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WORKING IN THESMALL BUSINESS

SECTORX420 Discussion Session #82

THE WORLD OFSMALL BUSINESS.

IS ITRIGHT FOR YOU?

OR

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THINKSMALL

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What’s your definitionof a

small business?

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There are many definitions based upon different criteria.

Here are just a few:

• Type of Ownership

• Size of the Capital Investment

• Sales and/or Service Volume

• Number of Employees

• Number of Locations

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So when did this “Small” business become a “Big” business?

• 1.Joe and his wife buy a “Subway franchise and open their first store. They beg, borrow (but don’t steal) enough to open---including credit card debt. No bank will touch them. They incorporate as a Sub S corporation.

• 2. Business is good. They decide to open a second store. Joe has installed a very good accounting system and they have good internal controls. They go to a bank for a loan, which is approved subject to Joe and his wife signing “joint and several” personal loan guarantees.

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5 years later…..• 3. Bob and family have expanded to 10

locations in several cities. Business is great and they have a chance to buy a company that operates 50 stores in another state. Up to this time they have established bank credit lines---but the banks always require personal guarantees on all loans. So they decide to go public.

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The next year……• 4. The company has a successful public

offering. The company is no longer a Sub-S, has over 1,000 outside shareholders, a Board of Directors that includes non-employees and non-family members.

• 5. Banks now deal directly with the company, and personal guarantees for lines of credit are no longer required.

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SO…………When did

This“Small Business”

Become a“Big Business?”

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My Preferred Definition:

"A small business is a business which is independently owned and operated, with

close control over operations and decisions held by the owners. Business

equity is not publicly traded and business financing is personally guaranteed by the owners. (The business will have less than

twenty employees).”---Professors Scott Holmes and Brian Gibson of

The University of Newcastle, Australia

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TO REVIEW:

• Management and ownership are rarely separate.

• Control over business operations and decisions reside with one or two persons, who are usually family members.

• The equity in the business is not publicly traded.

• The level and number of formal contractual relations are kept at a minimum level.

• Personal objectives of owners will guide and directly influence business decisions.

• The personal guarantees and signatures of the owners are required to secure business debt, and limited liability is rarely if ever present.

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What does it take to workfor a small business?

Probably the very same qualities ittakes to work for a big business---

but more so.

Good Communication Skills---bothWritten and Verbal

Reliability and Responsibility

Creativity

Organization

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The Question:IS IT

RIGHT FOR YOU?

The Answer:YOU’VE GOT TO FIGURE

THAT OUT FOR YOURSELF.

(Know Thyself)

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THINKSMALL

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THE BAD NEWS:

1. Nepotism

2. The owner retires and sells

3. The financial risk factor

4. The demands of work

5. You are VERY VISIBLE

6. In your face communications

7. Multi-tasking

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THE GOOD NEWS:

1. Small firms are big employers

2. Decision-making and areas of responsibility are usually shared more freely than in larger organizations

3. Less people carry a broader range of responsibilities

4. In a small organization you are in the best position to take advantage of any new jobs that are being created

5. Constant challenge of MULTI-TASKING

6. You are VERY VISIBILE

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DUE DILIGENCE:

• How long in business?

• Who owns it?

• If the business is family owned, are there relatives actively involved and employed in the business?

• Will the leadership go to younger, and possibly incompetent, members of the family?

• How far can I go with the company if I am not a member of the ownership family?

• What kind of reputation does the business have in the local community?

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DUE DILIGENCE:

• Does it have non-family employees who have been with the company extended periods of time and have achieved high levels of responsibility and income?

• Check with the Better Business Bureau if the community has one.

• You can check with other members of the community, such as; Businessmen, Lawyers, Accountants, Bankers.

• Also, don’t forget that customers are an excellent source of information too.

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Rules of Work not Taught in The Kelley School of Business

• You can go anywhere you want if you look serious and carry a clipboard.

• Important letters that contain no errors will usually develop errors in the mail.

• If it weren't for the last minute, nothing would get done.

• The last person that quit or was fired will be held responsible for everything that goes wrong.

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Rules of Work not Taught in The Kelley School of Business

• When you don't know what to do, walk fast and look worried.

• Don't be irreplaceable; if you can't be replaced, you can't be promoted.

• Eat one live toad the first thing in the morning and nothing worse will happen to you the rest of the day.

• When all else fails, go to lunch.

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The Four Questions

• What are the seven things I absolutely love to do?

• What are the seven things I am good at, have a talent for, or other people tell me I'm good at?

• What is absolutely essential for me to do in life?

• What do I feel I ought to do or would like to be doing?

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Two After Thoughts

"I am a great believer in luck,and I find the harder I work

the more I have of it."

---Thomas Jefferson___________________________________________________________

"If you thinkeducation is expensive,

try ignorance."

----Derek Bok

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“The Art of Living”

A wise person once said, “The art of living is to make use of what you’ve got and use it to the fullest. Most people do not know what they are living for. But once you have found out, you have the jewel of life.”

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“I HAVE ENOUGH FISH TO FEED MY FAMILY”

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Evaluation QuestionsUse

Strongly Agree---Agree—Disagree---Strongly Disagree---Don’t Know

1. I found the presentation of material easy to understand.2. This session increased my knowledge on the subject presented.3. I will be able to use some of the information

from this session in the future.4. The presenter was well prepared.5. This presentation should be repeated in the

future.