Small Business: Its
Opportunities and
Rewards
Chapter 1
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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Learning Objectives
LO1 Describe the scope of small business in the United
States.
LO2 Differentiate between small businesses and highgrowth ventures.
LO3 Explain the rewards entrepreneurs can achieve
through their businesses.
LO4 Dispel key myths about small businesses.
LO5 Identify actions key to becoming a small business
owner.
LO6 Recognize how small businesses are important to
our economy and your community.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-2
Starting an Entrepreneurial
Small Business
Small Business
 involves 1-50 people and has its owner managing
the business on a day-to-day basis
Entrepreneur
 a person who owns or starts an organization,
such as a business
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-3
Starting an Entrepreneurial Small Business:
Four Key Ideas
1.
2.
3.
4.
Believe that you can do this
Planning + Action = Success
Help Helps
Do well. Do Good.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-4
Starting an Entrepreneurial
Small Business
 Self-efficacy
 A person’s belief in
his or her ability to
achieve a goal.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-5
Entrepreneurs Are Everywhere
Small Business Administration
 a part of U.S. government which provides
support and advocacy for small business
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-6
The Top 10 Occupations
For Entrepreneurs
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-7
Entrepreneurs Are Everywhere
 Goods or services
 The tangible things
(goods) or intangible
commodities
(services) created for
sale.
 Firm
 An organization that
sells to or trades
with others.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-8
Entrepreneurs Are Everywhere
 Novelty
 Characterized by
being different or
new.
 Imitative
 Characterized by
being like or copying
something that
already exists.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-9
Entrepreneurs Are Everywhere
 Self-employed
 Working for yourself.
 Founders
 People who create
or start new
businesses
 Franchise
 A prepackaged
business bought,
rented, or leased
from a company
called a franchisor .
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-10
Entrepreneurs Are Everywhere
 Buyers
 People who
purchase an existing
business.
 Heir
 A person who
becomes an owner
through inheriting or
being given a stake
in a family business.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-11
The Many Types of Entrepreneurial Small
Businesses
Small and medium enterprise
 The international term for small businesses.
Independent small businesses
 A business owned by an individual or small
group.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-12
The Many Types of Entrepreneurial Small
Businesses
Owner-managed firms
 A business run by the individual who owns it.
Serial entrepreneurs
 People who open multiple businesses
throughout their career.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-13
Differences between Small Businesses and
High-Growth Ventures
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-14
Small Business Owner vs.
Entrepreneurs
 Small Business
 Founder has previous experience
 Started by individual
 Business in same industry
 Industry dominated by small firms
 Slow growth
 Limited ambition
 Little capitalization
 Entrepreneurship
 Growth industry or niche
 Growth ambitions
 Capitalized for growth
 Innovation and uniqueness
 Team of founders and network of support
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-15
The Many Types of Entrepreneurial Small
Businesses
Innovativeness
 refers to how important a role new ideas,
products, services, processes, or markets play in
an organization
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-16
Entrepreneurs and Firm Growth Strategies
Overall growth strategy
 One of four general ways to position a business
based on the rate and level of growth
entrepreneurs anticipate for their firm.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-17
Types of Firms
Figure 1.1
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-18
Entrepreneurs and Firm
Growth Strategies
Lifestyle or part-time firm
 A small business primarily intended to provide
partial or subsistence financial support for the
existing lifestyle of the owner, most often
through operations that fit the owner’s schedule
and way of working.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-19
Entrepreneurs and Firm
Growth Strategies
Traditional small business
 A firm intended to provide a living income to the
owner, and operating in a manner and on a
schedule consistent with other firms in the
industry and market.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-20
Entrepreneurs and Firm
Growth Strategies
High-performing small business
 A firm intended to provide the owner with a high
income through sales or profits superior to those
of the traditional small business.
