SMALL BUSINESS
MANAGEMENT
Chapter 2
The Small Business Decision
Bright Lights
Java Nook
Pet Safe Ideas
American Apparel
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.
The Small Business Decision

Personal Evaluation

Self evaluation exercise
Pg 43
Advantages of Small Business
Ownership

More personal contacts with people


Independence

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Customers, suppliers, employees etc
But must answer to ………..
Skill Development
Potential Financial Rewards
Challenge
Enjoyment
Rewards of Entrepreneurship
Disadvantages of Small Business
Ownership

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Risk
Stress
Need for Many Abilities
Limited Financial Rewards
People Conflicts
Time Demands
Java nook
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.
Demographic Characteristics of
Entrepreneurs



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Parents owned business –
Foreign parents –
High school degree or less –
College or more –
Age 31 and under –
Age 40 or more –
Personality Characteristics Required by
Successful Entrepreneurs




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Achievement Orientation
Risk Taking
Independence, Self Confidence, Self
Assurance
Innovativeness
Strong Verbal and Numerical Skills
Selling Skills
Personality Characteristics Required by
Successful Entrepreneurs (cont)


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Problem Solving Abilities
Strategic Planning
Perseverance
American Apparel
The Small Business Decision

Organizational Evaluation


Small Business Successes
Small Business Failures
Small Business Successes


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Alertness to Change –
Ability to Attract and Hold Competent
Employees –
Staying Close to the Consumer --
Small Business Successes



Thoroughness with Operating
Details
Ability to Obtain Needed Capital
Effective Handling of Laws, Rules,
and Regulations
Small Business Failures

Bankruptcies –


Business just closing doors


11,000/year
Many more
Why the failure



Life cycles
 55% operate after 3 years
External Internal – finance etc
external factors contributing to bankruptcy
economic downturn
competition
customer difficulties
change of market condition
govt regulation
unforseen circumstances
supplier difficulties
Technological change
employee fraud
labor legislation
0%
10%
20%
30%
40%
50%
60%
70%
Internal Factors contributing to bankruptcy
HR capabilities
Inovative strategy
Production or
operations
Marketing capabilities
financial management
general management
0%
10%
20%
30%
40%
50%
60%
70%
80%
Entrepreneurial Success in a Large
Business

Ten Commandments for Intrapreneur
Success
Do any job needed
 Share credit wisely
 Ask forgiveness – its easier than permission
 Ask advice before resourses
 Build good team
 Build quiet coalition
 Never bet on race unless you are running
 Be true to goals but realistic
 Honor your sponsor

Pet safe ideas
Entrepreneurialship and Small Business
Management

Entrepreneurial Skills

Characteristics

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creativity, innovativeness, independence,
risk-taking, idea oriented
Situations
generating ideas and solutions to
problems
 starting a new business, expanding or
opening new products

Characteristics of
Artisan Entrepreneurs
 Technical
training
 Paternalistic approach
 Reluctance to delegate
 Narrow view of
strategy
 Personal sales effort
 Short planning horizon
 Simple record keeping
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
Entrepreneurialship and Small Business
Bright light
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
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Entrepreneur vs Manager
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Barman
Java nook
American Apparel
Breadman
PET SAFE
Bright Lights, Deep Waters


Discuss the difference between an
entrepreneur and a manager using David
Green and Carmanah Lights as
examples.
What dangers of obtaining equity
financing are illustrated in this example?
return
Java Nook" CBC Venture


What does this example illustrate about
the advantages and disadvantages of
starting a small business?
Evaluate Annette and John's backgrounds
and preparation for starting a small
business. What could they have done to
better prepare for small business
ownership?
return
PET SAFE

Which of the Ten Commandments for
Intrapreneur Success do you feel that PET
SAFE follows?
return
Concept Checks

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
1. List the advantages of owning a
small business.
2. List the disadvantages of owning a
small business.
3. What are the characteristics of
successful small business owners?
4. What are the major cases of
business failure?
5. What is the difference between an
entrepreneur and a manager?