The small-business sector also gives entrepreneurs an outlet for developing their ideas and perhaps for creating entirely new industries. Many of today’s successful high-tech firms – Microsoft, Cisco Systems, Yahoo!, and Dell – began as small businesses.
The growth of each such new businesses not only provides new goods and services but also fuels local economies. The high-tech companies in California’s Silicon Valley created a need for many support services. A company called iQuantic provides human resources consulting to Silicon Valley clients, and to be close at hand, it located in a former mattress factory in San Francisco. By locating in San Francisco’s run-down Mission District, iQuantic brought money into that neighbourhood.
Another contribution of small business is its ability to provide needed services to the larger corporate community. The movement toward corporate downsizing that began in the early 1990s created a demand for other businesses to perform activities previously handled by company employees. Outsourcing such activities as security, employee benefits management, maintenance, and logistics created opportunities that were often filled by employees of small businesses.
Small businesses might begin with a shift in consumer interests and preferences and then blossom into a whole new industry. A generation ago, no one would have called cheerleading an industry. But today’s cheerleaders aren’t just yell leaders, bouncing around on the sidelines and calling out encouragement to their favorite team. Instead, they are competitive athletic teams in their own right, often longing more practice time and travel miles than the football team. They get recruited by college scouts and compete for national championships. Various businesses have grown up around the new cheerleading trend – training camps, costume and uniform suppliers, publications. The magazine American Cheerleader was launched in 1994 and now claims 200,000 in circulation, with a readership of 1 million.
Monday 30 April 2012
Saturday 28 April 2012
Small Business – Creating New Jobs
Small businesses make tremendous contributions to the U.S. economy and to society in whole. One impressive contribution is the number of new jobs created each year by small businesses. Three of every four new jobs created over the last 10 years were at companies with fewer than 500 employees. A significant share of these jobs was created by the smallest companies – those with four or fewer employees. Small firms are dominant factors in many of the industries that have added the most jobs: engineering and management services, construction trade contractors, wholesale trade, amusement and recreation, social services and restaurants.
In an economy slowed by recession, a sizable number of new jobs are created by entrepreneurs who decide to launch new business ventures. During the first years of the 21st century, employers hired 20 percent of fewer new college graduates than before the recession began. Instead of spending his final year at Texas A&M University job hunting, James Ewing launched Northgate Vintage, a retail store that offers vintage clothing. “In my classes, everybody is talking about how hard it is to find a job,: says Ewing. “I don’t have to worry about that because I can focus on this.”
Even if you never plan to start your own business, you will probably work for a small business at some point in your career. Not only do small firms employ about half of U.S. workers, but they are more likely than large firm to employ the youngest (and oldest) workers. In addition, as detailed in a later section of this chapter, small businesses offer significant opportunities to women and minorities.
Small businesses also contribute to the economy by hiring workers who traditionally have had difficulty finding jobs at larger firms. Compared with large companies, small businesses are more likely to hire former welfare recipients. Driven in part by their limited budgets, small businesses bay be more open to locating in economically depressed areas, where they contribute to rehabilitating neighbourhoods and reducing unemployment.
In an economy slowed by recession, a sizable number of new jobs are created by entrepreneurs who decide to launch new business ventures. During the first years of the 21st century, employers hired 20 percent of fewer new college graduates than before the recession began. Instead of spending his final year at Texas A&M University job hunting, James Ewing launched Northgate Vintage, a retail store that offers vintage clothing. “In my classes, everybody is talking about how hard it is to find a job,: says Ewing. “I don’t have to worry about that because I can focus on this.”
Even if you never plan to start your own business, you will probably work for a small business at some point in your career. Not only do small firms employ about half of U.S. workers, but they are more likely than large firm to employ the youngest (and oldest) workers. In addition, as detailed in a later section of this chapter, small businesses offer significant opportunities to women and minorities.
