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Chapter 05

Copyright © 2011 by the McGraw
-
Hill Companies, Inc. All rights reserved.

McGraw
-
Hill/Irwin

Small Business Entry

Paths to Part
-
Time
Entrepreneurship

Learning Objectives

LO1

Know when and why part
-
time
entrepreneurship makes sense

LO2

Discover the three key considerations for
assessing part
-
time business approaches.

LO3

Learn the four major paths to
entrepreneurship

LO4

Understand what it takes to be successful
in part
-
time entrepreneurship

5
-
2

Learning Objectives

LO5

Learn how to optimize your delegation
within the firm

LO6

Learn the benefits of bootstrapping

LO7

Learn the ethical challenges of part
-
time
entrepreneurship

LO8

Find out about the challenges of moving
from part
-
time to full
-
time
entrepreneurship

5
-
3

Definition of Part
-
Time

Self
-
Employment


Part
-
time self
-
employment


working for yourself
for less than 35 hours
a week


< 35 hrs/wk


Full
-
time self
-
employment


35 or more hours per
week



> 35 hrs/wk



5
-
4

Why Part
-
time Businesses Are
Important


Part
-
time self
-
employment
is a
major portion
of all current entrepreneurial companies in
the United States


Around half of
27.2 million
businesses are
part
-
time businesses.


6 million sellers
online


Volatility


frequency of business starts and stops

5
-
5

Question

Of 25.8 million U.S. businesses, what
percentage are part time?

A.
25

B.
50

C.
75

D.
10


5
-
6

When to Consider Part
-
Time

Entrepreneurship

5
-
7

Figure 5.1

Key Considerations for Success in

Part
-
Time Entrepreneurship


Cost to start
-
up


The
amount of money it takes
to start a
new business.


Time to start
-
up


How long it takes
to start a new business.


Permanence


The
impression of long
-
term continuity
a
business gives others.

5
-
8

Home
-
based Business


There were about
14.4 million
home
-
based
businesses in the United States in 2007, which
represented
52 percent

of all firms.


Home
-
based business meets at least
two of
the three

criteria for start
-
up.


It is
inexpensive
, since you are already living
somewhere


You
can get
your business
going

where you live
in a moment
.

5
-
9

Home
-
based Business


Zoning laws


Government
specifications for
acceptable use of
land and buildings in
particular areas.


Covenants


The limitations
imposed on your
property by your
neighborhood
group.


5
-
10

Home
-
based Business


Variances


Permission from a government
organization to act differently that the
laws state.

5
-
11

Issues Important to Running a
Home
-
based Business


Choose a work location in your home
that is
away from noise, distractions, and family
.


Be realistic about the
amount of space
you’ll
need for your equipment.


You’ll need an
office door
to
keep business
separate from family

and the rest of life.


Try your location out
for a day or two
to
check out noise, traffic patterns, lighting
needs, and distractions.

5
-
12

Issues Important to Running a
Home
-
based Business


Don’t overload
on
hours

of work, or on
snacks

from the refrigerator down the hall.


Setup your work day to
minimize distractions
from household or family chores


Consider hiring help
to handle household or
family chores to free up your time.


Set the ground rules
early and stick with
them. “No, I can’t mow the grass or
babysit.”

5
-
13

Equipment for a Home
-
based
Business


Comfortable,
usable
desk

and
chair

and
adequate
lighting


Telephone


High
-
capacity
Internet service


Business e
-
mail
account




High
-
speed desktop
computer


Fax machine


Copier


Appropriate
software


5
-
14

Twenty
Questions to

Ask Before
Planning

Your Home
Office

5
-
15

Internet Informational Web Sites


E
-
commerce


The use of the Internet to conduct
business transactions.


Informational Web sites


An Internet site designed to introduce
and explain a business to others.

5
-
16

Internet Informational Web Sites


Business
-
to
-
consumer (B2C)


Business
-
to
-
consumer transactions using e
-
commerce.


Business
-
to
-
business (B2B)


Business
-
to
-
business transactions using e
-
commerce.

5
-
17

E
-
Commerce as Percent of Total
Value: 2002

2007

5
-
18

Figure 5.2

Internet Informational Web Sites


The Internet’s power comes from its
being a very cost
-
effective and
efficient way to contact your
customers.


