1 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1: The Role of Small Business © Copyright Katherine Korman Frey/Vision Forward, LLC 1

2 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Goal: Provide the future entrepreneur with an overview of small business and entrepreneurship, characteristics of an entrepreneur, and a general discussion of the importance of small business in America. © Copyright Katherine Korman Frey/Vision Forward, LLC 2

3 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Objectives: Understand perceptions and definitions of entrepreneurship. Understand the definitions of “small business” and why this is important. Identify major characteristics of an entrepreneur. Learn about the role small business plays in the U.S. © Copyright Katherine Korman Frey/Vision Forward, LLC 3

4 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Objectives: Understand perceptions and definitions of entrepreneurship. Understand the definitions of “small business” and why this is important. Identify major characteristics of an entrepreneur. Learn about the role small business plays in the U.S. © Copyright Katherine Korman Frey/Vision Forward, LLC 4

5 © Copyright Katherine Korman Frey/Vision Forward, LLC Dictionary: Entreprenedre - “To undertake” Perception: A person of very high aptitude who pioneers change; Anyone who wants to work for himself or herself What is an Entrepreneur? Source:

6 © Copyright Katherine Korman Frey/Vision Forward, LLC "I have always thought of an entrepreneur as a person who starts a business to follow a vision, to make money, and to be the master of his/her own soul (both financially and spiritually). Inherent in the venture is the risk of what the future may bring. Therefore, I believe that an essential key to success is that the entrepreneur also be an ‘educated’ risk taker.... “ Linda Pinson Ms. Pinson is an author ad software creator and has provided to the Small Business Administration much of their material about writing a business plan. Source: What is an Entrepreneur?

7 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-1 What is an entrepreneur? Write down your definition of an entrepreneur:

8 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Objectives: Understand perceptions and definitions of entrepreneurship. Understand the definitions of “small business” and why this is important. Identify major characteristics of an entrepreneur. Learn about the role small business plays in the U.S. © Copyright Katherine Korman Frey/Vision Forward, LLC 8

9 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-2 What is a small business? Write down an example of a small business with which you are familiar or have read about.

10 © Copyright Katherine Korman Frey/Vision Forward, LLC Definition of a Small Business Business Size The Small Business Administration (SBA) The Small Business Act and NAICS Rule of thumb: < 500 employees, < $6 to $8 million in revenues. (Click for sample NAICS chart) (Click for sample NAICS chart) Additional important notes about business size

11 © Copyright Katherine Korman Frey/Vision Forward, LLC Examples of North American Industry Classification System Source: Small Business Administration, Small Business Size Standards matched to North American Industry Classification System, Effective January 28, (Click here: Back to Small Business Def.)

12 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-2a – PART I Why does the definition of a small business matter? Using the NAICS Chart, what is the maximum allowable size for these businesses? –Company A: Employment agency. –Company B: Food service contractor. (Click here: Sample NAICS chart)

13 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-2a – PART 2 Does it matter what size the company is? Company A: Employment agency. –Revenues: $7 million. –Clients: Primarily other small businesses. –Client vendor / procurement policies: None. The clients enjoy working with the placement agency because it is a small business, but there are no formal rules in place. (Click here: Sample NAICS chart)

14 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-2a – PART 2 Does it matter what size the company is? Company B: A food service contractor. –Revenues: $10 million. –Clients: K-12 schools and universities. –Client vendor / procurement policies: 25% small business set-asides. (Click here: Sample NAICS chart)

15 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Objectives: Understand perceptions and definitions of entrepreneurship. Understand the definitions of “small business” and why this is important. Identify major characteristics of an entrepreneur. Learn about the role small business plays in the U.S. © Copyright Katherine Korman Frey/Vision Forward, LLC 15

16 © Copyright Katherine Korman Frey/Vision Forward, LLC Major Characteristics of the Entrepreneur Entrepreneurial traits in a text Entrepreneurial traits when interviewing an entrepreneur

17 © Copyright Katherine Korman Frey/Vision Forward, LLC Textbook Traits Desire for responsibility Preference for moderate risk Confidence in ability to succeed Desire for immediate feedback High level of energy Future orientation Skill at organizing Value of achievement over money High degree of commitment Tolerance for ambiguity Flexibility Source: Zimmerer, Thomas W. and Scarborough, Norman S., Essentials of Entrepreneurship and Small Business Management, Prentice Hall, 2005.