Small businesses also contribute to the economy by hiring workers who traditionally have had difficulty finding jobs at larger firms. Compared with large companies, small businesses are more likely to hire former welfare recipients. Driven in part by their limited budgets, small businesses bay be more open to locating in economically depressed areas, where they contribute to rehabilitating neighbourhoods and reducing unemployment.
Thursday 26 April 2012
Contributions Of Small Business To The Economy
Small businesses form the core of the U.S. economy. Businesses with fewer than 500 employees generate 47 percent of total U.S. sales and over half the nation’s gross domestic product. Nine of every 10 U.S. businesses are small businesses. In addition, small businesses employ 53 percent of the nation’s private nonfarm workforce. Once business that started small but has been growing is Guitar Center. The retail chain has created unique links with its customers and placing themselves as The Best Business Practice in the Business World.
What musician could resist a music store where you can “come in and try anything and hang out as long as you want”? That’s the Guitar Center, a successful chain of about 130 music stores across the country and an additional 19 American Music Group (AMG) outlets. Not surprisingly, Guitar Center specializes in guitars, with models in every price range from $99 Fender Squier to a vintage 1958 Fender Stratocaster for nearly $40,000. But the store also offers drums, amplifiers, keyboards, and other instruments, as well as audio and recording equipment, parts, accessories, books, magazines, videos, and music software. It appeals to musicians and music lovers of all ages.
The country’s largest music equipment dealer, Guitar Center Inc. posts net income of nearly $37 million a year. It attracts not only crowd of customers – 1,400 people came to the recent grand opening of a new store – but also hundreds of potential employees. About 300 people showed up before a recent opening to apply for the store’s 15 available jobs, and management’s ability to handpick the most knowledgeable people to work in Guitar center is just one component of the chain’s success. Competitive savvy is another.
“They beat the competition on selection, they beat the competition on service, and they beat them on the price, the three legs of the stool that really drive store choice,” said an industry analyst. Guitar Center also advertises widely. Says one competitor about Guitar Center, “What your customer base does is go down there and check it out. Heck, I went down there and checked it out. They’ve got one of everything.”
The chain is expanding rapidly, building on strategy of growth in the 1970s, and added 14 new stores in one recent year, with about as many more still to come. In its high-ceilinged interiors are glass-walled rooms set aside for customers to try instruments, and some music lovers drop in regularly, often without buying anything. Product seminars and guest appearance by musical artists also draw customers to the store, where open space complements the massive displays of product offerings. Service is a priority, backed up by Guitar Center’s online store.
The performance of the American Music Group has not been quite as strong as Guitar Center’s. “The AMG business model is taking longer to develop than the company had anticipated,” said one analyst, and expansion plans for AMG were recently put on hold. Unlike Guitar Center, AMG must appeal to band instructors and their parents, and some competitors say the company’s business model – the “big-store” concept that made Wal-Mart a runaway success, using the store’s buying power to leverage a wider variety and lower prices-won’t work in that market, where long term relationships are important.
Guitar Center: Hitting All the Right Notes
What musician could resist a music store where you can “come in and try anything and hang out as long as you want”? That’s the Guitar Center, a successful chain of about 130 music stores across the country and an additional 19 American Music Group (AMG) outlets. Not surprisingly, Guitar Center specializes in guitars, with models in every price range from $99 Fender Squier to a vintage 1958 Fender Stratocaster for nearly $40,000. But the store also offers drums, amplifiers, keyboards, and other instruments, as well as audio and recording equipment, parts, accessories, books, magazines, videos, and music software. It appeals to musicians and music lovers of all ages.
The country’s largest music equipment dealer, Guitar Center Inc. posts net income of nearly $37 million a year. It attracts not only crowd of customers – 1,400 people came to the recent grand opening of a new store – but also hundreds of potential employees. About 300 people showed up before a recent opening to apply for the store’s 15 available jobs, and management’s ability to handpick the most knowledgeable people to work in Guitar center is just one component of the chain’s success. Competitive savvy is another.
