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Appendix A

Appendix A. Managing Small Business Start Ups. Entrepreneurship. Process of initiating a business venture organizing necessary resources assuming risks and rewards With downsizing and frustration with corporate lifestyles, many persons are electing to become entrepreneurs.

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Appendix A

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  1. Appendix A Managing Small Business Start Ups

  2. Entrepreneurship • Process of initiating a business venture • organizing necessary resources • assuming risks and rewards • With downsizing and frustration with corporate lifestyles, many persons are electing to become entrepreneurs.

  3. Small Businesses • Generally fewer than 500 employees • Create jobs (1987-1992: small, fast-growing firms added more high-paying jobs than large companies eliminated) • Create new products and services • Provide opportunities for persons who may have careers blocked in established corporations. (Female entrepreneurs in 33% of new ventures in 1994 vs. 24% in 1975)

  4. Small Businesses • About 97% of all businesses • Include about 90% of corporations • Contribute almost half the GDP • Provide majority of employment

  5. Small Businesses • Typically viewed as having high failure rates • 40-50% within 3 years • 60-80% within 5 years • However, 20% within 5 years may be more accurate. • 10% for female owned

  6. Personality Characteristics of Entrepreneurs • Independence • Internal Locus of Control (feel they control their own destinies) • Need to achieve • High self-confidence • High tolerance for ambiguity • High energy level

  7. Starting an Entrepreneurial Firm Develop a BUSINESS PLAN: • Product/Service? • Customers? • Which Legal Form to Use? • How to Finance? • Tactics to Establish? • How to Operate?

  8. Product/Service • Most ideas come from one’s profession or products/services used. Customers • Wholesale vs. Retail • Geography • Demographics • Competition for those customers

  9. Legal Form of the Business • Proprietorship = unincorporated business owned by an individual • Partnership = unincorporated business owned by two or more people • Corporation = artificial entity existing apart from its owners.

  10. How to Finance? • Obtaining Financial Resources • Personal Equity • Debt financing • Equity financing from Others • including Partners, Stockholders, and Venture Capital firms • they are investing in exchange for share of ownership in the company • Managing Financial Resources • Budgeting is critical, including allowances for initial losses

  11. How to Establish? • Start-up • Buy-out • Franchise • Spin-off • Incubator participation

  12. How to Operate? • Decisions to be made with respect to: • Production methods • Suppliers • Marketing techniques • Leadership styles • Human Resource policies, etc.

  13. Stages of Growth – Key Issues • Existence = Begins to produce product/service and get customers. • Survival = Has begun to generate sufficient cash flow. • Success = Now profitable. May consider using professional managers. • Takeoff = Delegation critical to manage and finance growth. • Resource maturity = Can begin acting like a large mature company, balancing stability and entrepreneurship with planning and controls.

  14. Getting Help • Accountants • Attorneys • A board of directors • Small Business Administration • Small Business Development Centers • SCORE (Service Corps of Retired Executives) • Trade Associations • Books • Internet

  15. Intrapreneurship • Intrapreneur= Someone who promotes innovation within an existing organization. • Requires: • Vision • Persistence • Ability to Build and Lead Teams

  16. Advice for Intrapreneurs • Come to work each day willing to be fired. • Do any job needed to make your project work, regardless of your job description. • Remember that it is easier to ask for forgiveness than for permission.

  17. Facilitating Intrapreneurship • Flexible organizational design • Non-Bureaucratic controls • Autonomous Venture Teams • Selection, training, and mentoring for intrapreneurship • Reward risk-taking • Tolerate failures

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