Small Business Management Chapter 1

Flashcard maker : Lily Taylor
Why the Interest in Small Business
-The number of small businesses is growing rapidly.
-Small firms generate most new private employment
-The public favors small business (at least sentimentally).
-There is increasing interest in small business entrepreneurship at high schools and colleges.
-There is a growing trend toward self-employment.
-Entrepreneurship is attractive to people of all ages.
Number of Small Businesses Is Growing Rapidly
-There are about 23 million small businesses in the United States.
-These organizations create 75 percent of the new jobs and employ 50 percent of the country’s private workforce.
-They also represent more than 99 percent of all employers and 97 percent of exporters
Small business must have at least two of the following features:
-Management is independent, because the manager usually owns the business.
-Capital is supplied and ownership is held by an individual or a few individuals.
-The area of operations is primarily local, although the market is not necessarily local.
-The business is small in comparison with the larger competitors in its industry
Entrepreneurial venture
the principal objectives of the owner are profitability and growth
Small business
independently owned and operated and is not dominant in its field
Small business owner
establishes a business primarily to further personal goals, including making a profit.
Entrepreneur
goals include achievement, profit, and growth, achieved through innovation and strategic management
Some Unique Contributions of Small Business
-Encourage innovation and flexibility.
-Keep larger firms competitive.
-Develop risk takers.
-Generate new employment.
-Provide greater employee job satisfaction.
Problems facing small businesses
-Recession/current economic issues.
-Retirement or transition.
-Capital or financing issues.
-Unexpected growth.
-Succession
*******shortage of capital is the greatest problem facing small business owners.
Inadequate Management
Many owners tend to rely on one-person management and seem reluctant to vary from this managerial pattern.
They tend to guard their position very jealously and may not select qualified employees, or may fail to give them enough authority and responsibility to manage adequately
Some Current Trends Challenging Small Business Owners
-Exploding technology
-Occupational and industry shifts
-Global challenges
Occupational and Industry Shifts
Reinvention
Reengineering
Downsizing
Reinvention
The fundamental redesign of a business, often resulting in reduction in size and markets
Reengineering
The redesign of operations, starting from scratch
Downsizing
reducing the number of employees to increase efficiency
Also called rightsizing
Why People Start Small Businesses
-Satisfying personal objectives
-Achieving business objectives
Satisfy Personal Objectives
-Achieve independence.
-Obtain additional income.
-Help their families.
-Provide products not available elsewhe
Business Objectives
the goals toward which the activities of the business are directed
Service, profit, social, growth
Profit motive
expecting to make a profit as the reward for taking the risk of starting and running the business
Social objectives
goals regarding assisting groups in the community and protecting the environment
Characteristics of Successful Entrepreneurs
-Desire independence.
-Have a strong sense of initiative.
-Are motivated by personal and family considerations.
-Expect quick and concrete results.
-Are able to react quickly.
-Are dedicated to their businesses.
-Enter business as much by chance as by design.
What Leads to Success in Managing a Small Business?
-Serving an adequate and well-defined market for the product.
-Acquiring sufficient capital.
-Recruiting and using human resources effectively.
-Obtaining and using timely information.
-Coping effectively with government regulations.
Having expertise in the field on the part of both the owner and the employees.
Being flexible.
High-knowledge industries
those in which 40 percent or more of human resources are professionals, technicians, or other “knowledge workers.”
Examples of Factors Affecting Industry and Business Trends
Economics
Technology
Lifestyle
Political-Legal antitrust regulations
Demographics
Some Areas of Concern for Small Business Owners
The success of smaller firms tends to be limited by factors such as inadequate management, shortages of capital, government regulation and paperwork, and lack of proper recordkeeping.
Two other concerns are poorly planned growth and the threat of failure.
Poorly Planned Growth (trapped by success)
Despair over the loss of closeness in important personal relationships.
Unshakable anxiety despite accomplishments.
Anger toward family, employees, and customers.
Frustration that the lack of significant current progress is preventing forward movement.
The paradox itself: You own your business, yet you don’t enjoy it.
Stages in the development of a small business
Owner-manager/worker
Owner-manger/workers (hires workers and delegates)
Owner-mangers/workers (hires workers, managers, and delegates)
Threat of Failure
Discontinuance -a voluntary decision to terminate a business
Failure -results from inability to succeed in running a business
Formal failures -failures ending up in court with loss to creditors and/or investors
Personal (informal) failures-the owner who cannot succeed voluntarily terminates the business
Resources to Overcome the Threat of Failure
Business incubators-nurture young firms and help them to survive and grow during the startup period when they are most vulnerable.

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