Most small businesses need to have a
Web site regardless of whether or not
they use it for actual sales.

5
-
19

Internet Informational Web Sites


Potential customers will use it to find
you.


If they’ve heard about you from
something other than the Internet,
they will use your site to find out more
information about you and to decide if
they want to actually contact you.

5
-
20

Internet Informational Web Sites


Blog


A Web page in which entries are posted
in reverse chronological order (i.e., the
most recent at the top of the page)


RSS feed


An Internet messaging service that pushes
(sends) whatever Web material you
specify to subscribers to that feed.

5
-
21

Internet Informational Web Sites


Multichannel marketing


The use of several different channels to
reach your customers, for example, a
Web site, direct mail, and traditional
retailing.


Reciprocal links


A listed, live connection to a different
Web site, which in turn displays a similar
link to the first Web site.

5
-
22

Internet Informational Web Sites


Search engine optimization


A general approach to Web site design
intended to result in the site being
displayed toward the beginning of a
search engine’s (e.g., Google, Yahoo!,
etc.) listing for that term.

5
-
23

Internet Informational Web Sites


Sponsored link


A form of paid advertising that gets your
company’s Web site at the top of a
search list.

5
-
24

Search Engine Rankings

April 2009

5
-
25

Figure 5.3

E
-
Commerce and eBay Web Sites


eBay

reports
over 4 million sellers

in the United
States alone


7 out of 8 sellers work on eBay only part time



For part
-
timer entrepreneurs the online
approach is highly attractive


advantages of
a large market


24/7 availability
of your products


a
quick start
-
up
which is
potentially inexpensive

5
-
26

E
-
Commerce and eBay Web Sites


Payment



Most online
transactions use a
credit card or an
online payment
system like PayPal.


Chargebacks



This is a fee the
service levels on you
for any of a variety
of problems related
to the sale

5
-
27

E
-
Commerce and eBay Web Sites


Reverse auction



An auction in which
the low bid gets the
business or wins.


Reserve price



A minimum
acceptable selling
price in an auction.
If the bidding does
not exceed the
price, the sale will
not go through.

5
-
28

The Multiple Channels

of Business Promotion

5
-
29

Figure 5.5

The Next Best Things to a Home
-
Based Business


Home retail
:


Parties
and
Door
-
to
-
Door


Avon, Mary Kay, Tupperware



Success Factors
are…


hosts with good contacts


good matches of products to the community


closing the sale

5
-
30

Home Retail


Advantages



ease of setup


low cost of start
-
up


ability to work away
from home and
employer


Disadvantages



working on the road


lack of a base to
organize and work


variable income


finding ways for
customers to reach
you

5
-
31

The Next Best Things to a Home
-
Based Business


Network marketing



An approach to selling in which the
salesperson recruits customers to become
distributors of the product or service to
others.


Amway



Avoid the appearance of pyramid schemes


5
-
32

The Next Best Things to a Home
-
Based Business


RETAIL STANDS


one of the most ancient forms of business



Carts
(temporary)


Kiosks
(permanent)



Success Factors


location


inventory selection

5
-
33

RETAIL STANDS


Advantages




little investment


variety of locations


quickly established


easily ended



Disadvantages



variable income


legal requirements


5
-
34

The Next Best Things to a Home
-
Based Business


Mobile Offices



Incubators



Virtual Offices


Doing Business without a Business
Organization

5
-
35

Success Factors for Part
-
time
Businesses


Boundary Management


separating and balancing business and
home



Time management


Use a to
-
do list


Prioritize


Keep it in its own space (home based)

5
-
36

Making Do When You Are

Starting Out


Bootstrapping


using low
-
cost or free techniques to
minimize your cost of doing business


Undercapitalization


not having enough money available to
the business to cover shortfalls in sales or
profits

5
-
37

Ethics and Part
-
time Small
Business


Moonlighting


working on your own part
-
time after your
regular job


Conflict

of interest


Cannibalizing

sales


Poisoning

the well


Aggrandizing


making your business or yourself seem
more accomplished than it is

5
-
38

Moving from Part
-
time to Full
-
time


Key question is usually
financial


Wait until there is a solid income


Make use of any
transition

services
offered by the former employer


Recognize that initially, you will spend all
your time
running

and
marketing

the
business

5
-
39