Chapter 12Chapter 12Chapter 12Chapter 12

Managing a Small BusinessManaging a Small Business

Identifying the Small-Business Owner• Independence; control; the chance to set your own

schedule and make your own decisions are some of the positives to owning your own business.

• However, long hours; customer complaints; meeting a payroll; and taking responsibility for every problem are some of the drawbacks of being a small-business owner.

• What it Takes– Fewer than half of all new businesses will survive for five

years.

Characteristics of a small business owner:– Self motivation-internal vs. external motivation (intrinsic

vs.extrinsic)– Risk taking

Identifying the Small-Business Owner• Characteristics of a small business owner:

– Persistence-”Persistence pays off”– Knowledge– Skills

• Management• Finance• Marketing• Human Relations

• Who Owns Small Business– Years ago, the majority of small-business owners were

middle aged (white) males with less than a college education.

– Today, small business-owners are more educated, younger, and are more likely to be female or minorities.

– Women now make up over 30 percent of all small-business owners.

– Minority business ownership has nearly doubled since the early 1980’s.

Starting the Small Business• An Idea plus Experience

– Business ideas come from hobbies, interests, and business experience.

– Several years of training in various aspects of business operations will prepare you for the role of owner. (Rick Stone-Premier Sound and Design)

• Right Place and Time– Good customer traffic is essential to small business success.– Timing is another important factor in starting a business.

• Team Approach– Employees must be selected carefully for their ability to work as

a team.– Small-business owners will require assistance from bankers,

lawyers, accountants and other people with specialized business knowledge.

• Preparation and Research-(the most important step in starting a business)

Starting the Small Business• Preparation and Research-(the most important step in

starting a business)– Information (knowledge) is power!– Knowing about customers, competitors, operations, and

activities, government regulations are key research in starting a small business.

• Developing a Business Plan– Owners of successful businesses develop and follow a

business plan.– A business plan is: a written description of the business idea

and how it will be carried out, including all major business activities.

– Key features:1. General description of the company2. Qualifications of owner3. Description of the product or service4. Analysis of the market (demand, customers, competition)5. Financial plan

Steps in Developing the Small Business

• The most popular use of business plans is to persuade lenders and investors to finance the venture.

• Business Plan Steps:1. Gather and review information

• Review other business plans and study information on the activities and financial performance of similar businesses, competitors.

2. Develop a “game plan”• Alternatives for production, marketing, staffing and financing

3. Write out the plan4. Have other business professionals review plan for strengths

and weaknesses. (SBA)

Financing the Small Business

– Types of Financing1. Start-up Financing-amount of money needed to open

business (includes cost of buildings (rent or own) equipment, inventory, supplies, licenses)

2. Short-term financing-money to pay current operating -obtained for period less than a year,one or 2 months.

3. Long term financing-money borrowed for such things as land , buildings, equipment.• Paid off over many years.

• Sources of Financing• Money to start a new business usually come from a

combination of owner-supplied money and borrowed funds.

• Borrowed funds are obtained through loans from banks and other financial institutions, or through financing provided by other companies. (venture capitalists)