SMALL BUSINESS MANAGEMENT: AN ENTREPRENEURIAL EMPHASIS

Small Business Management: An Entrepreneurial Emphasis

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ENTREPRE-

NEURSHIP IN THE NEW MILLENNIUM

E

ntrepreneurs are the decision makers who will help shape the free-enterprise economic system of the new millennium by discovering market needs and launching new firms to meet those needs.

Entrepreneurial Opportunities

An entrepreneur is a person who starts and/or operates a business.

In a private enterprise system, any individual is free to enter into business for himself or herself. At any given time, many potentially profitable opportunities exist in the environment. But these opportunities must be recognized and grasped by individuals with abilities and desire strong enough to assure success.

The Rewards and Drawbacks of Entrepreneurship

The rewards of entrepreneurship are:

The reward of profit.

The financial return of any business must compensate its owner for investing his or her personal time and personal savings before any true profits are realized.

Entrepreneurs expect a return that will not only compensate them for the time and money they invest but also reward them well for the risks and initiative they take in operating their own businesses.

The profit incentive is a more powerful motivator for some entrepreneurs.

The reward of independence.

Freedom to operate independently is another reward of entrepreneurship. Some entrepreneurs use their independence to achieve flexibility in their personal lives and work habits.

Entrepreneurs in general appreciate the independence inherent in entrepreneurial careers. They can do things their own way, reap their own profits, and set their own schedules.

The reward of a satisfying way of life.

Entrepreneurs frequently speak of the satisfaction they experience in their own businesses. Some even refer to the work they do as fun.

Entrepreneurial firms that remain small are often called lifestyle businesses. A lifestyle business is a business that fits an owners lifestyle and provides satisfaction because it reflects the owners special interests and pattern of life.

The drawbacks of entrepreneurship are:

Personal stress.

Starting and operating ones own business typically demands hard work, long hours, and much emotional energy. Entrepreneurs experience the unpleasantness of personal stress as well as the need to invest much of their own time and labor.

Possibility of business failure.

There is no guarantee of success or even of a bailout for a failing owner.

Who are the Entrepreneurs?

The characteristics of entrepreneurs are:

1) Need for achievement a desire to succeed, where success is measured against a personal standard of excellence.

2) Willingness to take risk willingness to take financial risks, career risks, social risks, and psychic risks.

3) Self-confidence feeling that one can meet the challenges that confront one and possessing internal locus of control, which is the belief that ones success depends on ones own efforts.

4) Passion for the business a level of enthusiasm that creates willingness to work hard.

There are three types of entrepreneurs:

1) Founder an entrepreneur who brings a new firm into existence.

2) General manager an entrepreneur who functions as an administrator of a business.

3) Franchisee an entrepreneur whose power is limited by a contractual relationship with a franchising organization.

There are two patterns of entrepreneurs:

1) Artisan entrepreneur a person who starts a business with primarily technical skills and little business knowledge.

2) Opportunistic entrepreneur a person who starts a business with both sophisticated managerial skills and technical knowledge.

Artisan entrepreneurs:

1) Are paternalistic, that is they guide their businesses much like their families.

2) Are reluctant to delegate authority.

3) Use few capital sources to create their firms.

4) Define marketing strategy in terms of the traditional price, quality, and company reputation.

5) Use primarily personal sales efforts.

6) Do little planning for future growth or change, thus, using a short time orientation.

Opportunistic entrepreneurs avoid paternalism, delegate authority as necessary for growth, employ various marketing strategies and types of sales efforts, obtain original capitalization from more than two sources, and plan for future growth.

An entrepreneurial team is formed when two or more individuals come together to function in the capacity of entrepreneurs.

Entrepreneurial ventures can be classified into:

1) Marginal firm any small firm that provides minimal profits to its owner.

2) Attractive small firm any small firm that provides substantial profits to its owner.

3) High-potential venture a small firm that has great prospects for growth.

The Changing Context of Small Business

In general, a small business has the following characteristics:

1) One individual or a small group of individuals supplies financing of the business.

2) Except for its marketing function, the business operations are geographically localized.

3) Compared to the biggest firms in the industry, the business is small.

4) The number of employees in the business is usually fewer than 100.

The changing business environment presents serious challenges to entrepreneurial and small firms. These challenges are:

The growth of superstores.

The big chains are now moving into smaller towns at a breakneck pace. Large chain superstores carry an array of merchandise and/or feature price levels that are guaranteed to attract a large number of customers.

Expansion of information technology and the Internet.

It seems clear that computers and related aspects of modern technology have permanently changed and will continue to change the way we do business. Companies of all sizes use information technology to become more effective.

The Internet links local computer networks worldwide and allows messages to travel at very high speeds, effectively providing a small company with a worldwide reach.

Emergence of a global economy.

The trend toward a global economy has brought a new kind of competition and also opened up business opportunities. Even though small businesses are typically situated in one locality, many of them now export or import products across national boundaries.

The Winning Hand of Entrepreneurs

A small entrepreneurial firm may achieve a potential competitive edge by using:

1) Customer focus The firm should meet customer needs but with a shift of emphasis away from sales and marketing, and toward customer service.

2) Integrity and responsibility The firm should have a solid reputation for honesty and dependability.

3) Innovation The firm should see things differently and find better ways of doing things.

Getting Started in Entrepreneurship

There are four routes to entrepreneurship:

1) Enter a family business.

2) Open a franchised business.

3) Start a new business.

4) Buy an existing business.

The ideal time for entrepreneurship appears to lie somewhere between the middle 20s and the middle 30s, when there is a balance between preparatory experiences on the one hand and family obligations on the other.

A refugee is a person who becomes an entrepreneur to escape an undesirable situation:

1) Foreign refugee a person who leaves his or her native country and becomes an entrepreneur in the new country.

2) Corporate refugee a person who leaves big business to go into business for himself or herself.

3) Parental refugee a person who leaves a family business to show the parent that he or she could do it alone.

4) Feminist refugee a woman who experiences discrimination and elects to start a firm in which she can operate independently without interference of male co-workers.

5) Housewife refugee a housewife who starts her own business after her children are grown or at some other point when she can free herself from household responsibilities.

6) Society refugee a person who senses alienation from the prevailing culture and expresses it through such entrepreneurial activity as a soil conservation business or an energy-saving business.

7) Educational refugee a person who tires of academia and decides to go into business.

Many who actually make the move into entrepreneurship are stimulated by a precipitating event, such as job termination, job dissatisfaction, or an unexpected opportunity.

Entrepreneurship in the New Millennium Page 1