1. SMALL BUSINESS MANAGEMENT Chapter 2 The Small Business Decision 11/3/20111MRs. Shefa Eh Sagga SBM

2. CHAPTER OBJECTIVES  1. To discuss the advantages and disadvantages of small business ownership as a starting point in making the small business decision.  2. To review the personal and organizational attributes of a successful small business owner.  3. To explain the reasons some businesses succeed and others fail.  4. To discuss entrepreneurial development in large business.  5. To identify the differences between an entrepreneur and a manager. 11/3/20112MRs. Shefa Eh Sagga SBM

3. The Small Business Decision  Personal Evaluation Self evaluation exercise 11/3/20113MRs. Shefa Eh Sagga SBM

4. Advantages of Small Business Ownership  More personal contacts with people. Customers, suppliers, employees etc.  Independence. But must answer to ………..  Skill Development.  Potential Financial Rewards. Seldom sole motivating reason  Challenge.  Enjoyment. Best ideas from hobbies 11/3/20114MRs. Shefa Eh Sagga SBM

5. Rewards of Entrepreneurship 11/3/20115MRs. Shefa Eh Sagga SBM

6. Disadvantages of Small Business Ownership  Risk (80% failure within 5 years).  Stress (high incidence of heart disease high diverse rate from increased stress and pressure).  Need for Many Abilities  Limited Financial Rewards (majority earn less than paid employment).  People Conflicts  Time Demands 11/3/20116MRs. Shefa Eh Sagga SBM

7. Entrepreneur Defined  A person who starts and/or operates a business.  All active owner-managers and second generation members of family owned firms and owner-managers which buy out founders of existing firms.  Also includes salaried managers of larger corporations who have a flair for innovation and risk. 11/3/20117MRs. Shefa Eh Sagga SBM

8. Demographic Characteristics of Entrepreneurs Parents owned business – 55% Foreign parents – 10% High school degree or less – 25% College or more – 70% Age 31 and under – 30% Age 40 or more – 25% 11/3/20118MRs. Shefa Eh Sagga SBM

9. Personality Characteristics Required by Successful Entrepreneurs  Achievement Orientation (Above average focus and drive).  Risk Taking (Take calculated risk, don’t fear failure).  Independence, Self Confidence, Self Assurance (Gained from entrepreneur parents).  Innovativeness (Why Not!!!).  Strong Verbal and Numerical Skills  Selling Skills (Hear no – don’t take it personally). 11/3/20119MRs. Shefa Eh Sagga SBM

10. Personality Characteristics Required by Successful Entrepreneurs (cont)  Problem Solving Abilities  Strategic Planning  Perseverance 11/3/201110MRs. Shefa Eh Sagga SBM

11. The Small Business Decision  Organizational Evaluation Small Business Successes Small Business Failures 11/3/201111MRs. Shefa Eh Sagga SBM

12. Small Business Successes  Alertness to Change –  Ability to Attract and Hold Competent Employees –  Staying Close to the Consumer -- 11/3/201112MRs. Shefa Eh Sagga SBM

13. Small Business Successes  Thoroughness (Accuracy) with Operating Details.  Ability to Obtain Needed Capital.  Effective Handling of Laws, Rules, and Regulations. 11/3/201113MRs. Shefa Eh Sagga SBM

14. Entrepreneurial Success in a Large Business  Ten Commandments for Entrepreneur Success  Do any job needed.  Share credit wisely.  Ask forgiveness – its easier than permission.  Ask advice before resources.  Build good team.  Build quiet coalition.  Never bet on race unless you are running.  Be true to goals but realistic.  Honor your sponsor. 11/3/201114MRs. Shefa Eh Sagga SBM

15. Small Business Failures  Bankruptcies – 9,500 in 2002.  Business just closing doors. 100,000 in 2002.  Why Life cycles.  55% operate after 3 years. External - Internal – finance etc 11/3/201115MRs. Shefa Eh Sagga SBM

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18. Entrepreneurialship and Small Business Management  Entrepreneurial Skills Characteristics  creativity, innovativeness, independence, risk-taking, idea oriented. Situations  generating ideas and solutions to problems.  starting a new business, expanding or opening new products. 11/3/201118MRs. Shefa Eh Sagga SBM

19. Characteristics of Artisan Entrepreneurs  Technical training.  Paternalistic approach.  Reluctance to delegate.  Narrow view of strategy.  Personal sales effort.  Short planning horizon.  Simple record keeping. 11/3/201119MRs. Shefa Eh Sagga SBM

20. Characteristics of Opportunistic ( Promoter) Entrepreneurs  Broad-based education.  Scientific approach to problems.  Willing to delegate  Broad view of strategy.  Diversified marketing approach.  Longer planning horizon.  Sophisticated accounting and financial control. 11/3/201120MRs. Shefa Eh Sagga SBM

21. Entrepreneurialship and Small Business Management  Managerial Skills Characteristics  develops strategy and goal setting,  prefers to know outcomes of actions or activities,  team player,  works through others,  skills in finance, marketing, personnel, operations. Situations  reaching performance objectives,  maintaining control of operations. 11/3/201121MRs. Shefa Eh Sagga SBM

22. Discussion What does the advantages and disadvantages of starting a small business?. Advantages of Small Business Ownership.  More personal contacts with people.  Independence  Skill Development  Potential Financial Rewards  Challenge.  Enjoyment  Disadvantages of Small Business Ownership. o Risk. Stress. o Need for Many Abilities. Limited Financial Rewards. o People Conflicts. Time Demands. 11/3/201122MRs. Shefa Eh Sagga SBM

23. Concept Checks 1.What are the characteristics of successful small business owners?. 2.What are the major cases of business failure?. 3.What is the difference between an entrepreneur and a manager?. 11/3/201123MRs. Shefa Eh Sagga SBM