1-1 Starting Your Small Business Defining Small Business Defining Small Business Trends, Challenges,...
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1-1
Starting YourSmall BusinessStarting Your
Small Business
Defining Small Business Trends, Challenges, Opportunities, &
Concerns of Small Business Characteristics of Successful Owners of
Small Business
Chapter
1
1-2McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
2
Rapid SmallBusiness Growth
• 23 Million• Employment
– 75% Of New Jobs– 50% Of Private Employment– 99% Of Employers
• 97% Of Exporters
1-3McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
3
Small Business?• Independent Management• Capital/Ownership = Few
Individuals• Operations Are Local• Business = Small But Competitors
= Large
1-4McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
4
SBA Definition“…a small business is one that is
independently owned and operated and is not dominant
in its field of operation.”
1-5McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
5
Classification By Size
<20 Employees Very Small
20 - 99 Small
100 – 499 Medium
500 Or More Large
1-6McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
6
Entrepreneurial Ventures VS.
Small Business
Ventureo Profit
o Growth
o Quick Sellout
Small/Microo No New Or
Innovative Activities
o Provide Owner Living
1-7McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7
Unique Contributions Of Small Business
• Encourage Innovation & Flexibility– are often sources of new ideas, materials,
process, and services that larger firm may be unable or reluctant to provide.
• Close Relationship With Customers/Community– Tend to be in close touch with communities
and customers.– Attracting customers on the basis of specialty
products, quality, and personal services rather than solely on the basis of price.
1-8McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
8
(cont…)• Force Large Firms To Be Competitive
– Encourage competition of new products and services in terms of design and efficiency.
• Provide Employees Learning Experience– Small business employees have more
freedom to make decisions, which can lend passion and interest to their work experience.
• Develop Risk Takers– Risk taking, with its consequent rewards and
punishments.
1-9McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
9
(cont…)• New Employment
– Generate employment by creating job opportunities.
– Serve as a training ground for employees by giving more comprehensive learning experience and emphasis on risk taking.
• Greater Employee Job Satisfaction
1-10McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
10
Major Problems For Small Business
• Inadequate Financing– is the primary cause of new business failure.– Unable to acquire and maintain facilities, hire
and reward capable employees, produce and market a product, or do the other things necessary to run a successful business.
• Inadequate Management– In the forms of limited business knowledge,
poor management, inadequate planning, and inexperience.
1-11McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
11
Major Problems For Small Business (cont…)
• Government Regulations/Paperwork– Small firms are subject to many of the same
regulations as their larger competitors.– The regulations are often complex and
contradictory; why small business managers find it so difficult to comply with governmental requirements.
1-12McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
12
Challenges To Small Business
• Exploding Technology• Occupational/Industry Shifts
– Reinvention– Reengineered– Downsizing/Rightsizing
• Global
1-13McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
13
Objectives OfSmall Business Owners –
Personal Objective• Achieve Independence
– Freedom from interference or control by superiors.
– Want autonomy to exercise their initiative and ambition.
• Additional Income– To obtained needed income.– Can provide opportunity to make greater deal of
money and to take advantage of certain tax benefits.
1-14McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
14
(cont….)
• Help Families– E.g: Students may return home to operate the
family business so their parents can retire or take life easier.
• Products Not Available– To provide products that not available
elsewhere.
1-15McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
15
Objectives OfSmall Business Owners -
Business Objectives• Service
– The objective is to serve customers by producing and selling goods or services at a cost that will ensure a fair price to the consumer and adequate profits for the owners.
• Profit– Entering a business to make a profit, which is
the reward for taking risks.
1-16McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
16
(cont…)• Social
– Are goals regarding assisting groups in the community and protecting the environment.
• Growth– Should select a growth objective, which will
depend on answers to questions such as “will I be satisfied for my business to remain small?” and “do I want it grow and challenge larger firms?”
• Mesh Objectives– Combine the personal and business objectives
in a small business.
1-17McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
17
Characteristics OfSuccessful Owners
+ Desire Independence
+ Strong Sense Of Initiative
+ Personal/Family Motivation
+ Quick/Concrete Results
+ Able To React Quickly
+ Dedicated To Business
+ Enter Business By Chance And/Or Design
1-18McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
18
Ideas For Small Business
Career Counseling Catering Computer &
Office Machine Repair
Day Care Education
Financial Planning Home Health Marketing Senior Fitness &
Recreation Specialized
Delivery