The Big World of Small Business

THE BIG WORLD OF SMALL BUSINESS Defining Small Businesses  No single definition, but for general discussion:  Independently owned and operated  Fewer than 500 employees  Not dominant in its market  Specific criteria vary for government programs like contracting  U.S. Small Business Administration (SBA) sets limits on:  Number of employees  Annual revenue Economic Roles of Small Businesses   Provide jobs  Employ nearly half of private sector workforce  Generated over 60% of net new jobs in past 25 years Introduce new products for unmet needs   Meet needs of larger organizations   Act as distributors, service providers, suppliers Take risks larger companies avoid   Entrepreneurs identify and fill overlooked market niches Test unproven ideas Provide opportunities for diverse range of people  Important avenue for economic advancement Characteristics of Small Businesses  Many are single-person "lifestyle" businesses  Others have potential for growth under right conditions  Some start small but plan rapid growth from outset  Compared to large firms, small firms tend to:  Have narrower focus  Get by with limited resources  Be more flexible and quick to react  Innovate frequently The Entrepreneurial Spirit  For some, working independently comes naturally  Others find it too risky or challenging  But entrepreneurial spirit vital to economy and large firms too Why People Start Companies  Desire for control over their future  Can't find suitable corporate jobs  Passion for an unmet market need  Tired of working for others  Pandemic pushed many to start businesses Traits of Successful Entrepreneurs    Confidence  Sense of control, comfort with risk  Decisive, curious, adaptable Passion  Love their work, inspire others  Visionary, committed, achievement-driven Drive  Persistent despite setbacks  Self-reliant, hard working, disciplined Intrapreneurs  Innovative employees who bring entrepreneurial spirit within a company  Can be key sources of new products and business processes  Help companies disrupt themselves before competitors do  Need support to innovate in bureaucratic organizations Planning a New Business Ownership Options    Create new independent business  Advantages: Flexibility, control  Challenges: Lack of track record, limited resources Buy existing business  Advantages: Inherits customers, operations  Risks: Potential unknown problems Buy a franchise  Advantages: Established model and brand  Tradeoffs: Less flexibility and independence Elements of a Business Plan  Guide to turn idea into reality  Persuade lenders and investors  Test feasibility of concept  Typical sections:   Executive summary  Company mission  Description of product/service  Management team  Target market  Competitive analysis  Marketing strategy  Operations plan  Financial needs and projections Concise executive summary ideal for initial investor pitches Lean Business Planning  Some advise focusing on quick prototype over detailed plan  Business Model Canvas and Lean Canvas provide one-page business model overview Nurturing a Young Business Causes of Failure  Lack of demand  Poor business model or strategy  Failure to pivot when needed  Managerial incompetence  Lack of funding or cash flow management  Ineffective marketing  Poor location  Neglecting customers  Uncontrolled rapid growth Pivoting  Adjusting business model when better opportunity emerges  Common path to success for start-ups  Requires close monitoring of market response Sources of Support  Government agencies (SBA, SCORE, MBDA etc.)  Educational institutions  Business partners  Mentors and advisory boards  Entrepreneur networks and support groups  Incubators and accelerators Key Takeaways  Small businesses vital to economy and innovation  Planning and preparation increase odds of success  Numerous sources of advice and support available  Pivoting to take advantage of opportunities can be key