FM20731 – Entrepreneurship
Business Ownership
Test Marketing
Week 4 – October 26, 2004
1
Women-owned Businesses
•
•
•
•
Increased 89% from 1987 to 1997
8.5 million businesses!
By 1999, $3.6 trillion
27.5 million employees
– 35-40% greater than Fortune 500 co’s
2
Why the Increase?
• Dissatisfaction with corporate life
– Layoffs
– Glass ceiling
• Lower pay
• Limited advancement
• Desire for balanced life
– A startup is not the answer!
• Desire for challenge
– 44% cited this reason for starting a business
• Really, many factors
3
Average Receipts Per Firm
$3,381,951
Women
Men
Equal
All U.S.
$1,986,111
$891,043
$582,482
$151,129
$847,639
$804,677
$259,218
All firms
Firms with Paid Employees
• Why are women’s businesses smaller?
4
Reasons why Smaller?
• Motivational Differences
– Other things more important than money
• Flexibility
– Different measures of success than men
– Other concurrent pursuits
5
Women-Owned by Industry
55%
Women-owned
All U.S.
43%
17%
14%
11%
3%
9%
2% 3%
2%
4%
2%
11%
10%
7%
4%
Construct. Manufact. Transport. Wholesale
Retail
Finance
• Service companies usually smaller
Services
Other
6
Reasons why Smaller?
• Newer companies
– But growing quickly
• Possible obstacles
– Access to capital
– Banks, SBA, others are changing this
7
Things are Changing
•
•
•
•
Many women are having success
Second-generation women taking over
Corps working to improve
Women may lead new wave of business
– More modern business styles
• Cooperative
• Less hierarchical
• Better for changing environment
8
Minority Entrepreneurs
% Change in Self-Employment 1988-1998
56.5%
30.1%
28.7%
1.1%
White
Black
Asian
Hispanic
9
African-American
• 108% increase in businesses 1987-1997
– Almost 900,000
– Expected to reach 2.2 million by 2010
• $59.3 billion in revenue in 1997
– 109% increase
• 35% in NY, CA, TX, FL
• 24% of firms in DC
10
Long History of A.A. Entrep.
• James Forten
– Successful Phila. Businessman
– Late 18th century
• Madam C. J. Walker
– First African-American Female Millionaire
– Late 1800’s
• 1910, most likely to be self-employed
– Of all ethnic and racial groups
11
AA-Owned by Industry
53%
African-American-owned
All U.S.
43%
14%
11%
9%
7%
1%
3%
14%
11%
4%
7%
5%
3% 4%
Construct. Manufact. Transport. Wholesale
11%
Retail
Finance
Services
Other
12
Barriers for African-Americans
• Discrimination
• Biggest: Access to capital
• As with women, being addressed
13
Asians and Pacific Islanders
• 1.06 million businesses in 1997
– 180% increase over 1987
• $275 billion in receipts
– 463% increase!
• Majority in CA, NY, TX, and HI
– HI has largest %, NY largest number
• Glass ceiling
– Viewed as good engineers, no managers
14
Asian Group Owned by Industry
44% 43%
Asian & Pacific Islanders
All U.S.
21%
14%
11%
3%
11%
3% 3%
4% 4%
6%
11%
8%
7%
4%
Construct. Manufact. Transport. Wholesale
Retail
Finance
Services
Other
15
Asian Group Ethnicity
27.7%
18.2%
14.8%
9.2%
10.7%
9.3%
7.7%
1.7%
Asian
Indian
Chinese
Filipino
Japanese
Korean
Vietnamese Other Asian Hawaiian
0.4%
Other
16
Asian Successes
• Many industries
• 5,000 hotel owners, 8,000 hotels
– 33% have graduate degrees
– 80% have at least college degree
• 1/3 of Silicon Valley firms by early
90’s
17
Hispanic (in 1997)
•
•
•
•
•
1.2 million firms
1.3 million employed
$186.3 billion in revenue
CA, TX, FL, and NY largest numbers
NM highest % Hispanic-owned
18
Hispanic-Owned by Industry
42% 43%
Hispanic
All U.S.
13%
16%
13% 14%
11%
7%
2% 3%
4%
7%
5%
3% 4%
Construct. Manufact. Transport. Wholesale
11%
Retail
Finance
Services
Other
19
Hispanic-Owned by Ethnicity
39.3%
23.9%
15.7%
10.4%
Mexican
L. American Other Hisp.
Cuban
5.8%
4.8%
Puerto
Rican
Spanish
20
Hispanic Successes
• Various industries
• Serving Hispanic community
• Restaurant industry
21
Family Businesses
•
•
•
•
•
•
Account for 78% of all job creation
60% of all employment
Over 80% of N. American businesses
Majority of international businesses
35% of Fortune 500
Some surprises:
– Ford, J&J, Marriott, Motorola, Nordstrom,
Philip Morris, Wal-Mart, Walt Disney
22
Advantages of Family Business
•
•
•
•
•
•
Stability
Trust
Resilience
Positive public perception
Speed
Ability to sacrifice for long haul
• Only if everyone gets along!
