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