Small Business Management - Ch.1 Summary

Role of the entrepreneur in the US economy.

Record numbers of people have launched companies over the past decade. The boom in entrepreneurship is not limited solely to the United States; many nations across the globe are seeing similar growth in the small-business sector. Various competitive, economic, demographic shifts have created a world in which small is beautiful.

Society depends on entrepreneurs to provide the drive and risk taking necessary for the business system to supply people with the goods and services they need.

The entrepreneurial profile.

Entrepreneurs have some common characteristics, including
a desire for responsibility
a preference for moderate risk
confidence in their ability to succeed
the desire for immediate feedback
a high energy level
a future orientation
skill at organizing
value of achievement over money
Benefits of owning a small business.

Driven by these personal characteristics, entrepreneurs establish and manage small businesses to gain control over their lives, to come self fulfilled, reap unlimited profits, contribute to society, and do what they enjoy doing most.

Drawbacks of owning a small business.

Small-business ownership has the potential drawbacks. There are no guarantees that the business will make a profit or even survive. The time and energy required to manage a new business may have dire effects on the owner and family members.

Driving forces behind the growth of entrepreneurship.

Several factors are driving the boom in entrepreneurship, including:

entrepreneurs portrayed as heroes
better entrepreneurial education's
economic and demographic factors
a shift to a service economy
technological advancements
independent lifestyles
international opportunities

Diversity and small-business and entrepreneurship.

Several groups are leading the nation's drive toward entrepreneurship --
women
minorities
immigrants
part-timers
home-based business owners
family based business owners
copreneurs
corporate castoffs
corporate dropouts

Contributions small businesses make to the US economy.

Small businesses make up 99% of all businesses
53% of the private sector workforce
create 75.8% of new jobs in the economy
produce 51% of the country's private gross domestic product (GDP)
account for 47% of business sales

Reasons small businesses fail.

The failure rate for small businesses is higher than for big businesses, and profits fluctuate with general economic conditions. SPA statistic showed that 60% of new businesses will have failed within six years. The primary cause of business failure is incompetent management.

Incompetent management
poor financial control
failure to plan
inappropriate location
lack of inventory control
improper managerial attitudes
inability to make the entrepreneurial transition

Business failure in proper perspective.

Because they are building businesses environment filled with uncertainty and shaped by rapid change, entrepreneurs recognize that failure is likely to be part of their lives; yet, they are not paralyzed by that fear. Successful entrepreneurs have the attitude that failures are simply stepping stones along the path to success.

Small-business owners can avoid the major pitfalls of running a business.

Know the business in depth
develop a solid business plan
manage financial resources effectively
understand financial statements
learn to manage people effectively
set the business apart from the competition
keep in tune with themselves