Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-1

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing

Chapter 1Chapter 1

Entrepreneurship in the Entrepreneurship in the New MillenniumNew Millennium

In the Spotlight:Dell Computer Corporationwww.dell.com

In the Spotlight:Dell Computer Corporationwww.dell.com

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-2

Learning Objectives: Chapter 1Learning Objectives: Chapter 1

1. Discuss the availability of entrepreneurial opportunities and give 1. Discuss the availability of entrepreneurial opportunities and give examples of highly successful businesses started by examples of highly successful businesses started by entrepreneurs.entrepreneurs.

2. Identify three rewards and three drawbacks of entrepreneurial 2. Identify three rewards and three drawbacks of entrepreneurial careers.careers.

3. Describe the various types of entrepreneurs, entrepreneurial 3. Describe the various types of entrepreneurs, entrepreneurial management styles, and entrepreneurial ventures.management styles, and entrepreneurial ventures.

4. Explain three aspects of the changing context of small business.4. Explain three aspects of the changing context of small business.

5. Identify three tools that provide a potential competitive edge for 5. Identify three tools that provide a potential competitive edge for small entrepreneurial firms.small entrepreneurial firms.

6. Discuss several factors that indicate a readiness for 6. Discuss several factors that indicate a readiness for entrepreneurship.entrepreneurship.

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-3

Striking Success StoriesStriking Success Stories

Mark Dankberg, Steven Hart, and Mark MillerViaSat Inc.

Using technological expertise

Carla ConnorC&B Industrial Safety, Inc.

Operating profitably on a small scale

William WilliamsGlory Foods

Developing a profitable niche market

William WilliamsGlory Foods

Developing a profitable niche market

www.viasat.com

www.gloryfoods.com

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-4

Entrepreneurial IncentivesEntrepreneurial Incentives

Rewards of EntrepreneurshipRewards of Entrepreneurship

Profit

Freedom fromthe limits of

standardized payfor standardized

work

Profit

Freedom fromthe limits of

standardized payfor standardized

work

Independence

Freedom fromsupervision and

rules of bureaucraticorganizations

Independence

Freedom fromsupervision and

rules of bureaucraticorganizations

Satisfying WaySatisfying Wayof Lifeof Life

Freedom fromFreedom fromroutine, boring,routine, boring,

and and unchallenging jobsunchallenging jobs

Satisfying WaySatisfying Wayof Lifeof Life

Freedom fromFreedom fromroutine, boring,routine, boring,

and and unchallenging jobsunchallenging jobs

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-5

Drawbacks of EntrepreneurshipDrawbacks of Entrepreneurship

• Hard WorkHard Work

• Long HoursLong Hours

• StressStress

• RiskRisk

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-6

Entrepreneurial CharacteristicsEntrepreneurial Characteristics

1. Need for achievement

2. Risk tolerance

3. Self-confidence

4. Enthusiasm

1. Need for achievement

2. Risk tolerance

3. Self-confidence

4. Enthusiasm

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-7

Three Types of EntrepreneursThree Types of Entrepreneurs

1. Founders1. Founders

2. General Managers2. General Managers

3. Franchisees3. Franchisees

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-8

Characteristics of Artisan andOpportunistic Entrepreneurs

Artisan Entrepreneur

1. Technical training

2. Paternalistic approach

3. Reluctance to delegate

4. Narrow view of strategy

5. Personal sales effort

6. Short planning horizon

7. Simple record keeping

Artisan Entrepreneur

1. Technical training

2. Paternalistic approach

3. Reluctance to delegate

4. Narrow view of strategy

5. Personal sales effort

6. Short planning horizon

7. Simple record keeping

Opportunistic Entrepreneur

1. Broad education

2. Rational approach

3. Willing to delegate

4. Broad view of strategy

5. Diversified marketing approach

6. Longer planning horizon

7. Sophisticated accounting andfinancial control

Opportunistic Entrepreneur

1. Broad education

2. Rational approach

3. Willing to delegate

4. Broad view of strategy

5. Diversified marketing approach

6. Longer planning horizon

7. Sophisticated accounting andfinancial control

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-9

Types of Entrepreneurial Ventures

Limited returnsLimited potential

Substantial returnsA “good living” for ownerStability

Big bucksExamples: Apple Computer NikeRapid growth

Marginal firms

Attractive small companies

High-potential ventures

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-10

Three Challenges to Small BusinessesThree Challenges to Small Businesses

1. Growth of superstores1. Growth of superstores

2. Expansion of information technology 2. Expansion of information technology and the Internetand the Internet

3. Emergence of a global economy3. Emergence of a global economy

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-11

Criteria for Defining Criteria for Defining Smallness in BusinessSmallness in Business

Number of employees

Value of assets

Volume of deposits

Insurancein force

Sales volume

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-12

Examples of SBA Size Standards

Sales DollarsAdvertising Agencies $ 3.5 millionEmployment Agencies $ 3.5 millionFurniture Stores $ 3.5 millionGeneral Contractors -

Single family houses $17.0 millionInsurance Agents, Brokers,

and Services $ 3.5 millionMobile Home Dealers $ 6.5 millionRadio and Television

Repair Shops $ 3.5 millionRadio Broadcasters $ 3.5 million

Number of EmployeesCopper Ore Mining 500 employeesHardware Wholesaling 100 employeesMeat Packing 500 employeesMetal Can Manufacturing 1,000 employees

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-13

Applications of New TechnologyApplications of New Technology

• Financial software applicationsFinancial software applications• Internet salesInternet sales• E-mailE-mail• TeleconferencingTeleconferencing• Computer-assisted manufacturing and Computer-assisted manufacturing and

designdesign• Easy access to database information on the Easy access to database information on the

InternetInternet

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-14

Types of Entrepreneurial Types of Entrepreneurial Career OpportunitiesCareer Opportunities

Opportunity Level of Risk

Starting a business High risk

Buying a business Medium risk

Opening a franchised business Medium risk

Entering a family business Variable risk

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-15

Age Concerns in Starting a BusinessAge Concerns in Starting a Business

Early Career Concerns

1. Getting an education

2. Gaining work experience

3. Acquiring financial resources

Early Career Concerns

1. Getting an education

2. Gaining work experience

3. Acquiring financial resources

Late Career Concerns

1. Fulfilling family responsibilities

2. Attaining seniority in employment

3. Earning investment in a retirement program

Late Career Concerns

1. Fulfilling family responsibilities

2. Attaining seniority in employment

3. Earning investment in a retirement program

Age

20 30 40 50

Small Business Management, 11th edition

Longenecker, Moore, and Petty2000 South-Western College Publishing 1-16

Entrepreneurial RefugeesEntrepreneurial Refugees

• Foreign refugeeForeign refugee

• Corporate refugeeCorporate refugee

• Parental refugeeParental refugee

• Feminist refugeeFeminist refugee

• Housewife refugeeHousewife refugee

• Society refugeeSociety refugee

• Educational refugeeEducational refugee