Assignment 226
Delp10
Chap0012.pptChapter One
Starting Your Small Business
Copyright © 2018 by McGraw-Hill Education. All rights reserved.
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Learning Objectives
Define what is meant by the term business.
Name some of the unique contributions of small business.
Explain some of the current problems small businesses face.
Discuss some of the current trends challenging entrepreneurs and small business owners.
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Learning Objectives (cont.)
Explain why people start small businesses.
Describe the characteristics of successful entrepreneurs.
Describe where the opportunities are for small businesses.
Identify some of the areas of concern for small business owners.
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Why the Interest in Small Business
Small firms are the backbone of America.
Small firms generate most new private employment.
Public support is growing as many consumers lose favor with big business retailers.
By ages 13 to 18, thirteen percent of males and ten percent of females are already aiming toward a business career.
In 2014, 9% of all U.S. workers were self-employed.
Entrepreneurship is attractive to people of all ages.
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Number of Small Businesses Is Growing Rapidly
There are about 28 million small businesses in the United States.
These organizations create 75 percent of the new jobs and employ 50 percent of the country’s private workforce.
Small businesses contribute 46% of all sales in the United States, and are responsible for 51 % of the gross domestic product (GDP).
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The Public Favors Small Business
Large number of magazines aimed at that market
Entrepreneurial Women
Family Business
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Self-Employed by Industry
| 2016 % |
| 8% |
| 17% |
| 21% |
| 7% |
| 9% |
| 7% |
| 11.5% |
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Defining Small Business
Small business must have at least two of the following features:
Management is independent, because the manager usually owns the business.
Capital is supplied and ownership is held by an individual or a few individuals.
The area of operations is primarily local, although the market is not necessarily local.
The business is small in comparison with the larger competitors in its industry
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Distinguishing between Entrepreneurial Ventures and Small Businesses
Entrepreneurial venture
The principal objectives of the owner are profitability and growth.
Small business
Independently owned and operated and is not dominant in its field.
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Distinguishing between Entrepreneurial Ventures and Small Businesses
Small business owner
Establishes a business primarily to further personal goals, including making a profit.
Entrepreneur
Goals include achievement, profit, and growth, achieved through innovation and strategic management.
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Some Unique Contributions of Small Business
Maintain close relationships with customers and the community.
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Some Current Problems Facing Small Businesses
Political and economic issues.
World economy.
Retirement or transition.
Capital or financing issues.
Unexpected growth.
Succession.
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Inadequate Financing
It cannot be stressed enough that a shortage of capital is the greatest problem facing small business owners.
Without adequate funds, the small business owner is unable to acquire and maintain facilities, hire capable employees, produce and market a product, or run a successful business.
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Inadequate Management
Many owners tend to rely on one-person management and are reluctant to release control, or to delegate responsibilities.
They and may not select qualified employees, or may fail to give them enough authority and responsibility to manage adequately.
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Some Current Trends Challenging Small Business Owners
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Declining Job Types by 2018
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Occupational and Industry Shifts
Reinvention
The fundamental redesign of a business, often resulting in reduction in size and markets.
Reengineering
The redesign of operations, starting from scratch
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Occupational and Industry Shifts
Downsizing
Reducing the number of employees to increase efficiency.
Also called rightsizing.
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Why People Start Small Businesses
Satisfying personal objectives.
Achieving business objectives.
Achieve independence.
Obtain additional income.
Help their families.
Provide products not available elsewhere.
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Achieve Business Objectives
Objectives
the goals toward which the activities of the business are directed.
Service, profit, social, growth.
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Achieve Business Objectives
Profits
Are the reward for accepting business risks and performing an economic service.
Are needed to ensure the continuity of a business.
Social objectives
Goals regarding providing a service to the community, and doing their part in environmental protection.
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Characteristics of Successful Entrepreneurs
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What Leads to Success in Managing a Small Business?
Serving an adequate and well-defined market for the product.
Acquiring sufficient capital.
Recruiting and using human resources effectively.
Obtaining and using timely information.
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What Leads to Success in Managing a Small Business?
Coping effectively with government regulations.
Having expertise in the field on the part of both the owner and the employees.
Being flexible.
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Doing an Introspective
Personal Analysis
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Where the New Jobs
Will Be
Figure 1.3
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Factors Affecting the Future of an Industry or a Business
High-knowledge industries
Those in which 40 percent or more of human resources are professionals, technicians, or other “knowledge workers.”
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Examples of Factors Affecting Industry and Business Trends
Figure 1.4
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Some Practical Ideas for
Small Businesses
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Some Areas of Concern for Small Business Owners
The success of smaller firms tends to be limited by factors such as inadequate management, shortages of capital, government regulation and paperwork, and lack of proper recordkeeping.
Two other concerns are poorly planned growth and the threat of failure.
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Poorly Planned Growth
Setting goals without realistic steps to meet them.
Not training your employees well-enough so that you are unable to delegate responsibilities.
Not preparing for emergencies.
Being unable to deal with stress.
The Trapped Owner Syndrome.
Failure to seek help.
The paradox itself: You own your business, yet you don’t enjoy it.
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Stages in the Development of a
Small Business
Figure 1.5
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Threat of Failure
Discontinuance
A voluntary decision to terminate a business, due to health, family situation, or the advantages of working for someone else.
Failure
Results from inability to succeed in running a business.
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Threat of Failure
Formal failures
Failures ending up in court with loss to creditors.
Personal (informal) failures
The owner who cannot succeed voluntarily terminates the business.
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Busisness Incubators
Business incubators
Nurture young firms and help them to survive and grow during the startup period when they are most vulnerable. They provide hands on management assistance, access to financing, and orchestrated exposure to critical business or technical support services; They may even provide shared office spaces, equipment and flexible leases.
