Please read the article and answer about questions. The Psychology of Entreprene
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Please read the article and answer about questions.
The Psychology of Entrepreneurs
In the opening vignette above, Laura Tidwell displayed three of the key characteristics of successful entrepreneurs introduced in Chapter 1: she believed in herself and her ability to create a business that would let her work and take care of her daughter, she sought out help from others to learn her busi- ness, and she persevered over several years until she achieved her goal. These are aspects of Laura’s behavior, her way of looking at and thinking about herself and her world, which is called cognition, andhervisibleactions.IsLaura’spatternofentrepreneurialbehaviortheonlytypethereis?
The answer is that there is no one pattern of entrepreneurial behavior or entrepreneurial type. In Chapter 1 we broke up the entrepreneurs around the world into opportunity-driven and necessity- driven types. We talked about entrepreneurs in corporate, social, and independent settings and how their focuses differed. We even discussed the four kinds of overall growth strategies entrepreneurs typically design their businesses around. There are literally hundreds of ways to think about entre- preneurial personalities. That is good because it means there can be more than one personality type that can lead to success, and it increases the likelihood that there is an approach to entrepreneurship that will fit with your interests and style.
Successful entrepreneurial behavior leads to the creation of a new firm that meets the goals of the entrepreneur. Some parts of entrepreneurial behavior can be done in very different ways, while some elements tend to be more consistent across people. In this chapter we will consider the ways people are different, the ways they are the same, and close with a look at the patterns leading to suc- cessful entrepreneurial behavior for several distinct groups of entrepreneurs.
The Five Ps of Entrepreneurial Behavior
There are five aspects of behavior that most successful entrepreneurs display. These are not the only possible behaviors that you could consider, but they are behaviors that have been shown in the research to relate to success among entrepreneurs. The five behaviors include the following:
1. Passion: Passion is an intense positive feeling the entrepreneur has toward the business or even the idea behind the business. It comes from being actively involved in moving the busi- ness forward. Passion has multiple benefits, such as increasing your commitment to the busi- ness (which relates to perseverance), and inspiring key stakeholders like potential investors, employees, or subcontractors. Passion is displayed in three ways: (1) by looking at the chal- lenges of the business in a creative way, (2) by being persistently focused on the business, and (3) by being absorbed by the tasks and concerns of the business.2 When we talk about entrepreneurs who “live for the business,” we’re talking about passion. When you see entre- preneurs get excited as they describe something about their business, we see and respond to their passion.
2. Perseverance: Perseverance is best thought of as a type of learned optimism,3 the ability to stick with some activity even when it takes a long time, and when a successful or unsuccessful outcome is not immediately known. It is one of the most powerful contributors to entrepre- neurial success like that of J. J. Rosen who literally taught himself programming to make his business work (see Small Business Insight box on page 32).4 In Chapter 1, we talked about the strategy of perseverance with the old expression “If you don’t succeed the first time, try, try again.” Trying again is the behavior behind perseverance, but requires thinking about what went wrong and what went right, and adjusting your next try to achieve a better result. Behind this thinking and behavior is the attitude of learned optimism, knowing that you can and will keep at this until you have mastered it.5 The danger is to keep trying the same action repeatedly without learning. That is a problem behavior called perseveration.
