Numerous Small Business Start-Ups - Term Paper Example

Entrepreneurship in Small Businesses: An attainable approach. Entrepreneurship deals with the process of starting one’s own business based on research conducted to identify the potential need in the market in terms of products and services. While entrepreneurship has been extremely successful in contributing significantly to the economic growth of a nation, its failures to build sustainable businesses cannot be ignored. Based on literature findings, the present context explores entrepreneurship and the influencing factors on building a successful business while identifying critical challenges, from small business perspective. Finally, conclusions with key findings and appropriate recommendations have been made. 1. Introduction: Starting one’s own business is an exciting, promising and high-risk proposition that usually stems from one single idea or a need. Study related to this process, usually referred to as entrepreneurship, has emerged as one of the most important outcomes of globalization. While significant part of a nation’s economic growth is through small business entrepreneurs, failure of this section of businessmen cannot be ruled out. In the current study, focus will be on efforts to identify various factors responsible for the success of small businesses and the challenges they face. An attempt will be made to list the core elements of successful entrepreneurship based on literature study and analysis before concluding with key findings. 2. Literature findings: In his magazine article, Todorvic (2004) expresses that origins of entrepreneurship can be traced to early last century and is yet under lot of debate concerning its definition or actual meaning. He asserts that entrepreneurship is such a vast multidimensional and dynamic aspect of conducting business in the globalized world that it has been given multiple definitions from varied perspectives. Quoting various definitions from different people, Todorvic (2004) mentions that entrepreneurship, for instance, is concerned with starting one’s own business; entrepreneurship is the process by which new products, services or outcomes are created by people that can be recognized with certain specific characteristics. Specific characteristics have been associated with entrepreneurship, such as innovation, focus, discipline, passion, self-confidence, positive attitude, and persistence (Nieuwenhuizen & Machado, 2004). Koester (2010) asserts that an innovative opportunist is the one that makes use of an opportunity in the marketplace and converts this into a promising business. Moreover, Koester (2010) also mentions that good interpersonal skills are imperative for successful entrepreneurship. Numerous small business start-ups have experienced a phenomenal increase in the US considering their flexibility, innovation, and competitive advantage (Hatten, 2011). Successful entrepreneurship, from a small business perspective adopted by Wiklund and Shepherd (2005) in their study, is impacted by three factors: an entrepreneurship orientation; funding; and environmental factors. Parks (2012) argues that many entrepreneurs do not become successful business owners of a sustainable business because they lack certain characteristics that are unique for an entrepreneur. Although people start small businesses, they tend to close the businesses eventually because these business owners’ vision is limited to certain specific achievements, like maybe some profits in short term; if these are not achieved, and then they tend to close their businesses. Hatten (2011; p.17) mentions that slightly more than 10 percent of small businesses close within a year, and that about 25 percent closed during first five years; and that only 13 percent proceed to establish sustainable businesses. However, entrepreneurship is more than starting a small business. Parks (2012) further argues that even small businessmen can be successful entrepreneurs if their business is carried out in a specific direction that is guided by a grand vision, forward thinking, team work, ownership, inspiration, dedication and hard work. Parks (2012) identifies six key secrets of successful entrepreneurship, namely, right attitude, opportunity, focus, talent, building a team and communication. 3. Discussion: Small businesses are usually dependent on certain external and internal factors for existence and sustenance. External factors include environmental factors and funding support. Small businesses often fail to procure sufficient funding, which causes them to eventually shut down if they fail to make profits during initial stages, which is very challenging. In such cases, a further burden of debt increases on the owner. Initial setups usually decide to run on lesser profit margin, which further complicates their situation. Other external cost liabilities come from energy consumption, insurance costs, taxes, rentals etc that form a part of operating costs. Internal factors again include operating and equipment costs, staff salaries, promotion costs etc; besides these, employee motivation, skills, integrity, and dedication are also critical to the success of any business. Appropriate systems such as technology, equipment, record keeping, security and safety mechanisms