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Small Business:
Its Opportunities and
Rewards
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Objectives:
• Understand the scope of small business in the U.S.
• Learn the differences between small business and high-
growth ventures
• Discover the rewards entrepreneurs can achieve
through their businesses
• Be able to dispel key myths about small businesses
• Identify actions key to becoming a small business
owner
• Understand how small businesses are important to our
economy and your community
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• Aaron McGruder loved to draw cartoons
• Passionate about becoming professional cartoonist
• Fewer than a dozen African-American cartoonists
• Decided to perfect art and business simultaneously
• 1996 – published on “The Hit list” online
• 1997 – published in The Diamondback and The
Source
• 1999 – The Boondocks begins national syndication
• Income in “six-figure” range in first year, largely due
to retaining rights to his work 1-3
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• Entrepreneur: a person who owns or starts
an organization, such as a business
• Small Business: involves 1-50 people and
has its owner managing the business on a
day-to-day basis
• Over a million new businesses per year in
U.S.
• 50% of Americans express desire to start
their own business
• Only 7% (1 in 7) actually do
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• Small Business Administration: a part of

U.S. government which provides support
and advocacy for small business
• SBA reports on new business survival
rates after four years:
– With employees: about 2/3 survive
– Owner-only: about 1/2 survive

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• Small Business Development Center:

offices co-sponsored by states and the
federal government that offer free or
low-cost help to existing or potential
small business
– More than 81% of SBDC clients were still in
operation after five years

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• Incubators: a facility which offers

subsidized space and business advice to
companies in their earliest stages of
operation
– More than 87% of firms receiving help from
incubators were still in operation after four
years
• Small business knowledge means small
business success!

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Defining a Small Business:

• Small and Medium Enterprise (SME):
international term for small businesses
– Small enterprises: 1-50 people
– Medium enterprises: 51-500 people

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• Independent Small Business: a business

owned by an individual or small group
• Owner-manager: individual who owns
and runs a business
• Absentee owner: profits from business,
but not involved in daily activities

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Small Business Owners and
Entrepreneurs:
• Entrepreneurial businesses are characterized
by novelty in their products, services, or
business models
• Small businesses are imitative, providing only
minor variations on an established model
• Self-employed: working for yourself
– About 16.3 million self-employed people in 2006

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Question
A person who becomes an owner through
inheriting or being given a stake in a family
business is a(n)
a) Buyer
b) Owner-manager
c) Heir
d) Founder

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Small Business Owners and Entrepreneurs:
• Entrepreneur: anyone who owns a business
• Groups within population of entrepreneurs:
– Founders: people who create or start new
businesses
– Franchise: prepackaged business bought, rented, or
leased from a company called a franchisor
– Buyers: people who purchase and existing business
– Heir: person who becomes an owner through
inheriting or being given a stake in a family business
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Small Business vs. High-Growth Ventures

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Small Business vs. High-Growth Ventures

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Question
All of the following are commonly mentioned
rewards for starting a small business except:

a) Flexibility
b) Recognition
c) Personal Growth
d) Livable Income

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Rewards for Starting a Small Business:

• 3 Key Rewards:
1. Flexibility

2. Livable income

3. Personal growth

Other factors: wealth, new product/idea

Less mentioned: recognition, admiration,
power, family
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Example

Dream Job
• Survey conducted by the Graduate Management
Admission Council (GMAC)
– 1,000 college seniors, 49% male and 31% female
were interested in pursuing entrepreneurship
– College graduates’ main concern used to be starting
salary, now it’s quality of life
– Next Generation is looking for:
• Ownership in a company
• Freedom to set their own hours
• Chance to make a difference

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http://www.entrepreneur.com/magazine/entrepreneur/1997/january/13766.html
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Question
All of the following are myths about small
businesses except:
a) Need to make something to make money
b) Growth is in the service industry
c) There is not enough financing to start a business
d) 70% of all new businesses fail within 2 years

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Myths about Small Businesses:

• There’s not enough financing to start a business.
• Truth:
– This is predominantly an issue that occurs at the
initial start-up
– In a recent survey, financing problems ranked
66th and 69th on the list
– There are a wide variety of fundraising
techniques, including investors, borrowing, and
saving

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Example
Be Realistic About Startup Financing
• Free Government money for a “great business idea”
is a myth
• Three general categories of start-ups:
– The “just get going” startup – small service
businesses without much startup financing
– The elite, successful tech-savvy entrepreneurs – use
angel investment and venture capital
– The middle-ground businesses – need six figures for
startup should scale down and change plans

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http://www.entrepreneur.com/startingabusiness/businessplans/businessplancoachtimberry/article183606.html
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Myths about Small Businesses:

• You need to make something (or something
high-tech) to make money.
• Truth:
– Growth is in the service industry.
– 40 million of the 110 million people working
in the U.S. in 2001 worked in service
industries

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Myths about Small Businesses:

• Seventy percent (or 80% or 90%) of all new
business fail within two years.
• Truth:
– About two-thirds of businesses with
employees survive 4 years or more
– 87% of incubator-aided businesses survive 4
years or more

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Complete self assessment on page 14

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Small Business and the Economy:

• Small business is vitally important to our
communities and our economy
1. New jobs
2. Innovations
3. New opportunities

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Small Business and the Economy:
• New Jobs: small businesses created 75% of the
last 3.4 million jobs created
– Small business is the engine of job creation
– Occupational Structure: the sequence or
organization of jobs and careers in the economy
– Small businesses employ more than half of all
Americans
– Small businesses are key employers – they
employ people who have atypical work histories or
needs

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Small Business and the Economy:

• Innovations: promotes creative destruction
– Creative Destruction: the way that newly created
goods, services, or firms can hurt existing
competitors
– Small businesses generate 13-14 times more
patents than big businesses

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Small Business and the Economy:
• New Opportunities: small business presents the
best opportunities for many people who foresee
problems fitting into mainstream jobs
– Small businesses are the support for the boat
that carries the economy: high-growth ventures
and large companies
• Small businesses provide cheaper alternatives to
product manufacture, distribution, and ideas

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