18 © Copyright Katherine Korman Frey/Vision Forward, LLC Entrepreneurial Traits… What Entrepreneurs Say: Tenacity and drive Opportunity “vision” Passion Relationships Judgment Source: Frey, Katherine Korman, Vision Forward, LLC case studies: The Hot Mommas TM Project, Cool Daddies Project, Extreme Entrepreneurs, & Innovative Intrapreneurs,

19 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-3 Major Characteristics of an Entrepreneur Pick a “top three” traits with which you identify. 2. Next, pick up to three traits where you would like to develop stronger skills. 3. Pick ONE trait from #1. Provide an example. 4. Pick ONE trait from #3. Brainstorm on how you can improve that trait.

20 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-3a Your Future Entrepreneurial Passion 1.List one to three areas about which you are passionate. Explain why. 2. KEEP THIS LIST.

21 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Objectives: Understand perceptions and definitions of entrepreneurship. Understand the definitions of “small business” and why this is important. Identify major characteristics of an entrepreneur. Learn about the role small business plays in the U.S. © Copyright Katherine Korman Frey/Vision Forward, LLC 21

22 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-4 The Role of Small Business in America Which of the below is/are FALSE?  1. Employ more than half of all private sector employees.  2. Create more than 50 percent of nonfarm private gross domestic product (GDP).  3. Produce 13 to 14 times more patents per employee than large patenting firms.  4. Are employers of 39 percent of high tech workers (such as scientists, engineers, and computer workers).  5. Made up 97 percent of all identified exporters and produced 29 percent of the known export value in FY  6. Provide 83% of the world’s steel.

23 © Copyright Katherine Korman Frey/Vision Forward, LLC The Role of Small Business in America Yesterday: One product at a time The Industrial Revolution & economies of scale Today: Current climate for business growth Small business ability to compete Universities and entrepreneurship

24 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-5: Culture of Entrepreneurship “Those associations only which are formed in civil life, without reference to political objects, are here adverted to. The political associations which exist in the United States are only a single feature in the midst of the immense assemblage of associations in that country. Americans of all ages, all conditions, and all dispositions, constantly form associations. They have not only commercial and manufacturing companies, in which all take part, but associations of a thousand other kinds — religious, moral, serious, futile, extensive, or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found establishments for education, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; and in this manner they found hospitals, prisons, and schools…. I have often admired the extreme skill with which the inhabitants of the United States succeed in proposing a common object to the exertions of a great many men, and in getting them voluntarily to pursue it. The Americans form associations for the smallest undertakings.” Alexis De Tocqueville, Democracy In America

25 © Copyright Katherine Korman Frey/Vision Forward, LLC The Role of Small Business in America Number of small businesses Role in economy - small firms Industry types and breakdowns (Click for Figure 1)(Click for Figure 1) Women and minority-owned small businesses The US - A culture of entrepreneurship Opportunity Culture Future Orientation Public Support Key Facts:

26 © Copyright Katherine Korman Frey/Vision Forward, LLC The Role of Small Business in America Types of Sole Proprietorships by Industry and Receipts (Revenues) Figure 1: Source: Industry Number of sole- proprietorships% Receipts (in thousands)% Professional, scientific & technical services 4,226,05624% $ 148,359,79615% Other services 3,047,63917% $ 85,381,0039% Retail trade 2,309,27013% $ 185,175,31019% Construction 2,283,92913% $ 154,225,36716% Health care and social assistance 1,520,4359% $ 82,760,4519% (Click for previous slide )(Click for previous slide )

27 © Copyright Katherine Korman Frey/Vision Forward, LLC The Role of Small Business in America Sources: SBA and NFIB Thinking ahead…. Should I start a business? Just starting out: 66% expect the venture to be full time 33% expect the venture to be part time 82.5% seek credit of some type

28 © Copyright Katherine Korman Frey/Vision Forward, LLC Exercise 1-6: Thinking Ahead – Motivations of Future Entrepreneurs Source: (Click for previous slide )(Click for previous slide ) Refer to the NFIB 2003 Small-Business Policy Guide (Chapter 4, Exhibit 3.4) Comment on which of the motivations listed (see link) link might apply to you if you were to start your own business.

29 © Copyright Katherine Korman Frey/Vision Forward, LLC Module 1 Objectives: Understand perceptions and definitions of entrepreneurship. Understand the definitions of “small business” and why this is important. Identify major characteristics of an entrepreneur. Learn about the role small business plays in the U.S. © Copyright Katherine Korman Frey/Vision Forward, LLC 29

30 © Copyright Katherine Korman Frey/Vision Forward, LLC Brought to you by: Entrepreneur-in-the-Classroom brought to you by: Curriculum developed by: Katherine Korman Frey –Founder, Vision Forward & The Hot Mommas ® Project. –Associate Director Center & Adjunct Professor, The George Washington University Center for Entrepreneurial Excellence. Contributing content provided by: Dr. George Solomon, Dr. Susan Duffy, Dr. Ayman Tarabishy and Professor Janet Nixdorff. Co-presenting SponsorIn Conjunction With