3. Promotion/Prevention Focus: Most of us have some mix of two internal focuses (also called our regulatory focus), a promotion focus intent on maximizing gains, which gives us a bias toward pursuing opportunities likely to lead to those gains, and a prevention focus intent on minimizing losses, with a bias toward inaction or protective action.6 Being a successful entrepreneur involves balancing the two focuses. In an established industry or a poor one, a prevention focus can work well, while a promotion focus can yield better results in richer, dynamic, uncertain environments or industries.7 A reckless pursuit of opportunity may bankrupt your company, while a protection-at-all-costs focus may mean you will miss the opportunities necessary to keep cash flowing into your firm. Successful entrepreneurs deal with preventing problems by planning ahead of time and creating actions to avoid or deal with problems. For J. J. Rosen, keeping his day job until his software business took off was one way to protect his family and business. Those same successful entrepreneurs also plan where to find opportunities and how to pursue them. But planning is rarely perfect; you have to be ready to act when the situation demands it. Your own promotion/prevention balance is likely to come into play in those quick decision situations. Trust your plans, and where the plans don’t have the answer, trust your “gut” or intuition. Entrepreneurs may have regrets about their choices, but they generally feel better having taken charge of the choice process.8
4. Planning Style: There is more than one way to plan. In fact, there are five ways.9 Com- prehensive planners take a long-term view, develop long-range plans for all aspects of the business, are comfortable with planning, and act based on the plans they’ve developed. Critical-point planners plan around the most important aspect of the business first, act on it, and then consider if additional plans are needed. It is not a very long-term approach to planning. Opportunistic planners generally start with a goal and look for opportunities to achieve it. Once they find a good opportunity, even if it isn’t the one related to their original goal, they act on it, so it is very short term in orientation. Reactive planners are completely passive, waiting for cues from the environment to determine what actions to take. Their focus is entirely short term, and there is little in the way of goals driving their efforts. They can make the most of a situation because there is no other plan competing for their attention. Habit-based planners do not really plan at all because their actions are dictated by their routines. They do today what they did yesterday. They don’t plan, and they don’t even tend to react to changes in their envi- ronments. Simply put, results from small business owners in countries around the world have shown that in terms of getting a start-up launched, keeping it going, and making a living from it, comprehensive planners do the best, followed by critical point planners, and opportunistic planning types.11 Reactive and habit planners generally do very poorly in business, even if they
manage to get their firms started. Professionalization: One hallmark of successful entrepreneurs is that they usually do at least one thing much better than average. That average is called a standard business practice and every industry has them. Doing that level or better is what professionalization is all about. There are three levels of professionalization: expert professionalization when most aspects of the business meet or exceed the industry’s standards, specialized when one or two aspects of the business are at this level, or minimalized when none of the business can achieve the in- dustry standard. Consider the oldest professionalized firm in the world, the Zildjian Company. The company started in Turkey in 1623 with a formula for making an alloy ideal for cymbals. At this stage the company was specialized. In 1929, when Avedis Zildjian inherited the com- pany, he moved it to America and applied his marketing, financial, and business knowledge to bring the firm up to the level of expert professionalization, where it remains today.12
Notice that these behaviors are relevant to more than starting a business. They are useful be- haviors in business in general and even in life. If you are an employee, your bosses will want you to show passion (often called engagement) in the business, be persevering and strike a balance of promotion and prevention. The fact that these five ideas are behaviors means that you can learn how to display them, even if it is not the way you were behaving originally. That is what education, skill development, and practice are all about. Each of these types of behavior can be assessed formally using psychological questionnaires, but you can make a general assessment with items like those in Skill Module 2.1.
Entrepreneurial Operational Competencies
All the aspects of the entrepreneurial personality depend on hard work, but there are other specific types of business-related expertise—called competencies—that appear repeatedly in successful entrepreneurs around the world.15 While there could be as many competencies as there are per- sonality types, theories, like the BRIE (boundary/resources/intention/exchange) model introduced in Chapter 1, help us focus on those few competencies that are essential to successfully starting and running a business. After you have read about these entrepreneurial competencies, use Skill Module 2.2 to assess your competencies.
The competency suggested by boundary relates to the organizational and business processes of a firm. This type of expertise can be called basic business competency.16 There are certain fundamental activities that all businesses must perform, which are called the key business functions, and in- clude sales, operations (also called production), accounting, finance, and human resources. Getting organized and registered—which creates the boundary—is an example of an operations activity.
There is also industry-specific knowledge. A restaurant really is different from a mechanic’s shop or a computer store or a portrait studio. Each requires you to understand a particular industry and market, and each requires a very particular kind of skill. This was a large part of the reason that Laura Tidwell, in the example at the start of this chapter, worked for others before going off on her own. Some of these skills focus on knowing your new business and its context (Chapters 5 and 6), having the kind of skills that fit the business, being able to diagnose your business’s health (Chapters 8, 12, 13, 17, and 18), and being able to see future business opportunities while doing your everyday work (Chapters 4, 7, and 20).
Resources lead to specific resource competencies.17 For even the smallest part-time business, the entrepreneur needs to find or gain access to resources such as time, information, financing, space for the business, raw materials, and a variety of people (advisers, suppliers, service providers, cus- tomers). For J. J. Rosen of Atiba Software, getting the computer programming knowledge was criti- cal. Knowing the best place to get raw materials or set up your operation, finding better information than your competition on your market, or having enough financing to ride out downturns in sales are examples of resources that could give you an advantage. You’ll learn more about gathering re- sources in Chapter 5 (Small Business Entry: Paths to Part-Time Entrepreneurship), Chapter 11 (Small Business Distribution and Location), Chapter 14 (Cash: Lifeblood of the Business), Chapter 15 (Small Business Finance: Using Equity, Debt, and Gifts), and Chapter 19 (Human Resource Man- agement: Small Business Considerations).
