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Small Business
Entrepreneurs:
Characteristics and
Competencies
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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Objectives:
• Learn about entrepreneurial personality types
• Learn the competencies of the successful entrepreneur
• Discover the types of career paths entrepreneurs pursue
• Understand the challenges of family business owners
• Recognize the special nature of entrepreneurial teams
• Gain insight into the challenges women and minority
business owners face
• Understand the situation of people who become
business owners later in life
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• Focus on Small Business: Internet
entrepreneur Laura Tidwell
• The Entrepreneurial Personality:
– Classic entrepreneur: Bill Gates, Sam
Walton
•
•
•
•
Loner, socially isolated
Hard worker
Fast learner
Risk-taker seeking wealth
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• Original Classic Entrepreneur:
– Hard worker
– Loner
– Socially isolated
– Fast learner
– Wealth seeker
– Risk taker
1700’s-1950’s
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• Idea Person:
– Hard worker
– Loner (could team up)
– Socially isolated
– Fast learner
– Fame seeker
– Risk taker
1950’s-1980’s
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• Small Business Owner:
– Hard worker
– Loner
– Socially isolated
– Average learner
– Average income seeker
– Risk averse
1950’s-1980’s
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• Contemporary Classic Entrepreneur:
– Hard worker
– Loner
– Socially isolated
– Fast learner
– Wealth seeker
– Risk taker
1950’s-1980’s
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• Salesperson Entrepreneur:
– Hard worker
– Team player
– Socially connected
– Fast learner (socially)
– Average learner (technologically)
– Acceptance seeker
– Risk averse
1980’s-Today
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• Managerial Entrepreneur:
– Hard worker
– Team player
– Socially connected
– Fast learner
– Wealth seeker
– Risk averse
1980’s-Today
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Entrepreneurial Competencies
• Competencies: forms of business-related
expertise
• Basic business competency: understanding
the organizational and business processes
of a firm
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• Key business functions: activities
common to all businesses
– sales, operations, accounting, finance, and
human resources
• Industry-specific knowledge: activities,
skills, and knowledge, specific to
businesses in an industry
– Understanding dimple patterns for making
golf balls
– Chemistry involved in Heating and A/C work
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• Resource competencies: the ability or
skill of the entrepreneur at finding
expendable components necessary to
the operation of the business
– Time
– Information
– Location
– Financing
– Raw materials
– Expertise
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• Determination competencies: skill
identified with the energy and focus
needed to bring a business into
existence
• Opportunity competencies: skills
necessary to identify and exploit
elements of the business environment
that can lead to a profitable and
sustainable business
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Professionalization
• Professionalization: the extent to which a firm
meets or exceeds the standard business
practices for its industry
• Standard business practice: a business action
that has been widely adopted within an industry
or occupation
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• Expert business professionalization: a
situation that occurs when all the major
functions of a firm are conducted
according to the standard business
practices of its industry
– These firms inspire the highest levels of trust
among their customers.
• Doctors
• Insurance providers
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• Expert business professionalization:
– Subcontractors: big firms require
subcontractors to meet hundreds of
corporate-dictated procedures
– Franchises: corporate parents specify most
of the procedures for the business’s
operation
– International quality certifications (ISO 9000):
small businesses must write in full detail how
they will ensure consistency and
professionalism
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• Specialized business professionalization:
founders or owners who are passionate
about one or two of the key business
functions, such as sales, operations,
accounting, finance, or human resources
– Specialized firms tend to generate moderate
levels of trust among customers.
