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Bus 230 - chapter 3

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  • Characteristics of entrepreneurs have changed through the years. Details are shown over the next few slides.
  • Competencies are very important for small business owners A competency is something you do well. Our competency is your strength in business. Many times it takes the form of a hobby which later becomes a small business.
  • Some functions are common to businesses. But every industry has it’s own set of skills necessary to be successful. A doctor’s office and a car mechanic both involve scheduling, selling a service, both have accounting and billing needs, both require employees. But the skills to be a successful doctor or successful mechanic are very different.
  • There are some types of competencies which are skills, but not the mechanic or doctor’s skills needed to provide the specific service of the business.
  • These competencies are essential to success for entrepreneurs. Starting a new company takes much in terms of time, effort, and focus in order to become successful.
  • Professionalization is key in a world with many fly-by-night operations. Customers prefer to do business with a professional company. Outward signs of being a professional company can be Certification (ISO 9000) Membership in the Chamber of Commerce A clean professional website Standard business practices become the norm in an industry. Doctor’s see patients only 4 days per week Retail stores open 7 days per week Providing more than the standard in an industry is an outward sign of quality. Providing less leaves customers questioning whether you are a “real” company.
  • Your level of professionalization has a direct affect on the level of trust you garner from customers, banker, suppliers, and others in your community.
  • The owner’s passion receives the lion’s share of attention, consciously causing that area of expertise to exceed the standards of the industry.
  • A single practice doctor’s office is a habitual entrepreneur. They work until they retire. Kids don’t come in and take over the business when dad retires.
  • Family businesses have all the facets of normal entrepreneurial firms but also have the emotional drama inherent in a family.
  • One problem seen in successful family owned businesses is that the second generation may not be as passionate about, or as capable of, running the family business. Many children who grow up with parents running a successful family business do not desire to work the weekends and late nights which were required to make the business successful. Another issue is who is the successor? And where does that leave a child who chooses not to work in the family business? These issues will also be discusses later in the book.
  • If starting a business late in life, it is essential to keep the money you have already amassed, safe. Keep in mind, if you lose all your money in this venture, you will not have as much time to rebuild your personal security.
  • Chap003 bus230

    1. 1. 3 Small Business Entrepreneurs: Characteristics and Competencies McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. Chapter 3 3-
    3. 3. <ul><li>Original Classic Entrepreneur: </li></ul><ul><ul><li>Hard worker </li></ul></ul><ul><ul><li>Loner </li></ul></ul><ul><ul><li>Socially isolated </li></ul></ul><ul><ul><li>Fast learner </li></ul></ul><ul><ul><li>Wealth seeker </li></ul></ul><ul><ul><li>Risk taker </li></ul></ul>Chapter 3 1700’s-1950’s 3-
    4. 4. <ul><li>Idea Person: </li></ul><ul><ul><li>Hard worker </li></ul></ul><ul><ul><li>Loner (could team up) </li></ul></ul><ul><ul><li>Socially isolated </li></ul></ul><ul><ul><li>Fast learner </li></ul></ul><ul><ul><li>Fame seeker </li></ul></ul><ul><ul><li>Risk taker </li></ul></ul>Chapter 3 1950’s-1980’s 3-
    5. 5. <ul><li>Small Business Owner: </li></ul><ul><ul><li>Hard worker </li></ul></ul><ul><ul><li>Loner </li></ul></ul><ul><ul><li>Socially isolated </li></ul></ul><ul><ul><li>Average learner </li></ul></ul><ul><ul><li>Average income seeker </li></ul></ul><ul><ul><li>Risk averse </li></ul></ul>Chapter 3 1950’s-1980’s 3-
