Chapter 2 - Small Business Entrepreneurs: Characteristics and Competencies

women in small business

- 4.3% of the national small business revenue - choose service industries with lower sales levels - motivated more by flexibility than money - want less risk which lead to lower returns

challenges of a family business

- conflict: reduce role conflict by keeping family issues out of the business - time management: basic method of time management is to make a list, prioritize the list, and delegate tasks - lack of a clear succession plan could end a family business - create a family council, advisory board, or formal board of directors for advice

planning

- critical-point planners: plan, act, consider more planning - opportunistic planners: start with a goal & look to achieve it - reactive planners: passive and actions are determined by environment - habit-based planners: don't plan but have a routine reactive and habit planners generally do poorly in business.

4 major approaches to study entrepreneurship

1. sociological 2. political 3. psychological 4. composite

resource competencies

ability or skill of the entrepreneur at finding expendable components necessary to the operation of the business, such as time, information, location, financing, raw materials, and expertise

political approach

deals with issues involved in relationships between entrepreneurship development and the state particularly in the context of the role of the latter in the development of entrepreneurs

sociological approach

deals with social and cultural factors responsible for the nature and growth of entrepreneurship development in a society

determination competencies

skills 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

culture of experimentation and learning

- deeds not words - test, retest -> move, act, communicate - entrepreneurial execution boils down to: compromise between strategic engineering & strategic anarchy, creates sustainability, and harnesses the intellect & passion of employees that support core competencies, mission, and vision

professionalization

- every industry has an average called a standard business practice - 3 levels of professionalization: 1. expert: when most aspects of the business meet or exceed the industry's standard 2. specialized: when 1 or 2 aspects of the business are at this level 3. minimalized: when none of the aspects of the industry standard appear in the business

minorities in small business

- face the same access issues as women, most often in financing - one solution is set-asides from big companies and the government - certification proves the firm is minority or women-owned - second solution is making extra efforts to network

the entrepreneurial life cycle

- *emergence*: when a person takes steps to start a business - *existence*: finds the firm in operation but not yet stable; liability of newness is an issue at this stage - *success*: once the firm is established in its market; slack resources can be put back into the firm if needed - *resource maturity*: may include micro-commitments - *takeoff*: if the firm has a period of exceptional growth

family businesses

- family business: firm with a majority family ownership - 58% of America's total workforce

industry-specific knowledge

KSAs specific to businesses in a particular industry

strategy formulation

- strategic engineering: senior management exercise, often not reality - strategic anarchy: totally bottom-up, out of control & unrealistic actions - entrepreneurial execution: creates a thinking process

entrepreneurial execution

- strategy formulation - process management - performance measuring & reporting - culture of experimentation & learning

pros of a family business

- strong unit can be effective with quick decision making - families are a source of funds and personnel - tend to raise future entrepreneurs

perseverance

- type of learned optimism & one of the most powerful contributors to entrepreneurial success - danger is to keep trying the same action repeatedly without learning

entrepreneurial operational competencies

- forms of business-related expertise composed of resources and capabilities - core competencies are what customers pay for

performance measure & reporting

- importance of performance goals cascading down & performance reporting cascading up - managers flying by wire through relying on remote reporting processing - high level metrics are still critical - process reports should first go to those who can affect them

passion

- increases commitment to the firm & inspires key stakeholders - displayed in 3 ways: 1. looking at the challenges of the business in a creative way 2. being persistently focused on the business 3. being absorbed by the tasks and concerns of the business

process management

- key element to entrepreneurial execution - emphasizes cross-functional collaboration - process must co-exist with practice - diagramming current jobs & how to create a network - worker is not a mindless doer - all workers must be a critical source of continuous improvement

entrepreneurial teams

- most teams are family related & know/trust each other - work out key issues before assembling a team - pick good team members for a strong organizational culture - they should have passion for the mission, team, customer, innovation, and fairness

the five Ps of entrepreneurial behavior

- passion - perseverance - promotion-prevention focus - planning style - professionalization

promotion-prevention focus

- promotion focus: intent on maximizing gains, yields results in richer, dynamic environments/industries - prevention focus: intent on minimizing losses, can work well in an established industry or a poor one

second career and veteran entrepreneurs

- second career entrepreneurs: people who begin their business after having left, retired, or resigned from work - veteran entrepreneurs: formerly in military service who decided to become self-employed as a subsequent career - challenges are keeping personal finances out of the business & loss of confidence

rewards for starting a small business

- universally mentioned: growth, income, flexibility - occasionally mentioned: wealth, product - rarely mentioned: recognition, admiration, power, family

psychological approach

entrepreneur is not a common person, typically has a personality with creative, managerial, and imaginative skill who can innovate and contribute positively to an industrial project

composite approach

entrepreneurship is a complex phenomenon, and entrepreneurial behavior is an outcome of the interplay of multiple social, cultural, economic, political, and psychological factors

key business functions

fundamental activities all business people must perform including sales, operations, accounting, finance, and HR

micro-commitment

online action that is quick and easy to make and connects you to the message, but does not require a substantial personal or financial commitment, such as liking a post or reposting it to your own social media account

slack resources

profits that are available to be used to satisfy the preferences of the owner in how the business is run

liability of newness

set of risks faced by firms early in their life cycles that comes from a lack of knowledge by the owners about the business they are in and by customers about the business