Intention reflects your determination to start your business and make it a success. These determination-driven skills can be called determination competencies18 and are demonstrated by focusing on your business over other choices and being ready to find out about and do what it takes to pursue opportunities that will help get the business going. The entrepreneurs we have men- tioned in this chapter—Tidwell and Rosen—displayed tremendous determination to do the work and stick with the business through thick and thin. Many of these determination competencies are essential to deciding if a business is feasible for you, a topic that is covered in Chapter 4 for the time before you start a business and in Chapter 20 for businesses already in operation. Time management competencies are covered in this chapter in the section on Family Businesses. The competencies related to getting help are seen in Skill Module 1.1 and in Chapter 3, where we will look at the social skills related to building and sustaining legitimacy and relationships.
Exchange deals with the actual process of exploiting the opportunity for profit—which is a fancy way of saying “making sales.” The competencies that make this work are called opportunity competencies,19 which include identifying an opportunity, a product, or service idea that is likely to lead you to a profit and is ideally distinctive to your firm and, you hope, hard for others to copy. For Bill Gates and J. J. Rosen, the opportunity each found was for creating software that would make life and work easier. You’ll learn more about the opportunity process and protecting opportu- nities through strategic planning in Chapter 4 and Chapter 7, where we will discuss the strategy of imitation with a twist.
Research suggests that people can learn what they need to know to have adequate levels of expertise in all five competency areas. In fact, students who go through formal training or classes often score higher on the expertise tests than people running businesses.20 In addition to training or classes, you can get consulting assistance from public or private sources, or you can even buy exper- tise in package form by adopting industry standard techniques. You can use state-of-the-art services or you can franchise.
The presence and absence of certain skills makes a tremendous difference in distinguishing those who start businesses from those who don’t. But for those businesses that do get started, the amount of expertise is what distinguishes the more successful from the less successful firms. The concern about expertise leads to thinking about the level of professionalization you choose to use in your firm.
The Sociology of Entrepreneurs
Entrepreneurs can be as strongly affected by their social or sociological characteristics as by their personality characteristics.21 These sociological characteristics relate to the social groups to which they belong. Family, gender, race, nationality, religion, age, and other types of group memberships, such as being a member of a team or a veteran, are typical examples. Some of these memberships are important enough that they are protected from discrimination by federal laws, and government and companies dealing with the government make special efforts to support members of those groups.
Others lack such protections but are still powerful influences on the individual entrepreneur. The challenges members of these groups face share some similarities, as do the programs designed to support them. To get an idea of how this works, the section below considers entrepreneurs in family businesses and teams, women entrepreneurs, and second-career entrepreneurs. While there are les- sons and advice given for each of the groups below, the lessons can apply to everyone, for example, the techniques of time management, which are discussed in the Family Business section, or the methods for managing idea ownership, discussed in the Teams section.
Family Businesses
We think that the U.S. economy is built on an array of very large, publicly held companies— General Motors, Boeing, IBM, Bank of America, Exxon, and others—but this is only part of the pic- ture. Many of America’s largest companies—Mars, Hallmark, Dell, Motorola, Nordstrom, Campbell Soup—fully one-third of the S&P 500 companies—are family owned and managed.22 Small and large, they make up over half the businesses in the United States historically and were the creators of well over half the new jobs in the United States.23 But our interests are in those small businesses that are also family businesses, and those represent 39 percent of American businesses, or about 10.8 million firms. Defined as firms with a majority family ownership and direct daily family involvement, family business is a major economic force, employing 58 percent of America’s total workforce.24
Small, family-owned businesses have many advantages. If the business is managed at the top by a group of tight-knit family members, communication-based integration can be more effective, and decision making can be easier and quicker.25 A strong family bond can become a strong business culture, enabling members to make effective, coordinated decisions with little or no formal com- munication. Family members already have developed strong relationships and interact on a regular basis both in and outside the workplace. Families are a major source of funds and personnel for new small businesses,26 providing a support network made up of people the entrepreneur knows and trusts. Family businesses are also a self-perpetuating source for future small businesses. Many new entrepreneurs have been raised in families in which one or both parents or other relatives owned a family business,27 as you can see in the examples of the Ross and Enstrom families below. As chil- dren of family business owners, these individuals learned how business works by observing their family at work. They gained early experiences that helped them develop the skills, competencies, and self-confidence that contributed to later decisions to become entrepreneurs and to their ability to succeed.28 In fact, most entrepreneurs come from families of entrepreneurs.
