Quản trị kinh doanh - Chapter 6: Managing small business start - Ups

Managing Small Business Start-UpsChapter 61Starting a New BusinessSince the 1970, the number of businesses in the U.S. economy has been growing faster than the labor forceThe annual number of business launches continues to increaseManager’s Challenge: Intermedics 2EntrepreneurshipProcess of initiating a business ventureOrganizing the necessary resourcesAssumes associated risks and rewards3Five types of Small Business OwnersIdealists24%Optimizers21%Hard Workers20%Jugglers20%Sustainers15%Rewarded by chance to work on something new and creativeThrive on the challenge of building a larger, more profitable businessEnjoy chance to balance work and personal lifeGet personal satisfaction from being a business ownerHigh energy people who enjoy handling every detail of their own businessSOURCE: Study conducted by Yankelovish Partners, reported in Mark Henricks, “The-Cast,” Entrepreneur (March 2000), 14-16.4Entrepreneurship and the EnvironmentTurbulence in the technology sector and the demise of many dot-com start-ups = heightened concerns about small companies competing against big businessEntrepreneurship and small business are vital, dynamic increasing important parts of U.S. economyare booming in other countries5Why Small Business Today?Economic changesGlobalizationAdvancing technologyIncreased competitionNew market niches6Definition of Small BusinessDefinition used by SBA detailed and complex, Independently owned and operatedNot dominant in its field of operationNumber of employees, depending on the industry Annual sales consideration, depending on the industry7General Types of Small BusinessMost entrepreneurs start...RetailManufacturingServiceAdditional typesConstructionCommunicationsFinanceReal estate8Impact of Entrepreneurial CompaniesImpactThe 5.7million U.S. business that have fewer than 100 employees generate 40% of the nation’s outputApproximately 600,000 new businesses each yearOnly 16,000 businesses employ more than 500 peopleJob CreationThe 23 million small businesses created 2 million jobs between October 2000 – March 2004InnovationNew and smaller firms have been responsible for 55% of the innovations in 362 different industries and 95% of all radical innovationsFast-growing businesses produce twice as many innovations per employee9Who Are Entrepreneurs?Diversity of EntrepreneursOften have distinguishing backgrounds and demographics – 1st born, children of immigrantsEmerging growth companies of the next decade Women-owned businesses: 1997-2002 grew 11% (twice rate of all privately-owned businesses)Minority-owned businesses: growing 17% per year with African American growing the fastest10Characteristics of EntrepreneursAwareness of Passing Time High Energy Level Need to Achieve Tolerance for Ambiguity Self-ConfidenceEntrepreneurialPersonalitySource: Adapted from Charles R. Kuehl and Peggy A. Lambing, Small Business: Planning and Management (Ft. Worth: The Dryden Press, 1994),45.Internal Locus of Control11Hours Worked per Week byOwners of New Businesses051015202530Less than 5050-5960-6970-79More than 80Percent % of New Business OwnersSOURCE: National Federation of Independent Business, Reported in Mark Robichaux, “Business First, Family Second,” The Wall Street Journal, May 12, 1989,B1.Experiential Exercise: What’s Your Entrepreneurial IQ?12Sources of Entrepreneurial Motivation and New-Business IdeasTo Control My FutureTo Fulfill a DreamTo Be My Own BossDownsized/Laid OffReasons for Starting a BusinessIn-depth Understandingof Industry/ProfessionMarket Niche SpottedBrainstormingCopying Someone ElseHobbyOther37%36%7%44Source of New-Business IdeasSource: “The Rewards,” Inc. State of Small Business, 2001, May 29 2001, 50-51; and Leslie Brokaw, “How To Start an Inc. 500 Company,” Inc. 500, 1994, 51-65.Joined Family Business41%36%27%25%5%11%13Starts with a viable business idea Develop a business plan Select a legal form of business Determine financial resourcesTactics to become ownerStarting an Entrepreneurial Firm14Business PlanDocument specifying the business details prepared by an entrepreneur prior to opening a new businessClear visionRealistic financial projectionsTarget marketIndustry and competitorsManagement teamCritical risks that could threaten successSources & uses of start-up funds & operating funds15Becoming A Business OwnerSole Proprietorship = unincorporated business owned by an individual for profitPartnership = unincorporated business owned by two or more peopleCorporation = artificial entity created by the state and existing apart from its owners.3 Basic Legal Forms16Financing ResourcesCrucial concern for entrepreneursDebt Financing – money to be repaid at a later dateEquity Financing – funds invested in exchange for ownership in the company17TacticsStart a New BusinessAdvantage – develop and design own wayDisadvantage – long time to get off ground and to make profitableBuy an Existing BusinessAdvantage – shorter time and existing track recordDisadvantage – need to pay for goodwillWays to Become a Business Owner18TacticsBuy a Franchise = an agreement to sell a product or service of anotherAdvantage – management help is provided by ownerDisadvantage – lack of controlParticipate in a Business Incubator = shared office space, management, support services, management adviceWays to Become a Business Owner19Launching a High-Tech Start-UpHigh-tech start-ups represent a special case Costs and risks are typically extremely highVenture capital bottomed out every year 2000-2003 (dot-coms crash & sharp decline in technology stocks)Recent years – revival of high-tech startupsInternet companies are making a combackHigh-tech start-ups face many of the same challenges – some unique issues and problems20Launching a High-Tech Start-UpHave a viable ideaWrite a business planAcquire initial financingBuilding and Testing the Product or ServiceLaunch companyBe prepared to obtain additional financingDevelop partnershipsConsider going public21Writing the Business PlanDescription of the business and why it is uniqueProfile of potential customers and market needsKey ingredient of the business that will attract millions of customersWhy customers will buy from this company rather than competitorsWhat the company has accomplished so far, including partnerships or early customer relationshipsHigh-Tech Start-up Business Plan Basic Points22Writing the Business PlanEntrepreneur’s background and role in the companySpecific data about where the company is located, key management people, and contact informationEssential information about funding received so far, funding and staffing needs, and expectations for growth of the business over the next yearHigh-Tech Start-up Business Plan Basic PointsEthical Dilemma: Closing the Deal23Five Stages of Growth For an Entrepreneurial Company24Managing a Growing BusinessPlanningDefining goals and deciding on the tasks and use of resources needed to attain themAs organization grows, formal planning usually is not instituted until around the success stageBusiness plan must be living documentPlanning concern – small businesses need to be Web-savvy25Managing a Growing BusinessOrganizing1st two stages typically very informalAt 3rd stage, success, functional managers are hiredRules and regulations, procedural manualsLatter stages, delegationOutsourcing – organizing approach26Managing a Growing BusinessLeadingEarly stages – leader’s visionBy success stage, must learn to motivate employees or bring in managers who canNeed for active communicationLeadership is important because many small firms have a hard time hiring qualified employees27Managing a Growing BusinessControllingFinancial control – important in each stageInitial stages – exercised by simple accounting records and by personal supervisionBy 3rd stage, operational budgets are in place; structured control systemsControl Techniques become more sophisticated as the firm matures28