“They beat the competition on selection, they beat the competition on service, and they beat them on the price, the three legs of the stool that really drive store choice,” said an industry analyst. Guitar Center also advertises widely. Says one competitor about Guitar Center, “What your customer base does is go down there and check it out. Heck, I went down there and checked it out. They’ve got one of everything.”
The chain is expanding rapidly, building on strategy of growth in the 1970s, and added 14 new stores in one recent year, with about as many more still to come. In its high-ceilinged interiors are glass-walled rooms set aside for customers to try instruments, and some music lovers drop in regularly, often without buying anything. Product seminars and guest appearance by musical artists also draw customers to the store, where open space complements the massive displays of product offerings. Service is a priority, backed up by Guitar Center’s online store.
The performance of the American Music Group has not been quite as strong as Guitar Center’s. “The AMG business model is taking longer to develop than the company had anticipated,” said one analyst, and expansion plans for AMG were recently put on hold. Unlike Guitar Center, AMG must appeal to band instructors and their parents, and some competitors say the company’s business model – the “big-store” concept that made Wal-Mart a runaway success, using the store’s buying power to leverage a wider variety and lower prices-won’t work in that market, where long term relationships are important.
Tuesday 24 April 2012
HITS & MISSES in Small Business
Everyone knows that credit cards are a double-edged sword. They’re easy and convenient to use, on the one hand, but they are also a risky way to borrow more money than you can quickly pay back. With interest rates and penalties high, many consumers have learned to be wary of forgetting about budgeting and saying, "PUT IT ON MY CREDIT CARD".
But what about small-business owners? Struggling to establish themselves and finding financing tough to obtain, many entrepreneurs use their personal credit cards as an important source of financing in the early years of their businesses, and even beyond. A National Small Business Association and Arthur Andersen survey reports that only 6 percent of all small businesses were operating with SBA loans, and a mere 2 percent has found venture capital to fund their start-ups. About half of small businesses in the survey used credit cards to pay for either starting or expanding their operations. The National Federation of Independent Business reports that smaller firms with sales under $500,000 and under 10 years old are most likely to use credit cards for working capital.
Diana Frerick is a case in point. She has used credit cards more than once to finance start-ups in the karaoke business, most recently to open Karaoke Star Store & Stage, an equipment retailer that now has 14 employees and more than $2 million in revenues.
Matt Jung and Chip George had a less positive experience ‘We had no assets,’ says Jung of their start-up. ‘We were taking anything we could get.’ After relying on credit to buy raw materials and finance operating costs for their beanbag chair company, Comfort Research, they found themselves deep in debt despite rapid growth and revenues $2 million. It took years to pay off the debt and accumulated interest. ‘It’s a very expensive way to borrow money,’ says Jung of his experience with credit cards. ‘I think they should be a last resort.’
Steve Rotermund, who ruined his personal credit to keep his passenger-jet cleaning company afloat several years ago, still has trouble buying consumer goods on credit. His advice to fellow entrepreneurs is, ‘Try to get money other ways if you can. Anything is better than credit cards.’
Nevertheless, when used wisely, small-business credit cards can be convenient for entrepreneurs. “A credit card with $10,000 limit could provide you with enough working capital to purchase equipment or furniture, or pay for a marketing campaign,” says the executive director of the National Association of Women Business Owners. Paying attention to the interest rate and other details can help business owners make wise decisions about credit, as can setting up a separate fund to fall back on it the business falters. Many financial institutions offer small-business cards with no annual fees and zero interest for the first six months. “What the small-business owner needs to do is compare,” says an economist with the SBA.