There are two challenges typical to family businesses—role conflict and succession.29 Role conflict describes the kind of problem that arises when people have multiple responsibilities, such as parent and boss, and each makes different demands on them.31 As a boss, you might want your daughter to stay at the store and work, while as a parent you might want your daughter to take time off to be with her own children. Role conflict is at its worst when people fail to recognize it. Often, reminding yourself and others that you face multiple, conflicting roles helps them understand the types of choices that must be made and the kinds of decisions that are most important.32 For fam- ily business, the most effective approach for avoiding role conflict is to keep family issues out of the family business, as you can see in the case of Boyd Coffee (see Small Business Insight box on page 39). Whenever possible, try and make decisions based on business necessities. When making a decision from a family perspective, broaden it to apply equally to nonfamily as well as family mem- bers. For example, if family members in the business can take off for their children’s graduations, so should employees who are not part of the family.33
Role conflict breeds another unending problem—the shortage of time. Entrepreneurs are among the most rushed people in the workforce. Part of this comes from the responsibilities of ownership. Entrepreneurs are always working, even if it is just thinking about what to do next at work. Add family responsibilities, and schedule overload is almost a certainty. There are, however, a collection of techniques for time management, which can help meet the challenges of schedule overload. Consider these basic methods:
List—Whether you use a pad of paper, a specialized form like a Franklin Planner, a PDA, or Microsoft Outlook’s Task function, the key to staying on top of your responsibilities is to list them as soon as you get them. Then as you finish them, you can enjoy crossing them off the list.
123 Prioritize—As you look at your list, prioritize your tasks based on their importance to your business and their due date. The most important tasks due soonest get a priority of 1. Tasks with lesser importance or a longer time to completion get ranked 2, and your “back burner” concerns get ranked 3. If there are tasks (of any level) that can be lumped together, so much the better. How do you decide importance? If the task will not help your business or family, it is probably not a priority 1 task.
Delegate—Look at your task list and see which tasks you can get others to do for you (for free or at a price). When you’re overloaded, getting more people on the job for you is a powerful way to get more done.
Repeat—Take a few minutes every day to repeat the above steps. It will save you time later. Strategize—Once a week, take a few minutes to look at the things you didn’t do this week and check if you are overlooking something which could be important to your business, family, or yourself, but is getting overlooked in the short run. Entrepreneurs are notorious for overlook- ing their health and cheating themselves and their businesses out of time to think about the big picture and their firm’s future. Ten minutes a week spent this way can make a world of difference.34
Thirty-nine percent of U.S. family-owned businesses are expected to face the retirement or semi- retirement of their CEO within the next five years. This statistic grows in importance if you factor in the idea that only one-third of family-owned businesses survive beyond the first generation.35 Part of the problem can be an entrepreneur, like Rudy Boyd, who has difficulty letting go. Problems can arise when the owner cannot come to grips with retirement or envision someone else running the company.36 Owners often resist giving up control and undermine—consciously or unconsciously— potential successors.37 This is a problem because top managers at family firms tend to stay in their positions much longer than those at nonfamily firms. One study found that CEOs of family firms had an average tenure of 17 years as opposed to just 8 years for CEOs in other businesses.38
When the current owners are ready to think about what follows them, we get into succession— the process of intergenerational transfer of a business. Often the lack of a clear succession plan is the death knell for those family firms facing their first intergenerational transition.39 If the founder dies, becomes seriously ill, or is incapacitated before he or she can groom a successor, the new family leader may be suddenly thrust into the role before coming up to speed on vital company information and developing needed skills. Also, in the absence of a succession plan, private and public dissen- sion among various factions of the family becomes more likely, negatively affecting operations within the firm, and may eventually cause the business to fail.