23
Disadvantages of Family Business
• Family issues spill over into business
• Success in family different than in bus.
24
Entrepreneurial Couples
• 1.8 million by 1993
• 66% increase in 80’s
25
Ups and Downs of Entrep. Couple
• Spouses can do shifts @ work & home
• Marriage and careers intertwined
– Divorce may cause one to lose business
• Conversation at home about business
• Too much togetherness
• Not enough togetherness if shifts
26
Advice for Entrep. Couples
• Each have specific responsibilities
– Written agreement can help
• Must have same goals, same vision
• What if couple divorces?
– One may have to buy other out
– Might have to sell business
• If can’t come up with cash or agree how
– Prenuptial agreement advised
• Or postnuptial if already married
27
Bringing in the Children
• Only successful 20% of the time!
• Only 13% of third generation
• Why?
– Don’t want to work the business
• Disinterested in industry
• Don’t want to live in parents’ shadow
– Sibling rivalry
– Hard for parents to let go
• Want things done their way
28
Succession Plan
•
•
•
•
Transferring assets/ownership is easy
Transferring leadership is hard
Should be done over time
Strategize
– Timing
– When will children be capable?
• Make plans clear!
– So children know what is coming
– Everyone should understand expectations
29
Other Issues
• Sell to outsider or employees
– An often overlooked option
• Active vs. inactive family members
– Will all get same part of business?
– Will those that don’t get compensated?
30
Low entry vs. delayed entry
• Children start entry level
– Learn business from ground up
– “Earn” it
– May not be good at training own children
• Work elsewhere, come in as management
– Don’t know business as well
– Jealousy
• No universal right answer
31
Hiring and Compensation
•
•
•
•
Best to hire family only if qualified
Best to pay at market rates
Should have a genuine interest
OK for bonuses, but separately
32
Choosing a Successor
• Problem if several are interested
• Appointing one may hurt others
• Shared responsibility is difficult
33
Final Project
•
•
•
•
Teams of 3-5
Best if mix of FM and FD students
There will be work time during class
Today:
– Determine Teams
– Brainstorm product ideas, choose one
• Can be a line of products
• You do not need to prototype, but can help
– Create a Mission Statement
– Make plans for test marketing
34
Create a Business Plan
• Mission Statement
(wk 3)
• Product idea(s) and
description(s)
– Test Marketing (wk 4)
• Bus. Envirmnt (wk 2)
• Marketing Plan (prior
courses, wk 6)
• Management Team
(wk 7)
• Financial Data (wk 9)
• Legal Considerations
(wk 7)
• Risks & Assumptions
(wk 10)
35
Other Elements You Might Include
• Sources of Financing (week 8)
• Exit Strategy (week 10)
• Insurance Requirements (week 7)
36
Basics of Market Research
Collect, analyze, and interpret in a systematic
manner data relevant to a particular marketing
question
• Collect
– Gather from sources
• Analyze
– Statistics
• Systematic
– Consistent
– Random
• Relevant!
• Interpret
– Theorize
37
Primary Data
• Original information (usually)
• Collected for a specific study
• Can be very expensive
38
Survey Methods: Telephone Study
• Most popular method
• Expensive
– People
– Computers
– Tolls
• Very fast and accurate (+- 3%)
• Missing: Unlisted phone numbers
– May be an important part of market
• TV overnights – nightly polls
39
Survey Methods: Personal Survey
• In person, at location – often at a mall
• Can be least expensive
– Do it yourself
• Very focused – single location
• Bias problems
– People can be suspicious
– Answer what they think you want to hear
– Make up answers
40
Survey Methods: Focus Groups
• Gather small representative group to ask detailed questions
• Log session – get to know better
• Usually compensate participants
• Sponsor is frequently
not known
• Observers hidden
behind one-way
mirror
41
Survey Methods: Mail Survey
• Much slower
– 10 days to get 80% of those who respond
• Single-digit % response rate typical
– Most people throw away
– Payment doesn’t help
– Selfish reasons increase response rates
• e.g. after-stay hospital survey
• Questions must be worded very carefully
• Anonymous and non-threatening
42
Sample
• Representative number of people from a
specific universe
• Everyone has equal chance of selection
– (i.e. it must be random to be useful)
• Can be surprisingly small and still be useful
43
Other Sources of Primary Data
• Customer check-out
– Supermarket discount cards
– Radio Shack
• In-store observation
– Successful buyers always on floor
• Post-sale survey forms
– Warranty forms
– Packed with delivery
• Crutchfield
• Negative form “why didn’t you buy”
• Newsletter “feedback” forms
44
Homework
• Study for Midterm
• Begin Test Marketing
45
Next Class – November 2
• Midterm Exam
• Teams
– Continue working on project
46