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33Small Business Small Business Entrepreneurs:Entrepreneurs:

Characteristics and Characteristics and CompetenciesCompetencies

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Objectives:Objectives:• Learn about entrepreneurial personality types

• Learn the competencies of the successful entrepreneur

• Discover the types of career paths entrepreneurs pursue

• Understand the challenges of family business owners

• Recognize the special nature of entrepreneurial teams

• Gain insight into the challenges women and minority

business owners face

• Understand the situation of people who become

business owners later in life

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• The Entrepreneurial PersonalityThe Entrepreneurial Personality::– Classic entrepreneurClassic entrepreneur: Bill Gates, Sam

Walton• Loner, socially isolated

• Hard worker

• Fast learner

• Risk-taker seeking wealth

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Profit entrepreneur Profit entrepreneur v. Craft v. Craft

entrepreneurentrepreneur

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Critique of Personality Studies• If I don’t have an “entrepreneurial personality” can I still

become a (successful) entrepreneur?• Do all 16.3m self-employed people have the same

personality?• Correlation around 0.3 between traits and

startup/success – lots of variation• Many traits are shared with managers and other

successful people– Need for achievement, extraversion, internal locus of

control

• Different stages/types of entrepreneurship may require different characteristics

– Idea person, growth stage, mature stage

– Profit entrepreneur v. craft entrepreneur

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Entrepreneurial CompetenciesEntrepreneurial Competencies• CompetenciesCompetencies: forms of business-related

expertise– Correlated with startup/success probabilities

• Basic business competencyBasic business competency: understanding the organizational and business processes of a firm

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• Key business functionsKey business functions: activities common to all businesses – sales, operations, accounting, finance, and

human resources

• Industry-specific knowledgeIndustry-specific knowledge: activities, skills, and knowledge, specific to businesses in an industry– 85% of entrepreneurs stay in the same

industry they were working in and add a twist

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• Resource competenciesResource competencies: the ability or skill of the entrepreneur at finding expendable components necessary to the operation of the business– Time

– Information

– Location

– Financing

– Raw materials

– Expertise

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• Determination competenciesDetermination competencies: skill identified with the energy and focus needed to bring a business into existence

• Opportunity competenciesOpportunity competencies: skills necessary to identify and exploit elements of the business environment that can lead to a profitable and sustainable business

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ProfessionalizationProfessionalization• ProfessionalizationProfessionalization: the extent to which a firm

meets or exceeds the standard business practices for its industry

• Standard business practiceStandard business practice: a business action that has been widely adopted within an industry or occupation

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• Expert business professionalizationExpert business professionalization: a situation that occurs when all the major functions of a firm are conducted according to the standard business practices of its industry– These firms inspire the highest levels of trusthighest levels of trust

among their customers.

• Doctors

• Insurance providers

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• Expert business professionalizationExpert business professionalization:– SubcontractorsSubcontractors: big firms require

subcontractors to meet hundreds of corporate-dictated procedures

– FranchisesFranchises: corporate parents specify most of the procedures for the business’s operation

– International quality certificationsInternational quality certifications (ISO 9000): small businesses must write in full detail how they will ensure consistency and professionalism

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• Specialized business professionalizationSpecialized business professionalization: founders or owners who are passionate about one or two of the key business functions, such as sales, operations, accounting, finance, or human resources– Specialized firms tend to generate moderate

levels of trust among customers.

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• Minimalized business professionalizationMinimalized business professionalization: a situation that occurs when the entrepreneur does nearly everything in the simplest way possible– No systematic accounting

– Personal sales

– Street vendors, swap meets, art fairs

• Very difficult to gain trust but the degree of professionalization can change over time!

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(Habitual also known as serial)(Habitual also known as serial)

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Family BusinessesFamily Businesses• Family businessFamily business: a firm in which one family

owns a majority stake and is involved in the daily management of the business

• 1/31/3 of the Standard & Poor’s 500 are family owned and managed

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• Family businesses make up over 1/21/2 of the businesses in the United States.

• 39%39% of businesses in the United States are small family businesses.

• They employ 58%58% of America’s workforce.

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Family Business ChallengesFamily Business Challenges• Role conflictRole conflict: the kind of problem that arises when

people have multiple responsibilities, such as parent and boss, and the different responsibilities make different demands on them

– Whenever possible, make decisions based on business business

necessitiesnecessities.

• ~7-8% of startups involve unrelated business associates – What additional challenges does this present?

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Family Business ChallengesFamily Business Challenges• SuccessionSuccession: the process of intergenerational

transfer of a business

– Lack of clear transition planclear transition plan is the death knell

– Answer is taking a professional approachprofessional approach

– Only 5%5% of entrepreneurs can rely on family members to take over

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Women and MinoritiesWomen and Minorities• Women-ownedWomen-owned businesses are one of the

fastest-growingfastest-growing sectors of all United States businesses

• 30%30% of all businesses are majority owned by women, with 18%18% equally owned by men and women

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• Minority-owned businessesMinority-owned businesses represent 11%11% of all United States businesses.

• 1992-1997 Growth rates– General BusinessGeneral Business 7% 7% – Minority-owned Minority-owned 30%30% – Native-American/Alaskan Native-American/Alaskan 84%84%– African-American African-American 26%26%– HispanicHispanic 30%30%– Asian/Pacific IslanderAsian/Pacific Islander 30%30%

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Access ProblemsAccess Problems• Discrimination issuesDiscrimination issues

– Active discriminationActive discrimination

– Lack of access to social networksLack of access to social networks

• Discrimination in financingDiscrimination in financing:

– Minority applicants were denieddenied at twicetwice the rate of whites.

– Asian and Hispanic owners pay higher interest rateshigher interest rates on their loans

– Set asidesSet asides: government contracting funds earmarked for particular kinds of firms, such as minority- or women-owned firms (requires certification)

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• Late career entrepreneursLate career entrepreneurs: people who begin their businesses after having retired or resigned from work in corporations at age 50 or older– Get adviceGet advice

– Take controlTake control over life

– NetworkingNetworking

– Keep personal finances outKeep personal finances out of the business

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