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• Minimalized business
professionalization: a situation that
occurs when the entrepreneur does
nearly everything in the simplest way
possible
– No systematic accounting
– Personal sales
– Street vendors, swap meets, art fairs
• Very difficult to gain trust
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Entrepreneurial Careers
• Habitual entrepreneurs: owners for a lifetime,
sometimes in one business, sometimes across
several firms
– No succession plan
– Figure to keep working until they can no longer
continue
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• Growth entrepreneurs: lifetime owners whose
goal is major success
– If they top out with one business, they’ll start
another growth-oriented company, often before
they exit the first one
– When they do retire, they tend to want to micromanage their successors
• Harvest entrepreneurs: owners with an exit plan
– Work first in order to play later
– Build one company at a time, sell it, enjoy the
proceeds, and then start another
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Question
What term describes entrepreneurs who
alternate periods of growth and stability?
a)
Spiral (Helical) entrepreneurs
b)
c)
d)
Occasional entrepreneurs
Habitual entrepreneurs
Growth entrepreneurs
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• Spiral (helical) entrepreneurs: alternate periods of
growth and stability
– Driven by a need to balance family and business
– The endgame strategy is scaling down the
business
• Occasional entrepreneurs: people who generally
have another primary job
– Fascinated by entrepreneurship and pursue it
periodically
– Classic part-time entrepreneur
– Seasonal basis (doing taxes, or making Christmas
wreaths)
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Family Businesses
• Family business: a firm in which one family
owns a majority stake and is involved in the
daily management of the business
• 1/3 of the Standard & Poor’s 500 are family
owned and managed
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Example
It’s All Relative
• Robert Douglas Jr. graduated from Eckerd College
with a political science degree and got his
commercial pilot license worked as a flight engineer
for a father-son airline business
• Enjoying the family atmosphere, Robert Jr. decided
to work for his father at The Black Dog Tavern Co.
Inc.
– A restaurant located at Martha’s Vineyard in
Massachusetts
– T-shirts famous for Ivy Leaguers
http://www.entrepreneur.com/magazine/entrepreneur/2005/march/76152.html
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Question
What percentage of U.S. businesses are small
family businesses?
a)
4%
b)
c)
d)
25%
71%
39%
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• Family businesses make up over 1/2 of
the businesses in the United States.
• 39% of businesses in the United States
are small family businesses.
• They employ 58% of America’s
workforce.
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Family Business Challenges
• Role conflict: the kind of problem that arises
when people have multiple responsibilities,
such as parent and boss, and the different
responsibilities make different demands on
them
– Whenever possible, make decisions based on
business necessities.
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Question
What is the term for the process of
intergenerational transfer of a business?
a)
Transition
b)
c)
d)
Succession
Take-over
Acquisition
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Family Business Challenges
• Succession: the process of intergenerational
transfer of a business
– Lack of clear transition plan is the death knell
– Answer is taking a professional approach
– Only 5% of entrepreneurs can rely on family
members to take over
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Women and Minorities
• Women-owned businesses are one of the
fastest-growing sectors of all United States
businesses
• 30% of all businesses are majority owned by
women, with 18% equally owned by men and
women
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Example
Girl Power
• Women Presidents’ Organization brought together
women entrepreneurs and elementary-age girls to
teach financial literacy
• Cash flow – financial game created for kids
• “WPO members wanted to give back in a
meaningful way that fit with our mission of
accelerating and enhancing the growth of womenowned businesses”
• Several girls already own a craft business and plan
to create a board game
– Call Cash flow an inspiration
http://www.entrepreneur.com/magazine/entrepreneur/2007/september/183042.html
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• Minority-owned businesses represent
11% of all United States businesses.
• 1992-1997 Growth rates
–
–
–
–
–
–
General Business
Minority-owned
Native-American/Alaskan
African-American
Hispanic
Asian/Pacific Islander
7%
30%
84%
26%
30%
30%
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Access Problems
• Discrimination in financing:
– Minority applicants were denied at twice the rate
of whites.
– Asian and Hispanic owners pay higher interest
rates on their loans
– Set asides: government contracting funds
earmarked for particular kinds of firms, such as
minority- or women-owned firms
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• Late career entrepreneurs: people who
begin their businesses after having
retired or resigned from work in
corporations at age 50 or older
– Get advice
– Take control over life
– Networking
– Keep personal finances out of the business
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Questions?
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