial Success in a Large Business  Ten Commandments for Intrapreneur Success  Do any job needed  Share credit wisely  Ask forgiveness – its easier than permission  Ask advice before resourses  Build good team  Build quiet coalition  Never bet on race unless you are running  Be true to goals but realistic  Honor your sponsor Pet safe ideas

Entrepreneurialship and Small Business Management  Entrepreneurial Skills Characteristics  creativity, innovativeness, independence, risk-taking, idea oriented Situations  generating ideas and solutions to problems  starting a new business, expanding or opening new products

Characteristics of Artisan Entrepreneurs  Technical training  Paternalistic approach  Reluctance to delegate  Narrow view of strategy  Personal sales effort  Short planning horizon  Simple record keeping

Characteristics of Opportunistic ( Promoter) Entrepreneurs  Broad-based education  Scientific approach to problems  Willing to delegate  Broad view of strategy  Diversified marketing approach  Longer planning horizon  Sophisticated accounting and financial control

Entrepreneurialship and Small Business Management  Managerial Skills Characteristics  develops strategy and goal setting,  prefers to know outcomes of actions or activities,  team player,  works through others,  skills in finance, marketing, personnel, operations Situations  reaching performance objectives,  maintaining control of operations Bright light

Entrepreneur vs Manager  Barman  Java nook  American Apparel  Breadman  PET SAFE

Bright Lights, Deep Waters  Discuss the difference between an entrepreneur and a manager using David Green and Carmanah Lights as examples.Carmanah Lights  What dangers of obtaining equity financing are illustrated in this example? return

Java Nook" CBC VentureCBC Venture  What does this example illustrate about the advantages and disadvantages of starting a small business?  Evaluate Annette and John's backgrounds and preparation for starting a small business. What could they have done to better prepare for small business ownership? return

PET SAFE  Which of the Ten Commandments for Intrapreneur Success do you feel that PET SAFE follows? return

Concept Checks 1. List the advantages of owning a small business. 2. List the disadvantages of owning a small business. 3. What are the characteristics of successful small business owners? 4. What are the major cases of business failure? 5. What is the difference between an entrepreneur and a manager?