As is true of so many things in a successful small business, the answer lies in taking a profes- sional approach to the problem. In this case the professional approach involves crafting a succession plan like the one created by Boyd Coffee after D-ick became president. Succession plans deal with the people who will take over, what roles they will fill, and what supports (such as training, outside assistance, voting power, resources control) they will receive.42 Problems arise when there are no successors available within the family. One study found that only 5 percent of all entrepreneurs were able to rely on family members to take over.43 Sometimes none of the children have an interest in the family business. The opposite problem arises in situations like that at Boyd Coffee when several family members believe they should take over the top spot and vie for the position to the detriment of both family and business. Problems like the Boyd Coffee competition remind us that it is impor- tant to plan how disputes will get resolved. Expect those disputes. The owners of a family business tend to be especially passionate about their enterprise, because they have a huge economic incentive to pay very close attention.44
One way to maximize communication in the succession process is to create a family council. A family council includes family members with immediate interests in the business (spouse, sisters and brothers, older children, etc.). The focus of council meetings is the business-family relationship. The meetings can also be a good forum for grappling with issues like role expectations, commit- ment, and personal responsibility.45
An advisory board, or a formal board of directors, can also contribute important skills and strategic direction. At Helzberg Diamonds, Barnett Helzberg Jr. set up a board to confront plan- ning issues and to “help bring order (read professionalization) to the seat-of-the-pants decision making” at the firm. The board was critical to succession planning at Helzberg when trusted board members convinced Mr. Helzberg that he needed to step aside as president. He brought in someone else who had the skills to lead day-to-day operations while keeping the chairmanship himself.46
The key difference between a family council and a board of directors is that the function of the family council is to keep the family involved while the board is focused on running the business. The board includes significant nonfamily membership.47 Careful use of a family council can also help by keeping family members involved in an appropriate way, allowing you more room to main- tain a different balance with your board of directors.48
In addition, a good plan, like the one Boyd Coffee developed, also talks about the handling of the assets of the company in order to minimize the tax burden on the family and the firm and pro- vide a suitable income for the former owner and his or her household. Because of the legal, tax, accounting, and leader development complexities, succession planning is best done with the advice of experts.49 For family councils and boards of advisers, it is often helpful to get professional advice at the start, and then continue on your own. One organization that tracks experts in family business is the Family Firm Institute.
One special situation of the family business is the case of a married couple who jointly own and manage their business.50 You only need to consider the divorce rate in general to realize that mar- riage and business can be a volatile mixture. The problems of a lack of agreement, difficulty keep- ing business and family issues separate, and how to handle endings51 are very much in evidence in couples’ businesses, and the solutions are very much the same—being clear about responsibilities, trying to maintain boundaries between work and home, having outside advisers to help sort out thorny issues, and planning for how the firm might end or change.52
Entrepreneurial Teams
While the classic image of the entrepreneurial small business would involve the image of the solo entrepreneur, the modern reality is different. The majority of new businesses have a team of two or more co-owners, and the trend is toward even more businesses being developed by teams of entrepreneurs. Figure 2.1 shows you the latest breakdown from the Panel Study of Entrepreneurial Dynamics.
Most teams are family related. In fact 53 percent of teams are spouses or life partners working together. Another 18 percent of the teams have different arrangements of family members work- ing together, while only 15 percent of teams are composed of unrelated business associates.
That means about 520,000 new firms a year are started by teams, with about 442,000 started by family teams. 54
Why so many teams? There are advantages to a team. When family members start a business, they start with already knowing and trusting each other. Teams are also likely to have more money, time, and expertise to put into a business. If the team members live together, they can save even more for the business.
