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Chapter 1. Small Business: its Opportunities and Rewards

Small Business involves 1-50 people and has its owner managing the business on a day-to-day basis.

Entreprenuer a person who owns or starts an organization, such as a business.

Independent Small Businesses a business owned by an individual or small group.

ImitativeCharacterized by being like or copying something that already exists.

Founders - people who create or start new businesses.

Franchise a prepackaged business bought, rented, or leased from a company calledfranchisor.

Buyers people who purchase an existing business.

Heir a person who becomes an owner through inheriting or being given a stake in a family business.

DEFINING SMALL BUSINESS

- The international community uses the term small and medium enterprise or SME, it consists of1-50 people, while medium enterprise have 51-500 people.

- SME focuses on independent and owner-managed small business.o Independentmeans that the business whose stock can be bought on an exchange.o Owner-managementrefers to constant or at least daily management of a business by

its owner.

- Small businesses are imitative in nature.- The person who starts a business is living the life of the entrepreneur, anyone who owns a

business is an entrepreneur, it also means that the self-employed, anyone who works forhimself or herself instead of for others, is also an entrepreneur.

- FoundersFranchiseBuyers (Heirs)- Owner-manager, the role in which most entrepreneurs spend their working lives.

Small Businesses versus High-Growth Ventures

- Small business are usually intended to remain small, generally a size that the owner feelscomfortable controlling personally.

- High-Growth Ventures start small but are intended to grow rapidly, often requiring a team ofpartners or managers to handle the growth.

- The knowledge needed for a small business focuses on how to start small, with resources fromthe owner, family and friends.

- The key market knowledge for a small business focuses on its immediate marketplace andcommunities.

- Must know about how to achieve maximum flexibility while pursuing a comfortable level ofsales, growth, and profit.

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- Business worldwide are evaluated on their innovativeness and growth potentialo Innovativeness refers to how important to a firm are new ideas, products, services,

processes or markets.

o Potential for growth refers to the eventual size of the market, which can range from asmall, local, or niche market to something used by millions or even billions.

- Rating firms high or low on these two measures helps identify the different types of businessesin what is called the Dynamic Capitalism Typology.

Differences between Small Businesses and High-Growth Ventures

Small Businesses High-Growth Ventures

Preferred funding source Owners own money Other peoples money

When the firms ion trouble Cut costs Sell more

Whats more important Sales Marketing

Personal control preference Retain autonomy Involve key others

Focus Efficiency Effectiveness

Metastrategy Imitation NoveltyExternal control preference Control firm Control market

Grow When necessary When possible

Human resources Personalize Professionalize

Acceptance Personal validation External legitimacy

What limits growth Loss of control Market response

Delegation orientation Delegation is difficult Delegation is essential

Rewards for Starting a Small Business

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for the money, To do things my way- Entrepreneurs talks about Three Key Rewards

o Flexibilityto have greater flexibility for my personal and family lifeo Livable incometo give myself, ,y spouse and my children financial securityo Personal growthto continue to grow and learn as a person.

- Income rewards refers to the money made from owning your own business.- Flexibility rewards the most rapidly growing type of reward, refers to the ability of business

owners to structure their lives in the way that best suits their needs.

Myths about Small Businesses

1. Not enough financing2. You cant start business during recession3. To make profits, you need to make something.4. If you fail, you never try again.5. Students dont have the skills to start a business.

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Getting Started now: Entry Competencies

- There are four elements to consider before starting your own business.o A Boundary is something that sets it up as a firm.

It can be something as simple as a business name or government registration, aphone or e-mail address dedicated to the business, or a specific location for the

firm in a home, commercial space, or even on the internet.

It gives you a place to locate and protect the resources youve gathered for thebusiness.

o Resources include the product or service to be offered, informational resources onmarkets and running a business, financial resources, and human resources such as your

own time to devote to the business, or that of others working with you or for you.

o Intention is the desire to start a business and is the most frequently occurring elementof the BRIE model.

o Exchange refers to moving resources, goods, or service to others, in exchange formoney or other resources.

- BRIE (boundary-resources-intention-exchange) checklist is a proven and handy way to thinkabout the activities necessary to get a business started.

Aspects of Global Entrepreneurship

- Factor-driven economies, a nation where the major forces for jobs, revenues, and taxes comesfrom farming or extractive industries like forestry, mining, or oil production.

- Efficiency-driven economies, a nation where industrialization is becoming the major forceproviding jobs, revenues and taxes and where minimizing costs while maximizing productivity is

a major goal.- Innovation-driven economies, a nation where the major forces for jobs, revenues, and taxes

come from high-value added production based on new ideas and technologies and from

professional services based on higher education.

The Other Forms of Entrepreneurship

- PICS Model of Entrepreneurship- Public Entrepreneurship , involves in revitalizing government agencies, tends to focus on the

customer-focus and efficiency aspects of entrepreneurship.

- Independent Entrepreneurship, involves all four elements- Corporate Entrepreneurship, the focus is on customer-focus and innovation, bringing new

products or services to market, or opening up new markets to the firm.

- Social Entrepreneurship, involves creating new charitable and civic organizations which arefinancially self-sufficient, or for non-profit companies that use much of their profit to fund

charities.