High-growth venture
 A firm started with the intent of eventually going
public, following the pattern of growth and
operations of a big business.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-21
Entrepreneurs and Firm
Growth Strategies
Main street businesses
 A popular term for small businesses reflecting
the idea that these are the kinds of firms you
would expect to find on the main street of a
typical American city, and are the opposite of big
businesses or “Wall Street” businesses.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-22
Rewards for Starting a Small Business
Growth rewards
 what people get from facing and beating
challenges
Income rewards
 money made by owning one’s own business
Flexibility rewards
 ability of business owners to structure life in the
way that suits their needs
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-23
Rewards New Entrepreneurs Seek Through
Small Business
Figure 1.2
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-24
Drive: The surprising truth about what
motivates
http://ed.ted.com/on/zdAE1
6IS
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-25
Myths about Small Businesses
 Not enough financing
 You can’t start a business during a recession
 To make profits, you need to make something
 If you fail, you can never try again
 Students don’t have the skills to start a business
 Ninety percent of all new businesses fail within
two years
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-26
Myths about Small Businesses
Crowdfunding
 Funding a business online through the collective
involvement of others who provide donations,
loans, or investments.
Bootstrapping
 Using low-cost or free techniques to minimize
your cost of doing business.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-27
Four Elements Needed to Get Your
Business Started (BRIE)
Figure 1.3
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-28
Small Business and the Economy
 Creative destruction
 The way that newly
created goods,
services, or firms can
hurt existing goods,
services, or firms.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-29
Major Inventions from Small Businesses
and Student-Started Businesses
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-30
Two Aspects of Global Entrepreneurship
Factor-driven economy
 A nation where the major forces for jobs,
revenues, and taxes come from farming or
extractive industries like forestry, mining, or oil
production.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-31
Two Aspects of Global Entrepreneurship
Efficiency-driven economy
 A nation where industrialization is becoming the
major force providing jobs, revenues, and taxes,
and where minimizing costs while maximizing
productivity (i.e. efficiency) is a major goal.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-32
Two Aspects of Global Entrepreneurship
Innovation-driven economy
 A nation there the major forces for jobs,
revenues, and taxes come from high-value added
production based on new ideas and technologies
and from professional services based on higher
education.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-33
Early-Stage Entrepreneurial Activity for 21 Nations
in 2011, by Phase of Economic Development
Figure 1.4
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-34
Global Entrepreneurship
Opportunity-driven entrepreneurship
 Creating a firm to improve one’s income or a
product or service.
Necessity-driven entrepreneurship
 Creating a firm as an alternative to
unemployment.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-35
Global Entrepreneurship
Virtual Instant Global Entrepreneurship
(VIGE)
 process that uses the Internet to quickly create
businesses with a worldwide reach.
 Depends on using websites like eBay or eLance to
quickly establish a global presence
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-36
Beyond Small Business:
CSI Entrepreneurship
Creation
 focus which looks at
the making of new
entities
Customer-focus
 focus which refers
to being in tune
with one’s market
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-37
Beyond Small Business:
CSI Entrepreneurship
Efficiency
 focus which refers
to doing the most
work with the
fewest resources
Innovation
 focus which looks at
a new thing or a
new way of doing
things
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-38
Beyond Small Business:
CSI Entrepreneurship
Independent entrepreneurship
 form of entrepreneurship in which a person or
group own their own for-profit business
Corporate entrepreneurship
 form of entrepreneurship which takes place in
existing businesses around new products,
services or markets
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-39
Beyond Small Business:
CSI Entrepreneurship
Social entrepreneurship
 form of entrepreneurship involving the creation
of self-sustaining charitable and civic
organizations, or for-profit organizations which
invest significant profits in charitable activities
Mindshare
 degree of attention to which your target market
pays to your idea or organization
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1-40
Challenge and the
Entrepreneurial Way
If you don’t succeed the first time, try, try again
Scale back
Bird in the hand
Pivot
Take it on the road
Ask for help
Plan to earn
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1-41
Challenge and the
Entrepreneurial Way
 Effectuation
 An approach used to
create alternatives in
uncertain
environments.
 Crowdsourcing
 Techniques often
based on Internetbased services to get
opinions or ideas
through the
collective
involvement of
others.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1-42