But what about small-business owners? Struggling to establish themselves and finding financing tough to obtain, many entrepreneurs use their personal credit cards as an important source of financing in the early years of their businesses, and even beyond. A National Small Business Association and Arthur Andersen survey reports that only 6 percent of all small businesses were operating with SBA loans, and a mere 2 percent has found venture capital to fund their start-ups. About half of small businesses in the survey used credit cards to pay for either starting or expanding their operations. The National Federation of Independent Business reports that smaller firms with sales under $500,000 and under 10 years old are most likely to use credit cards for working capital.
Diana Frerick is a case in point. She has used credit cards more than once to finance start-ups in the karaoke business, most recently to open Karaoke Star Store & Stage, an equipment retailer that now has 14 employees and more than $2 million in revenues.
Matt Jung and Chip George had a less positive experience ‘We had no assets,’ says Jung of their start-up. ‘We were taking anything we could get.’ After relying on credit to buy raw materials and finance operating costs for their beanbag chair company, Comfort Research, they found themselves deep in debt despite rapid growth and revenues $2 million. It took years to pay off the debt and accumulated interest. ‘It’s a very expensive way to borrow money,’ says Jung of his experience with credit cards. ‘I think they should be a last resort.’
Steve Rotermund, who ruined his personal credit to keep his passenger-jet cleaning company afloat several years ago, still has trouble buying consumer goods on credit. His advice to fellow entrepreneurs is, ‘Try to get money other ways if you can. Anything is better than credit cards.’
Nevertheless, when used wisely, small-business credit cards can be convenient for entrepreneurs. “A credit card with $10,000 limit could provide you with enough working capital to purchase equipment or furniture, or pay for a marketing campaign,” says the executive director of the National Association of Women Business Owners. Paying attention to the interest rate and other details can help business owners make wise decisions about credit, as can setting up a separate fund to fall back on it the business falters. Many financial institutions offer small-business cards with no annual fees and zero interest for the first six months. “What the small-business owner needs to do is compare,” says an economist with the SBA.
Sunday 22 April 2012
Typical Small-Business Ventures Part-3
Almost half of small businesses in the U.S. are home-based businesses-firms operated from the residence of the business owner. Between 1960 and 1980, fewer people worked at home, largely because the number of farmers, doctors, and lawyers in solo practices was declining. But since then, the number of people working at home has more than doubled. A major factor in this growth is the increased availability of personal computers and access to the Internet and other communication devices such as fax machines and cell phones. As computers technology evolves at a rapid pace and more workers prefer the flexibility of working from alternative locations, the Census Bureau predicts that the number of home-based businesses will grow even faster during the early decades of the 21st century.
Operating home-based businesses can help owners keep their costs low. Without having to leave or maintain separate office or warehouse space, a home-based business owner can pour precious funds into the business itself. But financing a small business can be challenging. Some home-based business owners have even discovered the benefits of selling their goods through eBay, the online auction site. Andrew and Tracy Hortatsos, owners of ShadeSaver.com, sell 50 percent of their retail sunglasses through eBay. “It was probably the single most important thing we stumbled upon as far as allowing our business to grow significantly,” says Andrew Hortatsos. The cost of operating from home through eBay is far less than the cost of leasing, staffing, and maintaining a retail store at a high-traffic shopping mall, not to mention the far greater number of consumers eBay reaches. $ Other benefits of home-based business include greater flexibility and freedom from the time and expense of commuting. Drawbacks include isolation and less visibility to customers-except, of course, if your customers visit you online. In that case, they don’t care where your office is located.
Many small-business start-ups are more competitive because of the Internet. An estimated three of every five small businesses have an online presence today. But the Internet does not automatically guarantee success, as illustrated by the thousands of dot.com failures during the early years of e-commerce. Setting up a Web site can be relatively inexpensive and gives a business the potential to reach a huge marketplace. Tiny Salem Five Cents Saving Bank, a Massachusetts firm with only nine branches, has a significant presence on the Internet. It established that presence by acting quickly in the min-1990s, when Internet Banking was still an innovation. Consumers like the new service and low fees, and before long, Salem Five had attracted thousands of new customers. When bigger banks began adding Internet service, Salem Five changed its online name from salefive.com to directbanking.com and honed its focus to New England, where the bank already had a good reputation to build on. It continues to innovate and has opened branches with automated-teller machines and Internet kiosks offering videoconferencing with bank representatives. High technology coupled with concern for customer service keeps Salem Five in business even as the biggest banks spend millions of dollars on advertising.