When putting a team together it is important to work out key issues ahead of time. For example, team members might be putting different amounts of money or time into the business, but might be expecting identical returns, which creates an equity problem.55 A team can also face conflict over idea ownership (see The Thoughtful Entrepreneur box below), shared goals and how to make decisions, especially when the team is evenly split on choices.56 Legal solutions to setting up partnerships are discussed in Chapter 18, and the solutions mentioned above for couples—being clear about responsibilities, trying to maintain boundaries between work and home, having outside advisers to help sort out thorny issues, as well as planning for how the firm might end or change57— work just as well for teams composed of unrelated individuals as they do for couple-based teams. Women and Minorities in Small Business
Women-owned businesses are one of the fastest growing sectors of all U.S. businesses.58 Between 1997 and 2012, the number of private businesses with at least 51 percent female ownership increased by 54 percent, while the rate for firms overall was 37 percent.59 Around 29 percent of all businesses are majority owned by women, with another 17 percent equally owned by women and men.60
Although in 2012, there were 8.3 million businesses owned by women, women-owned firms accounted for only 4 percent of small business revenue nationally.61 Why the smaller impact? Gen- erally it is explained by the kinds of occupations and industries women choose when starting their businesses. For example, Table 2.1 shows that more women choose service industries that tend to have lower average sales levels, while there are more men in construction and financial industries, which have higher average sales levels. Men also report more high-tech firms, as well as firms where technology is central to the business. Both are associated with higher firm sales.62
The entrepreneurs’ goals in starting the business might also play a role. For example men more often mention making money as a motivation, while women more often mention having flexibil- ity for personal and family life. The overall growth strategies discussed in Chapter 1 also differ, with more women choosing single-person lifestyle firms over the small business forms that employ others. Along these strategy lines, women prefer less-risky firms, which also tend to be the firms with lower returns.63 Another idea from Chapter 1 was whether the entrepreneur chooses to start a business to pursue opportunity or out of necessity, here however American women and men report similar trends, with about 70 percent of each group mentioning opportunity.
Representing approximately 22 percent of all U.S. businesses, the number of minority-owned firms has likewise grown explosively in recent years.66 While the total number of U.S. self- employeds edged up by only 6 percent between 2000 and 2010, minority-owned businesses wit- nessed a remarkable 43 percent growth rate. During that same time period, the number of African American-owned businesses climbed by 13 percent, Hispanic-owned businesses by an incredible 86 percent, and Asian or Pacific Islander-owned businesses by 6 percent.67
What are the reasons for such phenomenal growth in the number of minority entrepreneurs? The establishment of both public and private funding and networking initiatives have helped to level the business playing field for minority entrepreneurs by offering information, advice, and funding access. Another explanation lies in the growth of racial and ethnic groups within the U.S. popula- tion, a trend that is expected to continue. The two fastest growing minority groups (Hispanics and Asian Americans) represent the largest segments of minority business owners. Hispanics represent 46 percent of all ethnic business owners, Asians 25 percent, and African Americans 24 percent.68
Despite the growth in the number of women and minority entrepreneurs, both groups still face the challenge of access. Access refers to the simplest form of discrimination—often women- or minority-owned firms are simply excluded from the opportunities offered to firms owned by white males. This can result from the way that networks built from interpersonal relations in business exclude women and minorities. When business relationships build from shared hobbies, sports, or even college ties, social situations that are all male or largely white outside of work can lead to unintegrated business networks.
Access problems for women- and minority-owned small businesses crop up most often as dis- crimination in financing.69 This means that they may not be given the same access to funds70 or contracting opportunities71 that white male-owned firms are given. For example, a national survey of small business finances found that minority business loan applicants were denied at twice the rate of whites, even though application rates did not vary by race.72 The same study found that Asian and Hispanic business owners pay higher interest rates on their loans. These differences in loan denial rates and in interest rates occurred even when all business-related differences were considered.
There are two solutions for access-based challenges. One solution is institutional, when minority- and women-owned small businesses pursue dedicated contracting funds, known as set-asides, amongbigcompaniesandgovernmentagencies.Thegoodnewsisthatgovernmentsatalllevels have special contracting opportunities for small businesses that are owned and operated by minorities or women. For example, the U.S. government allocated nearly $23.5 billion on set-aside basedcontractsin2011.73Bigcompaniesandthosewithgovernmentcontractsalsohavesimilar programs, typically with two to three times.as much money as the federal government allocates.74 Qualification for set-asides requires certification as a business owned and operated by a woman or a minority (or both).75 For corporations, certification is handled by organizations that are not affiliated with the government or big business, such as the National Minority Supply and Diversity Council
or the Women’s Business Enterprise National Council. Certification consists of proving that the business is truly owned and operated by a woman or minority. A similar process is used by the U.S. government, with the Small Business Administration certifying firms for the SBA’s 8(a) Business Development Program, whose details are online at the SBA site. It is also good to know that the Commerce Department has the Minority Business Development Agency (www.mbda.gov/gov/) that can provide help, along with local SBA, SCORE, and Small Business Development Center offices.
Certification is not for every women- or minority-owned small business. For example, the SBA 8(a) and most corporate certification programs require a business to be in operation at least two years. As is true for any program involving government or big business, the small business needs to put more energy and resources into record keeping than it might otherwise do, especially businesses that opt for minimalized or specialized levels of professionalization. For those businesses that qualify, certification provides a ready means of access to opportunity and to networks of businesses and government agencies which can be leveraged to gain access to other sectors of business.