    6. 6. <ul><li>Contemporary Classic Entrepreneur: </li></ul><ul><ul><li>Hard worker </li></ul></ul><ul><ul><li>Loner </li></ul></ul><ul><ul><li>Socially isolated </li></ul></ul><ul><ul><li>Fast learner </li></ul></ul><ul><ul><li>Wealth seeker </li></ul></ul><ul><ul><li>Risk taker </li></ul></ul>Chapter 3 1950’s-1980’s 3-
    7. 7. <ul><li>Salesperson Entrepreneur: </li></ul><ul><ul><li>Hard worker </li></ul></ul><ul><ul><li>Team player </li></ul></ul><ul><ul><li>Socially connected </li></ul></ul><ul><ul><li>Fast learner (socially) </li></ul></ul><ul><ul><li>Average learner (technologically) </li></ul></ul><ul><ul><li>Acceptance seeker </li></ul></ul><ul><ul><li>Risk averse </li></ul></ul>Chapter 3 1980’s-Today 3-
    8. 8. <ul><li>Managerial Entrepreneur: </li></ul><ul><ul><li>Hard worker </li></ul></ul><ul><ul><li>Team player </li></ul></ul><ul><ul><li>Socially connected </li></ul></ul><ul><ul><li>Fast learner </li></ul></ul><ul><ul><li>Wealth seeker </li></ul></ul><ul><ul><li>Risk averse </li></ul></ul>Chapter 3 1980’s-Today 3-
    9. 9. <ul><li>Entrepreneurial Competencies </li></ul><ul><li>Competencies : forms of business-related expertise </li></ul><ul><li>Basic business competency : understanding the organizational and business processes of a firm </li></ul>Chapter 3 3-
    10. 10. <ul><li>Key business functions : activities common to all businesses </li></ul><ul><ul><li>sales, operations, accounting, finance, and human resources </li></ul></ul><ul><li>Industry-specific knowledge : activities, skills, and knowledge, specific to businesses in an industry </li></ul><ul><ul><li>Understanding dimple patterns for making golf balls </li></ul></ul><ul><ul><li>Chemistry involved in Heating and A/C work </li></ul></ul>Chapter 3 3-
    11. 11. <ul><li>Resource competencies : the ability or skill of the entrepreneur at finding expendable components necessary to the operation of the business </li></ul><ul><ul><li>Time </li></ul></ul><ul><ul><li>Information </li></ul></ul><ul><ul><li>Location </li></ul></ul><ul><ul><li>Financing </li></ul></ul><ul><ul><li>Raw materials </li></ul></ul><ul><ul><li>Expertise </li></ul></ul>Chapter 3 3-
    12. 12. <ul><li>Determination competencies : skill identified with the energy and focus needed to bring a business into existence </li></ul><ul><li>Opportunity competencies : skills necessary to identify and exploit elements of the business environment that can lead to a profitable and sustainable business </li></ul>Chapter 3 3-
    13. 13. <ul><li>Professionalization </li></ul><ul><li>Professionalization : the extent to which a firm meets or exceeds the standard business practices for its industry </li></ul><ul><li>Standard business practice : a business action that has been widely adopted within an industry or occupation </li></ul>Chapter 3 3-
    14. 14. <ul><li>Expert business professionalization : a situation that occurs when all the major functions of a firm are conducted according to the standard business practices of its industry </li></ul><ul><ul><li>These firms inspire the highest levels of trust among their customers. </li></ul></ul><ul><ul><ul><li>Doctors </li></ul></ul></ul><ul><ul><ul><li>Insurance providers </li></ul></ul></ul>Chapter 3 3-
    15. 15. <ul><li>Expert business professionalization : </li></ul><ul><ul><li>Subcontractors : big firms require subcontractors to meet hundreds of corporate-dictated procedures </li></ul></ul><ul><ul><li>Franchises : corporate parents specify most of the procedures for the business’s operation </li></ul></ul><ul><ul><li>International quality certifications (ISO 9000): small businesses must write in full detail how they will ensure consistency and professionalism </li></ul></ul>Chapter 3 3-
    16. 16. <ul><li>Specialized business professionalization : founders or owners who are passionate about one or two of the key business functions, such as sales, operations, accounting, finance, or human resources </li></ul><ul><ul><li>Specialized firms tend to generate moderate levels of trust among customers. </li></ul></ul>Chapter 3 3-
