business planning chapter 1

1-1Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing

Chapter 1Chapter 1

Entrepreneurship in the Entrepreneurship in the New MillenniumNew Millennium

Small Business StatisticsSmall Business Statistics

Approx. 25 million S.B.’s in the U.S.Approx. 25 million S.B.’s in the U.S. Represent 99%(+) of all employersRepresent 99%(+) of all employers Provide 67% of workers w/first jobProvide 67% of workers w/first job Approx. 75% of new jobs Approx. 75% of new jobs 46% of all sales in the U.S.46% of all sales in the U.S. Represent 96% of all exporters of goodsRepresent 96% of all exporters of goods Provide55% of innovationsProvide55% of innovations

Small BusinessSmall Business

• ““No” official certification process. SBA No” official certification process. SBA uses Standard Industrial Classification uses Standard Industrial Classification (SIC) codes in determining size standards.(SIC) codes in determining size standards.

• However, it is usually a firm with fewer However, it is usually a firm with fewer than 500 employees.than 500 employees.


Criteria for Defining Criteria for Defining Smallness in BusinessSmallness in Business

Number of employees

Value of assets

Volume of deposits

Insurancein force

Sales volume

EntrepreneurEntrepreneur

• Traditional: a person who starts and/or Traditional: a person who starts and/or operates a businessoperates a business

• Broader Definition: includes owner-Broader Definition: includes owner-managers; second generation family managers; second generation family owners; and those who buy out existing owners; and those who buy out existing firmsfirms


Entrepreneurial IncentivesEntrepreneurial Incentives

Rewards of Entrepreneurship

Profit

Freedom fromthe limits of

standardized payfor standardized

work

Independence

Freedom fromsupervision and

rules of bureaucraticorganizations

Satisfying WaySatisfying Wayof Lifeof Life

Freedom fromFreedom fromroutine, boring,routine, boring,

and and unchallenging jobsunchallenging jobs


Drawbacks of EntrepreneurshipDrawbacks of Entrepreneurship

• Hard WorkHard Work• Long HoursLong Hours• StressStress• RiskRisk


Entrepreneurial CharacteristicsEntrepreneurial Characteristics

1. Need for achievement

2. Risk tolerance

3. Self-confidence

4. Enthusiasm


Three Types of EntrepreneursThree Types of Entrepreneurs

1. Founders1. Founders2. General Managers2. General Managers3. Franchisees3. Franchisees


Characteristics of Artisan andOpportunistic Entrepreneurs

Opportunistic Entrepreneur1. 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

Artisan Entrepreneur1. 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


Entrepreneurial RefugeesEntrepreneurial Refugees

• Foreign refugeeForeign refugee• Corporate refugeeCorporate refugee• Parental refugeeParental refugee• Feminist refugeeFeminist refugee• Housewife refugeeHousewife refugee• Society refugeeSociety refugee• Educational refugeeEducational refugee


Age Concerns in Starting a BusinessAge Concerns in Starting a Business

Late Career Concerns

1. Fulfilling family responsibility

2. Attaining seniority in employment

3. Earning investment in a retirement

program

Age20 30 40 50

Early Career Concerns

1. Getting an education

2. Gaining work experience

3. Acquiring financial resources


Three Challenges to Small BusinessesThree Challenges to Small Businesses

1. Growth of superstores1. Growth of superstores2. Expansion of information technology 2. Expansion of information technology

and the Internetand the Internet3. Emergence of a global economy3. Emergence of a global economy

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business planning chapter 1