Small business

The Foundations of
Edited by: Noémi Piricz
Based on: Thomas W. Zimmerer – Norman M.
Scarborough: Essentials of Entrepreneurship and
Small Business Management, Pearson Education
International 2005, Chapter 1
Who is an Entrepreneur?
Let’s collect his/her most important
Entrepreneur is one who creates a new
business, taking certain risks and
for the purpose of achieving profit and
by identifying opportunities and assembling
the necessary resources
Personal Benefits of Entrepreneurship
1. Opportunity to create your own destiny –
„being able to follow his/her own interests,
desire and fun”
2. Opportunity to reap more profits (e.g.
Bill Gates, M. Dell)
3. Opportunity to contribute to society –
trust and respect
Drawbacks of Entrepreneurship
Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
High level of stress
Complete responsibility
Discouragement and disillusionment
The Cultural Diversity of
Young entrepreneurs – comparing
with other generations they are 3 times
more likely to launch businesses
Women entrepreneurs
- still certain discrimination in work
- the rate of women entrepreneurs is
growing dynamically
Part-time entrepreneurs
- popular gateway to entrepreneurship,
- lower risk
Family business: two or more members
of the same family have the financial
control of the company
- deep roots in family values, long term
plans, trust etc.
- bitter disputes, business and private life
mixed, problem of finding a good leader
after retirement
The Power of „Small” Business
Small business: employs fewer than 100
people (US)
In the US small firms employ 51 % of the
nation’s private sector workforce, even
though they posses less than one-fourth of
total business assets!
Small businesses produce 51% of the
American private GDP.
Small companies create four times more
innovation per research and development
dollar than medium-sized firms
The 10 Deadly Mistakes of
1. Management mistakes – capacity,
leadership ability, knowledge etc.
2. Lack of experience – professional,
economic, organizational, dealing with
human resources etc.
3. Poor financial control –
undercapitalization (consequence: the firm
runs out of capital before it is able to
generate positive cash flow)
4. Weak marketing efforts – mistake: if the
entrepreneurs dream it, customers will
automatically come; instead of providing
them with value, quality, convenience,
service and fun!
5. Failure to develop a strategic plan – „I
don’t have time for it”
6. Uncontrolled growth – expansion should
be financed by the profit they generate or
by capital contributions from the owners
7. Poor location – they often choose a
vacant building
8. Improper inventory control – neglected
in many cases, problems: too much or too
few inventory, and even too much of the
wrong type of inventory
9. Incorrect pricing – costs, aims, methods
10. Inability to make the „entrepreneurial
transition” – after the start up, growth
usually requires radical changes in several
Key Definitions (of Chapter 1):
Part-time entrepreneurs
Family business
Small business
cash flow

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