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33Small Business Small Business Entrepreneurs:Entrepreneurs:

Characteristics and Characteristics and CompetenciesCompetencies

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Objectives:Objectives:• Learn about entrepreneurial personality types

• Learn the competencies of the successful entrepreneur

• Discover the types of career paths entrepreneurs pursue

• Understand the challenges of family business owners

• Recognize the special nature of entrepreneurial teams

• Gain insight into the challenges women and minority

business owners face

• Understand the situation of people who become

business owners later in life

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• Focus on Small Business: Internet Internet entrepreneur Laura Tidwellentrepreneur Laura Tidwell

• The Entrepreneurial PersonalityThe Entrepreneurial Personality::– Classic entrepreneurClassic entrepreneur: Bill Gates, Sam

Walton• Loner, socially isolated

• Hard worker

• Fast learner

• Risk-taker seeking wealth

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• Original Classic Entrepreneur:Original Classic Entrepreneur:– Hard worker

– Loner

– Socially isolated

– Fast learner

– Wealth seeker

– Risk taker

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1700’s-1950’s1700’s-1950’s

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• Idea Person:Idea Person:– Hard worker

– Loner (could team up)

– Socially isolated

– Fast learner

– Fame seeker

– Risk taker

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1950’s-1980’s1950’s-1980’s

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• Small Business Owner:Small Business Owner:– Hard worker

– Loner

– Socially isolated

– Average learner

– Average income seeker

– Risk averse

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1950’s-1980’s1950’s-1980’s

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• Contemporary Classic Entrepreneur:Contemporary Classic Entrepreneur:– Hard worker

– Loner

– Socially isolated

– Fast learner

– Wealth seeker

– Risk taker

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1950’s-1980’s1950’s-1980’s

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• Salesperson Entrepreneur:Salesperson Entrepreneur:– Hard worker

– Team player

– Socially connected

– Fast learner (socially)

– Average learner (technologically)

– Acceptance seeker

– Risk averse

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1980’s-Today1980’s-Today

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• Managerial Entrepreneur:Managerial Entrepreneur:– Hard worker

– Team player

– Socially connected

– Fast learner

– Wealth seeker

– Risk averse

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1980’s-Today1980’s-Today

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Entrepreneurial CompetenciesEntrepreneurial Competencies• CompetenciesCompetencies: forms of business-related

expertise

• Basic business competencyBasic business competency: understanding the organizational and business processes of a firm

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• Key business functionsKey business functions: activities common to all businesses – sales, operations, accounting, finance, and

human resources

• Industry-specific knowledgeIndustry-specific knowledge: activities, skills, and knowledge, specific to businesses in an industry– Understanding dimple patterns for making

golf balls

– Chemistry involved in Heating and A/C work

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• Resource competenciesResource competencies: the ability or skill of the entrepreneur at finding expendable components necessary to the operation of the business– Time

– Information

– Location

– Financing

– Raw materials

– Expertise

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• Determination competenciesDetermination competencies: skill identified with the energy and focus needed to bring a business into existence

• Opportunity competenciesOpportunity competencies: skills necessary to identify and exploit elements of the business environment that can lead to a profitable and sustainable business

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ProfessionalizationProfessionalization• ProfessionalizationProfessionalization: the extent to which a firm

meets or exceeds the standard business practices for its industry

• Standard business practiceStandard business practice: a business action that has been widely adopted within an industry or occupation

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• Expert business professionalizationExpert business professionalization: a situation that occurs when all the major functions of a firm are conducted according to the standard business practices of its industry– These firms inspire the highest levels of trusthighest levels of trust

among their customers.

• Doctors

• Insurance providers

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• Expert business professionalizationExpert business professionalization:– SubcontractorsSubcontractors: big firms require

subcontractors to meet hundreds of corporate-dictated procedures

– FranchisesFranchises: corporate parents specify most of the procedures for the business’s operation

– International quality certificationsInternational quality certifications (ISO 9000): small businesses must write in full detail how they will ensure consistency and professionalism

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• Specialized business professionalizationSpecialized business professionalization: founders or owners who are passionate about one or two of the key business functions, such as sales, operations, accounting, finance, or human resources– Specialized firms tend to generate moderate

levels of trust among customers.