American business history is filled with inspirational stories of great inventors who launched companies in barns, garages, warehouses, and attics. For young visionaries like Apple Computer founder Stephen Jobs and Steven Wozniak, the logical option for transforming their technical idea into a commercial reality was to begin work in a family garage.
Operating home-based businesses can help owners keep their costs low. Without having to leave or maintain separate office or warehouse space, a home-based business owner can pour precious funds into the business itself. But financing a small business can be challenging. Some home-based business owners have even discovered the benefits of selling their goods through eBay, the online auction site. Andrew and Tracy Hortatsos, owners of ShadeSaver.com, sell 50 percent of their retail sunglasses through eBay. “It was probably the single most important thing we stumbled upon as far as allowing our business to grow significantly,” says Andrew Hortatsos. The cost of operating from home through eBay is far less than the cost of leasing, staffing, and maintaining a retail store at a high-traffic shopping mall, not to mention the far greater number of consumers eBay reaches. $ Other benefits of home-based business include greater flexibility and freedom from the time and expense of commuting. Drawbacks include isolation and less visibility to customers-except, of course, if your customers visit you online. In that case, they don’t care where your office is located.
Many small-business start-ups are more competitive because of the Internet. An estimated three of every five small businesses have an online presence today. But the Internet does not automatically guarantee success, as illustrated by the thousands of dot.com failures during the early years of e-commerce. Setting up a Web site can be relatively inexpensive and gives a business the potential to reach a huge marketplace. Tiny Salem Five Cents Saving Bank, a Massachusetts firm with only nine branches, has a significant presence on the Internet. It established that presence by acting quickly in the min-1990s, when Internet Banking was still an innovation. Consumers like the new service and low fees, and before long, Salem Five had attracted thousands of new customers. When bigger banks began adding Internet service, Salem Five changed its online name from salefive.com to directbanking.com and honed its focus to New England, where the bank already had a good reputation to build on. It continues to innovate and has opened branches with automated-teller machines and Internet kiosks offering videoconferencing with bank representatives. High technology coupled with concern for customer service keeps Salem Five in business even as the biggest banks spend millions of dollars on advertising.
American business history is filled with inspirational stories of great inventors who launched companies in barns, garages, warehouses, and attics. For young visionaries like Apple Computer founder Stephen Jobs and Steven Wozniak, the logical option for transforming their technical idea into a commercial reality was to begin work in a family garage.
Friday 20 April 2012
Typical Small-Business Ventures Part-2
Retailing is another important industry for today’s small businessperson. General merchandising giants like Sears, Target, and Wal-Mart may the best-known retailing firms, but small privately owned retail stores far outnumber them. Small-business retailing includes stores that sell shoes, jewellery, office supplies and stationery, clothing, flowers, drugs, convenience foods, and thousands of other products. People wishing to form their own business have always been attracted to retailing because of the ability to start a firm with limited funds, rent a store rather than build a custom facility, create a Web site, and use family members to staff the new business.
Powell’s Books, based in Portland, Oregon, is one of the most successful retail bookstores in the U.S. In contrast to so-called “Big Box” book superstores like Barnes & Noble and Books-A-Million that use their huge buying power to secure lower prices for large orders and Amazon.com’s well-known high-tech, stock-everything strategy, Powell’s competes by specializing in used, sometimes hard-to-find books. Through its seven bookstores and its Web site (Powells.com), Powell’s serves customers who like buying from an independent store instead of one of the larger chains and we don’t mind paying extra to find something special to read. Their different strategies permit the two competitors to benefit one another. Powell’s buys returned books from Amazon.com at a discount and sells them as used. Amazon fills order for out-of-print books through Powell’s. This strategy will never make Powell`s the largest bookseller, but that is just fine with the retailer’s founder, Michael Powell.