The second approach to solving problems of access is personal and involves making extra efforts to network. As discussed in Chapter 3, building a social network is central to business success. For minority-owned and women-owned businesses, networking is especially important because such firms need to network even more than other types of firms. While networking with other minority- owned or women-owned firms will feel comfortable, and lead to business within that group, the real gains in business require networking in more diverse and potentially less comfortable situations, such as industry and trade associations, chambers of commerce, and the like. Success comes from the number of different types of contacts one makes, and for a minority- or women-owned business, this requires having business contacts from other races, genders, ages, and sectors. Being given early retirement can be seen as a company’s effort to replace expensive (if capable) older talent with junior people who work for less. But being laid off or downsized suggests that the person was expendable at best, deadwood at worst. The difference in labeling makes a difference in the late career entrepreneur’s self-confidence.
When there are self-confidence issues, the first solution is to take some time to get over the shock to self-image. Counseling, whether job or psychological, can also help tremendously. When the person is ready, the solution often involves redefining one’s life. The goal is to describe life in ways that help the individual take control over it. A layoff becomes an indication that it was time to move on. A downsizing becomes something that occurs to those best able to land on their feet. In taking control over the past, it can become easier to assert control over the present and future.
The second self-confidence solution comes from networking. Entrepreneurs as a group are an energetic and optimistic group. Just talking to people you know, as Donna Herrle did (see Small Business Insight box see below), or joining local entrepreneur organizations, such as the chamber of commerce or the local chapter of a trade or professional organization, can expose you to people full of energy and ideas. This is contagious, and as you hear the stories of perseverance and overcoming challenges that abound among entrepreneurs, the possibilities for a successful entrepreneurial life seem to become more realistic.
The third problem is keeping personal finances out of the business.81 Often when individuals are laid off or given early retirement, they can receive lump-sum financial settlements. Frequently, people intending to become late career entrepreneurs plan to use a substantial portion of these funds to start the new business. Sometimes this happens because late career entrepreneurs see their per- sonal funds as “easy money,” funds that can be obtained quickly and without a lot of hassles. The problem is that many people who take the easy money are also taking the easy way out. They fail to carefully consider how they will invest the money in the business, and how it will be used. Taking the easy way out can often mean late career entrepreneurs underprepare for the rigors of business, and they are risking their retirement nest egg.
For late career entrepreneurs, the solution is to treat their own money as objectively as possible. Invest it only if you can make a strong case that the investment in the business is going to produce reasonable returns. Treat your own money as an outsider’s investment. Do a business plan and consider seeking outside funding from friends and family to help keep you honest about the chances for the business.
This chapter starts with the idea that while no single explanation can really cover all 14.7 million self-employed people in the United States, there are aspects of the entrepreneurial life that apply to many. Some of these are general ideas, such as the entrepreneurial career or the competencies needed to be successful in small business. There are also types of entrepreneurs that describe many, but not all, self-employed people. Whether we look at attitudinal or behavioral types like the classic entrepreneur or small business owner, or if we look at demographical groups such as women entre- preneurs, the more we know about people pursuing entrepreneurship, the better it is for identifying important issues in their business and personal lives. Every entrepreneur’s story is uniquely his or her own, but across millions of entrepreneurs, there are some similarities, and these help make it easier to think about the entrepreneurial process and get the right kind of help to entrepreneurs.
1. What five specific types of business-related expertise in addition to the “hard worker” personality does this chapter list as competencies shared by all entrepreneurial personality types?
2. According to this chapter, what techniques for time management can help meet an entrepreneur’s challenges of schedule overload?
Explanation / Answer
Ans1.
The five P’s of entrepreneurial behavior is as follows:
The most efficient planner is the comprehensive planner followed by a critical point and opportunistic planner. The Reactive and habit based planners don’t make successful entrepreneurs.
To summarize in addition to education, skill and practice correct entrepreneurial behavior is the key to a successful entrepreneur.
Ans 2. According to the chapter the techniques of time management to help meet the entrepreneur’s challenges of schedule overload, who are always rushed with family responsibilities and work schedule are as follows:
To sum it up the entrepreneur needs to find a systematic way of working and should assign priorities, delegate and strategize to ensure efficient functioning.
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