Defining Small Business

Defining Small Business

• A small business needs at least two of the following features:
  • Management is independent, with the manager usually owning the business
  • Capital is supplied and owned by an individual or few individuals
  • Operations are primarily local, but the market doesn't have to be
  • The business is small compared to its larger competitors

Reasons to Start a Small Business

• To satisfy personal reasons
• To achieve business objectives
• To achieve independence
• To obtain additional income
• To help their families
• To provide products not available elsewhere

Achieving Business Objectives

• Objectives are the goals toward which business activities are directed
• These goals include service, profit, social impact, and growth
• Social objectives involve providing a service to the community, and environmental protection
• Profits are the reward for accepting business risks and performing an economic service
• Profits are needed to ensure the business’ continuity

Stages of Small Business Development

• Three Stages of Small Business Development
  • Stage 1: Owner-manager/worker
  • Stage 2: Owner-manager and workers (hires workers and delegates)
  • Stage 3: Owner-manager(s) and workers (hires managers and delegates)

Starting an Entrepreneurial Small Business: Four Key Ideas

• When starting a smaller business, consider these:
  • Believe you can do it: self-efficacy
  • Planning + Action = Success
  • Help helps
  • Do well, do good
• The majority of new firms go through start-up processes
• The firms that find more success follow this four-step processes:
  • Feel
  • Check
  • Plan
  • Do
• Belief in yourself is called self-efficacy
• A plan without action is futile, and actions without plans are usually wasted
• Entrepreneurs depends on partners, investors, employees, customers and neighbors in the long run

The Entrepreneurial Process

• Feel: Where the entrepreneur has a feeling about staring a business or creating a product/service
• Check: Smart entrepreneurs check the likelihood for success with feasibility analyses or customer development processes
• Plan: Getting from idea to business via small-scale, part-time start-ups; lean business practice approaches; pilot testing; business modeling; or business plan creation
• Do: Refine your approach until having a successful firm

The BRIE Model

• Four elements are needed to start a business:
  • Boundary
    • Creating a space for the business in a location or people's minds
    • Something that sets it up as a firm and separates it from the occasional buying, selling, or bartering
    • Business name or government registration; a dedicated phone or email; a specific location
    • A place to locate and protect resources
  • Resources
    • Funds, product, knowledge etc to make up the business
    • A product, service or process to be offered
    • Information on markets and running the business
    • Financial and human resources
  • Intention
    • The desire to start a business
    • Most frequently occurring element of the BRIE model
  • Exchange (Entrepreneurship)
    • Moving resources, goods, or services in exchange for money or resources
    • If there is no exchange, there is no business

CSI: Entrepreneurship

• Self-employed founders are involved in independent entrepreneurship
• Founders of nonprofit organizations or for-profit social ventures are pursuing social entrepreneurship
• It is now possible to legally organize a business to be socially responsible, such as B-corp, PBC, or L3C
• Focusing on ecological issues is sustainable or green entrepreneurship
• Corporate entrepreneurship is for innovative individuals employed by others
• CSI entrepreneurship is the three forms of entrepreneurship, corporate, social, and independent
• Motivation can be opportunity-driven or necessity-driven entrepreneurship

Entrepreneurs are Everywhere

• The entrepreneur's occupation depends on the type of goods/services they and their firm are producing
• Entrepreneurial businesses show novelty
• Small business owners are self-employed entrepreneurs
• The Founders start the business by themselves or in a franchise
• Other groups consist of buyers and heirs; after entry, role becomes owner-manager

Types of Entrepreneurial Small Businesses

• There are over 30 million entrepreneurial firms in the U.S which fall into a few categories
  • Small and medium enterprises (SMEs)
  • Independent small businesses
  • Owner-managed firms
• Some entrepreneurs are serial entrepreneurs
• Innovativeness is the importance new ideas, products, services, processes, or markets have in an organization

Firm Growth Strategies

• A firm's overall growth strategy can be:
  • Lifestyle or part-time firms
  • Traditional small businesses
  • High-performing small businesses
  • High-growth ventures, including unicorns
• All but high-growth ventures are considered main street businesses
• Lifestyle/part-time firms have sales less than $25,000 per year and are a supplemental income source
• Traditional small businesses are the smallest full-time businesses with sales between $25,000 and $100,000
• High-performing small businesses level off after success, defined by sales between $100,000 and $1,000,000
  • These firms grow at rates of between 5% and 15% per year and are called gazelles
• High-growth ventures aim to grow over 25% per year and have sales of more than $1,000,000
• Unicorns are at the top of the valuation group with over a billion dollars
• 95% of businesses outside high-growth, being Main Street businesses

Differences Between Small Businesses and High-Growth Ventures

Distinguishing Between Entrepreneural Ventures and Small Businesses

• Small businesses are independently owned and operated and is not dominant in the field
• The principal objectives of entrepreneurial ventures of the owner are profitability and growth.
• Entrepreneurs' goals include achievement, profit, and growth, achieved through innovation and strategic management
• Small business owners establishes a business primarily to further personal goals and make a profit

Myths About Small Businesses

• There’s not enough financing
  • There’s crowdfunding, P2P lending, drop-shipping, and bootstrapping techniques, besides SBA and bank loans
• To make profits, there is need to make something
  • There are plenty of service industries making profits
• If there is failure, there is no coming back
  • Henry Ford failed twice before making Ford
• Students lack skills to start a business
  • There are companies founded by students, moms, and second-career entrepreneurs
• 90% businesses fail within two years
  • 25% businesses survive 15 years or more

Practical Ideas for Small Businesses

• Home health care
• Marketing, promotion, and public relations
• Senior fitness and recreation
• Specialized delivery services
• Career counseling
• Catering
• Computers and the internet
• Day care
• Educational services and products
• Financial planning

Inventions from Small Businesses and Student-Started Businesses

• Small Businesses:
  • Heart Valves
  • Assembly Lines
  • Supercomputers
  • Relational Databases
  • Photocopiers
  • Outboard Engines
  • GORE-TEX
  • Snapple
• Student Started:
  • Video Laryngoscope
  • JIT PC Assembly
  • Home Computers
  • Social Networking
  • Google
  • Snowboards
  • Extreme Custom Nail Polish
  • Kombucha

Current Problems Confronting Small Businesses

• Political and economic issues
• World economy
• Retirement or transition
• Capital or financing issues
• Unexpected growth
• Succession

Contributions of Small Businesses

• Encourage innovation and flexibility
• Keep larger firms competitive
• Develop risk takers
• Generate new employment
• Maintain close relationships with customers and the community

Small Business and the Economy

• New Jobs: They are willing to offer jobs to people with atypical work histories or needs
• New Ideas: They cause creative destruction, creating new goods, services, or firms that hurt existing ones
• New Opportunities: They create opportunities for immigrants, communities, entrepreneurs, customers, and larger businesses
• New Markets: They find new markets via importing and exporting
• Instant Global Entrepreneurship (VIGE): They conduct e-commerce using virtual