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• Minimalized business Minimalized business

professionalizationprofessionalization: a situation that occurs when the entrepreneur does nearly everything in the simplest way possible– No systematic accounting

– Personal sales

– Street vendors, swap meets, art fairs

• Very difficult to gain trust

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Entrepreneurial CareersEntrepreneurial Careers• Habitual entrepreneursHabitual entrepreneurs: owners for a lifetime,

sometimes in one business, sometimes across several firms

– No succession plan

– Figure to keep working until they can no longer continue

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• Growth entrepreneursGrowth entrepreneurs: lifetime owners whose goal is major success

– If they top out with one business, they’ll start another growth-oriented company, often before they exit the first one

– When they do retire, they tend to want to micro-micro-

managemanage their successors

• Harvest entrepreneursHarvest entrepreneurs: owners with an exit plan

– Work first in order to play later

– Build one company at a time, sell it, enjoy the proceeds, and then start another

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What term describes entrepreneurs who alternate periods of growth and stability?

a) Spiral (Helical) entrepreneurs

b) Occasional entrepreneurs

c) Habitual entrepreneurs

d) Growth entrepreneurs

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Question

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• Spiral (helical) entrepreneursSpiral (helical) entrepreneurs: alternate periods of growth and stability

– Driven by a need to balance family and business

– The endgame strategy is scaling downscaling down the business

• Occasional entrepreneursOccasional entrepreneurs: people who generally have another primary job

– Fascinated by entrepreneurship and pursue it periodically

– Classic part-time entrepreneur

– Seasonal basis (doing taxes, or making Christmas wreaths)

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Family BusinessesFamily Businesses• Family businessFamily business: a firm in which one family

owns a majority stake and is involved in the daily management of the business

• 1/31/3 of the Standard & Poor’s 500 are family owned and managed

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It’s All Relative• Robert Douglas Jr. graduated from Eckerd College

with a political science degree and got his commercial pilot license worked as a flight engineer for a father-son airline business

• Enjoying the family atmosphere, Robert Jr. decided to work for his father at The Black Dog Tavern Co. Inc. – A restaurant located at Martha’s Vineyard in

Massachusetts

– T-shirts famous for Ivy Leaguers

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http://www.entrepreneur.com/magazine/entrepreneur/2005/march/76152.html

Example

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What percentage of U.S. businesses are small family businesses?

a) 4%

b) 25%

c) 71%

d) 39%

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• Family businesses make up over 1/21/2 of the businesses in the United States.

• 39%39% of businesses in the United States are small family businesses.

• They employ 58%58% of America’s workforce.

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Family Business ChallengesFamily Business Challenges• Role conflictRole conflict: the kind of problem that arises

when people have multiple responsibilities, such as parent and boss, and the different responsibilities make different demands on them

– Whenever possible, make decisions based on

business necessitiesbusiness necessities.

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What is the term for the process of intergenerational transfer of a business?

a) Transition

b) Succession

c) Take-over

d) Acquisition

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Question

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Family Business ChallengesFamily Business Challenges• SuccessionSuccession: the process of intergenerational

transfer of a business

– Lack of clear transition planclear transition plan is the death knell

– Answer is taking a professional approachprofessional approach

– Only 5%5% of entrepreneurs can rely on family members to take over

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Women and MinoritiesWomen and Minorities• Women-ownedWomen-owned businesses are one of the

fastest-growingfastest-growing sectors of all United States businesses

• 30%30% of all businesses are majority owned by women, with 18%18% equally owned by men and women

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Girl Power• Women Presidents’ Organization brought together

women entrepreneurs and elementary-age girls to teach financial literacy

• Cash flow – financial game created for kids• “WPO members wanted to give back in a

meaningful way that fit with our mission of accelerating and enhancing the growth of women-owned businesses”

• Several girls already own a craft business and plan to create a board game– Call Cash flow an inspiration

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http://www.entrepreneur.com/magazine/entrepreneur/2007/september/183042.html

Example

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• Minority-owned businessesMinority-owned businesses represent 11%11% of all United States businesses.

• 1992-1997 Growth rates– General BusinessGeneral Business 7% 7% – Minority-owned Minority-owned 30%30% – Native-American/Alaskan Native-American/Alaskan 84%84%– African-American African-American 26%26%– HispanicHispanic 30%30%– Asian/Pacific IslanderAsian/Pacific Islander 30%30%

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Access ProblemsAccess Problems• Discrimination in financingDiscrimination in financing:

– Minority applicants were denieddenied at twicetwice the rate of whites.

– Asian and Hispanic owners pay higher interest higher interest ratesrates on their loans

– Set asidesSet asides: government contracting funds earmarked for particular kinds of firms, such as minority- or women-owned firms

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• Late career entrepreneursLate career entrepreneurs: people who begin their businesses after having retired or resigned from work in corporations at age 50 or older– Get adviceGet advice

– Take controlTake control over life

– NetworkingNetworking

– Keep personal finances outKeep personal finances out of the business

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Questions?Questions?

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