also play a role in building a sustainable business. While these are technical factors, some of the human factors for small businesses, as identified in literature, include the right attitude, determination, hard work, and strong interpersonal skills. Successful entrepreneurs are recognized by specific characteristics that depict these factors. For instance, according to Parks’s (2012) analysis, entrepreneurs can be successful only when they approach their businesses with the attitude of succeeding, and that attitude which allows the business owner to bounce back at every failed step. Such an attitude requires courage and confidence besides determination to achieve the desired outcome. Such individuals ensure they take the responsibility for their actions, whether good or bad; and these individuals never blame any other person or factor for their failed attempts. Secondly, business leaders should possess and demonstrate integrity and honesty through actions. Their principle-oriented behavior will guide others in the right direction; even amidst failures, these individuals tend to stand firm on their decisions, which inspires the right behavior in their employees. Openness and transparency in communication will help earn trust of employees and also allow employees know the actual situation of the business. Inspired and dedicated employees will strive to take the business to next level with immense effort. Entrepreneurs must be able to build strong teams that foster team work, trust, strong interpersonal relationships, and interdependency. Small businesses face some serious challenges, especially, from external factors such as funding, bankruptcy, or withdrawal of ownership, competition etc; small businesses are hit hard when charged with legal lawsuits. Expertise of the owners and strength of collaboration between different owners in case of multiple-owners business play a significant role in sustenance. These two challenges usually pose risk in terms of effective management and control. Inexperienced owners tend to ignore basic rules of business management such as effective planning of resources, funds, and goals. Multiple ownership also causes confused and multiple controls, ineffective leadership and lack of motivation. Challenges in small businesses that initially perform well also stem from need for increasing employees or resources which usually go unnoticed by inexperienced new entrepreneurs, and eventually diminish. It is very easy to copy small businesses thereby increase competition, which could be another reason for the low profits of small businesses. Lack of empowerment in small businesses actually causes performance and profits to slow down (Steinman, 2012). 4. Conclusions and recommendations: This brief study on entrepreneurship in small businesses based on findings from literature indicates that entrepreneurship is a specific approach to starting and managing a successful business that is unique and serves specific needs of target customers, rather than starting one’s own business. successful entrepreneurs are identified with specific characteristics such as confidence, focus, determination, hard work, ownership, and positive attitude. In addition to possessing these qualities, the entrepreneur should be able to perform adequate planning and goal setting, and manage interpersonal relationships with partners, including business partners, finance partners, and other stakeholders. The most common risk factors in small businesses include sustainable profits, funding, management control, and usage of efficient systems. To address these risk factors, a few recommendations can be attempted. Firstly, entrepreneurs should be able to adopt cost saving measures from the beginning and avoid any unnecessary and non-value adding activities that would save costs, effort and energy. Secondly, these entrepreneurs should encourage innovation and flexibility to develop products/services as per the market demand through appropriate empowerment of employees. Thirdly, efficient management control supported by clear policies and procedures will foster better and stronger relationships between partners in cases of multiple ownerships. Lastly, but most importantly, employee empowerment can be an effective way to manage changing customer expectations and needs, competition, and also employee motivation. References Hatten, T.S. (2011). Small business management: Entrepreneurship and beyond. (5th ed.). Mason, OH: Cengage Learnig. Koester, E. (2010). Green entrepreneur handbook: The guide to building and growing a green and clean business. Boca Raton, FL: CRC Press. Nieuwenhuizen, C and Machado, R. (2004). Basics of entrepreneurship. Cape Town: Juta & Company. Parks, S. (2012). How to be an entrepreneur: The six secrets of self-made success. Harlow, UK: Pearson. Steinman, S. (2012). The small business turnaround guide: Take your business from troubled to triumphant. New York: Morgan James Publishing. Todorovic, Z.W. (2004). The Framework of Static and Dynamic Components: An Examination of Entrepreneurial Orientation and University Ability to Teach Entrepreneurship. Journal of Small Business and Entrepreneurship, 17 (4), 301-316. Wiklund, J and Shepherd, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20(1), 71-91. Read More