Appendix A Managing Small Business Start Ups

Entrepreneurship u Process of initiating a business venture –organizing necessary resources –assuming risks and rewards u With downsizing and frustration with corporate lifestyles, many persons are electing to become entrepreneurs.

Small Businesses u Generally fewer than 500 employees u Create jobs ( : small, fast-growing firms added more high-paying jobs than large companies eliminated) u Create new products and services u Provide opportunities for persons who may have careers blocked in established corporations. (Female entrepreneurs in 33% of new ventures in 1994 vs. 24% in 1975)

Small Businesses u About 97% of all businesses u Include about 90% of corporations u Contribute almost half the GDP u Provide majority of employment

Small Businesses u Typically viewed as having high failure rates –40-50% within 3 years –60-80% within 5 years u However, 20% within 5 years may be more accurate. –10% for female owned

Personality Characteristics of Entrepreneurs u Independence u Internal Locus of Control (feel they control their own destinies) u Need to achieve u High self-confidence u High tolerance for ambiguity u High energy level

Starting an Entrepreneurial Firm Develop a BUSINESS PLAN: u Product/Service? u Customers? u Which Legal Form to Use? u How to Finance? u Tactics to Establish? u How to Operate?

Product/Service u Most ideas come from one’s profession or products/services used. Customers u Wholesale vs. Retail u Geography u Demographics u Competition for those customers

Legal Form of the Business –Proprietorship = unincorporated business owned by an individual –Partnership = unincorporated business owned by two or more people –Corporation = artificial entity existing apart from its owners.

How to Finance? u Obtaining Financial Resources –Personal Equity –Debt financing –Equity financing from Others »including Partners, Stockholders, and Venture Capital firms »they are investing in exchange for share of ownership in the company u Managing Financial Resources –Budgeting is critical, including allowances for initial losses

How to Establish? u Start-up u Buy-out u Franchise u Spin-off u Incubator participation

How to Operate? u Decisions to be made with respect to: –Production methods –Suppliers –Marketing techniques –Leadership styles –Human Resource policies, etc.

Stages of Growth – Key Issues u Existence = Begins to produce product/service and get customers. u Survival = Has begun to generate sufficient cash flow. u Success = Now profitable. May consider using professional managers. u Takeoff = Delegation critical to manage and finance growth. u Resource maturity = Can begin acting like a large mature company, balancing stability and entrepreneurship with planning and controls.

Getting Help u Accountants u Attorneys u A board of directors u Small Business Administration u Small Business Development Centers u SCORE (Service Corps of Retired Executives) u Trade Associations u Books u Internet

Intrapreneurship u Intrapreneur = Someone who promotes innovation within an existing organization. u Requires: –Vision –Persistence –Ability to Build and Lead Teams

Advice for Intrapreneurs u Come to work each day willing to be fired. u Do any job needed to make your project work, regardless of your job description. u Remember that it is easier to ask for forgiveness than for permission.

Facilitating Intrapreneurship u Flexible organizational design –Non-Bureaucratic controls –Autonomous Venture Teams u u Selection, training, and mentoring for intrapreneurship u Reward risk-taking u Tolerate failures