    17. 17. <ul><li>Minimalized business professionalization : a situation that occurs when the entrepreneur does nearly everything in the simplest way possible </li></ul><ul><ul><li>No systematic accounting </li></ul></ul><ul><ul><li>Personal sales </li></ul></ul><ul><ul><li>Street vendors, swap meets, art fairs </li></ul></ul><ul><li>Very difficult to gain trust </li></ul>Chapter 3 3-
    18. 18. <ul><li>Entrepreneurial Careers </li></ul><ul><li>Habitual entrepreneurs : owners for a lifetime, sometimes in one business, sometimes across several firms </li></ul><ul><ul><li>No succession plan </li></ul></ul><ul><ul><li>Figure to keep working until they can no longer continue </li></ul></ul>Chapter 3 3-
    19. 19. <ul><li>Growth entrepreneurs : lifetime owners whose goal is major success </li></ul><ul><ul><li>If they top out with one business, they’ll start another growth-oriented company, often before they exit the first one </li></ul></ul><ul><ul><li>When they do retire, they tend to want to micro-manage their successors </li></ul></ul><ul><li>Harvest entrepreneurs : owners with an exit plan </li></ul><ul><ul><li>Work first in order to play later </li></ul></ul><ul><ul><li>Build one company at a time, sell it, enjoy the proceeds, and then start another </li></ul></ul>Chapter 3 3-
    20. 20. <ul><li>Spiral (helical) entrepreneurs : alternate periods of growth and stability </li></ul><ul><ul><li>Driven by a need to balance family and business </li></ul></ul><ul><ul><li>The endgame strategy is scaling down the business </li></ul></ul><ul><li>Occasional entrepreneurs : people who generally have another primary job </li></ul><ul><ul><li>Fascinated by entrepreneurship and pursue it periodically </li></ul></ul><ul><ul><li>Classic part-time entrepreneur </li></ul></ul><ul><ul><li>Seasonal basis (doing taxes, or making Christmas wreaths) </li></ul></ul>Chapter 3 3-
    21. 21. <ul><li>Family Businesses </li></ul><ul><li>Family business : a firm in which one family owns a majority stake and is involved in the daily management of the business </li></ul><ul><li>1/3 of the Standard & Poor’s 500 are family owned and managed </li></ul>Chapter 3 3-
    22. 22. <ul><li>Family businesses make up over 1/2 of the businesses in the United States. </li></ul><ul><li>39% of businesses in the United States are small family businesses. </li></ul><ul><li>They employ 58% of America’s workforce. </li></ul>Chapter 3 3-
    23. 23. <ul><li>Family Business Challenges </li></ul><ul><li>Role conflict : the kind of problem that arises when people have multiple responsibilities, such as parent and boss, and the different responsibilities make different demands on them </li></ul><ul><ul><li>Whenever possible, make decisions based on business necessities . </li></ul></ul>Chapter 3 3-
    24. 24. <ul><li>Family Business Challenges </li></ul><ul><li>Succession : the process of intergenerational transfer of a business </li></ul><ul><ul><li>Lack of clear transition plan is the death knell </li></ul></ul><ul><ul><li>Answer is taking a professional approach </li></ul></ul><ul><ul><li>Only 5% of entrepreneurs can rely on family members to take over </li></ul></ul>Chapter 3 3-
    25. 25. <ul><li>Women and Minorities </li></ul><ul><li>Women-owned businesses are one of the fastest-growing sectors of all United States businesses </li></ul><ul><li>30% of all businesses are majority owned by women, with 18% equally owned by men and women </li></ul>Chapter 3 3-
    26. 26. <ul><li>Minority-owned businesses represent 11% of all United States businesses. </li></ul><ul><li>1992-1997 Growth rates </li></ul><ul><ul><li>General Business 7% </li></ul></ul><ul><ul><li>Minority-owned 30% </li></ul></ul><ul><ul><li>Native-American/Alaskan 84% </li></ul></ul><ul><ul><li>African-American 26% </li></ul></ul><ul><ul><li>Hispanic 30% </li></ul></ul><ul><ul><li>Asian/Pacific Islander 30% </li></ul></ul>Chapter 3 3-
    27. 27. <ul><li>Late career entrepreneurs : people who begin their businesses after having retired or resigned from work in corporations at age 50 or older </li></ul><ul><ul><li>Get advice </li></ul></ul><ul><ul><li>Take control over life </li></ul></ul><ul><ul><li>Networking </li></ul></ul><ul><ul><li>Keep personal finances out of the business </li></ul></ul>Chapter 3 3-
    28. 28. <ul><li>Questions? </li></ul>Chapter 3 ? ? ? 3-