Chapter 1 - Small Business Ventures: Varieties and Impacts
high-growth ventures
- aim for growth rates of 25%+ per year - sales more than $1 million - aim to become big businesses and pursue high levels of professionalization and external funding - 5% of all businesses -> called *unicorns* - ex: Uber, Airbnb
high-performing small business
- level off after success of $100k to $1mil depending on industry - grow at rates of 5-15% a year - add employees and grow to multiple locations to maximize profitability - 20% of businesses
why are small businesses important for the economy?
- new jobs - new ideas (creative destruction) - new opportunities - new markets (importing/exporting) - e-commerce using VIGE
myths about small businesses
- not enough financing - you need to make something to make profits - students don't have the skills to start a business - 90% of all businesses fail within 2 years
strategies to overcome challenges the entrepreneurial way
- perseverance - scale back the level of resources you currently have - bird in the hand (effectuation - create alternatives in uncertain environments) - pivot (corridor principle - as you start pursuing one opportunity you will encounter others) - take it on the road by trying a different market - ask for help (crowdsourcing) - plan to earn - find the best idea for you and plan for action to make it happen
lifestyle or part-time firms
- sales ≤ $25k - provide enough profit to supplement an income but not enough to live - start and stay very small - can operate seasonally - growth quickly levels off after owners learn the basics of making money in their industry/setting - 53% of small businesses
names for entrepreneurial firms
- small and medium enterprises (SMEs) - independent small businesses - owner-managed firms
traditional small businesses
- smallest full-time businesses - schedule defined by customer needs, not owner - sales between $25k and $100k - growth levels off after operations settle and generate income to provide a living for the owner & family - 22% of small businesses
VIGE
- virtual instant global entrepreneurship - process that uses the internet to quickly create businesses with a worldwide reach
4 key things to consider when starting a small business:
1. believe that you can do this 2. planning + action = success 3. help helps 4. do well, do good
4 generic growth strategies
1. lifestyle or part-time firms 2. traditional small business 3. high-performing small business 4. high-growth ventures
BRIE Model
Boundary: creating a place for your business - in location and in people's minds Resources: money, product, knowledge, etc. that make up the business Intention: desire to start a business Exchange: moving resources/products/services in exchange for money
ex. of innovation-driven economies
Germany, Korea, US
ex. of factor-driven economies
Pakistan, Jamaica, Venezuela
ex. of efficiency-driven economies
Russia, Brazil, China
define entrepreneur
anyone who owns a business, so anyone self-employed
drop-shipping
business where you sell items in person or online but hold no inventory, referring sales to a 3rd party who handles the shipping and often financial transactions in your name
CSI entrepreneurship
corporate, social, independent
necessity-driven
creating a firm as an alternative to unemployment
opportunity-driven
creating a firm to improve one's income or a product or service
start-up process
feel -> check -> plan -> do
innovation-driven economies
focus on high-value-added production based on new ideas/technologies with a large service sector for domestic and export.
corporate entrepreneurship
focuses on bringing new products or services to market or opening up new markets for the firm
social entrepreneurship
founders of nonprofit organizations of those pursuing for-profit social ventures
what are the groups of entrepreneurs?
founders, franchise, buyers, heris
crowdfunding
funding a business online through the collective involvement of others who provide donations, loans, or investments
innovativeness
how important a role new ideas, products, services, processes, or markets play in an organization
what are most small businesses?
imitative - they do what other firms are doing with little variation
efficiency-driven economies
industrialized economies where minimizing costs and maximizing productivity is a major goal.
P2P lending
loans made from 1 or more individuals to the entrepreneur, rather than through a conventional bank
unicorns
most successful high-growth ventures with a valuation of $1 billion or more
factor-driven economies
nation relying on farming, mining, extracting (oil), and forestry for for jobs, revenues, and taxes.
motivation for entrepreneurship
opportunity-driven necessity-driven
founder
people who start a business
serial entrepreneur
person who opens multiple businesses throughout their career
franchise
prepackaged business you buy or lease from a franchisor
independent entrepreneurship
self-employed founders, owners of a for-profit business
sustainable/green entrepreneurship
social entrepreneurship focused on ecological issues
main street businesses
term for small businesses reflecting the idea that these are the kinds of firms you'd expect to find on the main street of a typical American street and are the opposite of big business or "Wall Street" businesses
overall growth strategy
the kind of business the owner would like to have from the perspective of how fast and to what level they would like the firm to grow
creative destruction
the way newly created goods, services, or firms can hurt existing goods, services, or firms
what makes entrepreneurial businesses different?
they show novelty in their products
heir
those who inherit or are given a stake in the family business
buyer
those who purchase an existing business
what does an entrepreneur's occupation depend on?
type of goods or services they produce
bootstrapping
using low-cost or free techniques to minimize the cost of doing business
owner-manager
what most entrepreneurs spend their working lives
