Small business : Definitions and Characteristics

Transcription

1 Small business : Definitions and Characteristics

2 Why Small Business Today? a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation Economic changes Globalization Increased competition Advancing technology New market niches 2

3 Cows, after you ve seen them for a while, are boring. They may be perfect cows, attractive cows, cows with great personalities, cows lit by beautiful light, but they re still boring. A Purple Cow, though. Now that would be interesting. Seth Godin, 2002

4 SMALL BUSINESS OWNERSHIP Description of a small business Owner is usually the manager Operates in one or very few locations Typically serves a small market Not dominant in its field Small business employment Ownership diversity SLIDE 4

5 Common Types of Small Businesses as Percent of All Small Businesses SLIDE 5

6 Checkpoint Beyond the formal definition of a small business, what four points can be used to describe a small business? Owner is usually the manager Business operates in one or very few locations Business typically serves a small market Business is not dominant in its field SLIDE 6

7 SMALL BUSINESS ADVANTAGES Meeting customer needs Providing unique services SLIDE 7

8 Checkpoint How can small businesses compete successfully with larger businesses? Smaller businesses are able to provide more personalized products and services to their customers. They are able to provide products and services where smaller orders and projects are required and tend to fill unique customer needs, which larger companies do not provide. SLIDE 8

9 COMMON REASONS FOR SMALL BUSINESS FAILURE Not keeping adequate records Not having enough start-up money Lack of management experience Lack of experience with the type of business Not controlling operating expenses Poor location for the business Failure to manage credit offered to customers SLIDE 9

10 SMALL BUSINESS ASSISTANCE University and college faculty members Local groups of business people Small Business Administration (SBA) SLIDE 10

11 Checkpoint List common reasons for small business failure. Not keeping adequate records Insufficient start-up money Lack of management experience Lack of experience with the type of business Not controlling operating expenses Poor location Failure to manage credit SLIDE 11

12 Definition of Small Business Independently owned and operated Not dominant in its field of operation Number of employees, depending on the industry Annual sales consideration, depending on the industry 12

13 Eight reasons why many small businesses fail. 13

14 Competitive Advantages of a Small Business Can maintain a closer relationship with its customers, employees, and its suppliers Has a smaller base, and hence can provide more individual attention to its customers Because of lower overhead, smaller firms can perform more efficiently. Small firms have greater flexibility because their size lets them adopt new processes, services, materials, and products. 14

15 Competitive Advantages of a Small Business (contd.) Small companies encourage competition in design and efficiency and help prevent larger firms from forming monopolies. The owner of a small business retains an element of control and autonomy that is dispersed in a larger company. Small businesses tend to produce well-rounded people because they provide a greater variety of learning experiences and more potential for 15 diversified interaction.

16 Competitive Advantages of a Small Business (contd.) The opportunities for freedom in decision making and the variety of activities leads to more creative and aggressive leadership. Small businesses tend to attract good management personnel and so reduce the overall chance of failure. Management people are attracted to smaller firms because: Advancement within smaller firms can be accelerated. Personnel tend to have greater responsibilities and duties. Work experience tends to be more diversified. 16

17 Disadvantages of a Small Business Some disadvantages of small business: The inability to hire qualified employees Lack of funds for expansion Tax burdens Limited or nonexistent credit with suppliers High costs for advertising Coping with competition Many of these disadvantages can be linked directly to improper planning and misuse of funds Success or failure revolves around Inadequate managerial ability Inadequate financing Poor competitive position 17

18 Organizational Stages of Small Business Growth

19 Stages in Firm Growth and Management Growth Stage Entrepreneur s Workload Stage 1. One-Person Operation Stage 2. Player-Coach Doing all of the work. Making contact with customers. Continuing to do some of the basic work, although learning to hire and supervise. Stage 3. Intermediate Supervision Rising above hands-on management; working through intermediate managers. Stage 4. Formal Organization Using plans and budgets; following policies and procedures. 19

20 Managing Versus Doing STAGE 1 STAGE 2 STAGE 3 STAGE 4 One-Person Operation Player-Coach Intermediate Supervision Formal Organization Time spent managing Time spent doing 20

21 Managerial Tasks of Entrepreneurs Planning Activities Creating an Organizational Structure Entrepreneurial Management Leading and Delegating Controlling Operations 21

22 THANK YOU 22