Small business also plays a significant role in agriculture. Although most farm acreage is in the hands of large corporate farm, the majority of farmers still operate as small businesses. Most U.S. farms are owned by individual farmers or families, not partners or shareholders. The family farm is a classic example of a small-business operation. It is independently owned and operated, with relatively few employees, relying instead on the labor of family members. But today’s small farmers must be able to combine savvy business and marketing techniques to thrive, as has California-based Earthbound Farm, an organic grower.
Powell’s Books, based in Portland, Oregon, is one of the most successful retail bookstores in the U.S. In contrast to so-called “Big Box” book superstores like Barnes & Noble and Books-A-Million that use their huge buying power to secure lower prices for large orders and Amazon.com’s well-known high-tech, stock-everything strategy, Powell’s competes by specializing in used, sometimes hard-to-find books. Through its seven bookstores and its Web site (Powells.com), Powell’s serves customers who like buying from an independent store instead of one of the larger chains and we don’t mind paying extra to find something special to read. Their different strategies permit the two competitors to benefit one another. Powell’s buys returned books from Amazon.com at a discount and sells them as used. Amazon fills order for out-of-print books through Powell’s. This strategy will never make Powell`s the largest bookseller, but that is just fine with the retailer’s founder, Michael Powell.
Small business also plays a significant role in agriculture. Although most farm acreage is in the hands of large corporate farm, the majority of farmers still operate as small businesses. Most U.S. farms are owned by individual farmers or families, not partners or shareholders. The family farm is a classic example of a small-business operation. It is independently owned and operated, with relatively few employees, relying instead on the labor of family members. But today’s small farmers must be able to combine savvy business and marketing techniques to thrive, as has California-based Earthbound Farm, an organic grower.
Wednesday 18 April 2012
Typical Small-Business Ventures Part-1
For decades, small businesses have competed against some of the world’s largest organizations, as well as multitudes of other small companies. One of these fearless competitors is Dublin, California-based Sanrise Group, started by David Schneider to help businesses store the explosion of Internet data and solve today’s data-storage chaos. Imitating Dell’s original model of selling built-to order PCs directly to customers, Sanrise designs preconfigured data-storage equipment to match specific business customer needs and ships it worldwide within 30 days. Not only does the equipment match customers’ needs, but it also saves then 30 to 40 percentage in storage costs, while letting them avoid the months often involved between order and delivery and setup. To continue to serve its 600-plus customers and compete with larger, better financed rivals, Sanrise raised a whopping $115 million from several major outside investors. Revenues are soaring, too, and are expected to reach $100 million soon.
The past 15 years have seen a steady erosion of small businesses in many industries as larger firms have brought out small independent businesses and replaced them with larger operations. Drugstore retailers have been tremendously affected, as thousands of small neighborhood pharmacies have been replaced by retail giants like Walgreen’s, CVS, and Rite Aide. The number of independent pharmacies has plummeted 30 percent over the past 10 years. But as the below table reveals, the businesses least likely to be gobbled up and consolidated into larger firms are those that sell services, not things; rely on consumer trust and proximity; and keep their overhead costs low.
For centuries, most nonfarming small businesses have been concentrated in retailing and the service industries. As the below figure indicates, small businesses provide the majority of jobs in the construction, agriculture services, wholesale trade, services, and retail-trade industries. Small service businesses can be as high-touch as a country inn or hair stylist, or as high-tech as Sanrise Group.
David vs. Goliath: Business Sectors Most Dominated and Least Dominated by Small Firms | |||
Most Likely to Be a Small Firm | Fewer Than 20 Workers | Least Likely to Be a Small Firm | Fewer Than 20 Workers |
Dentists | 98% | Hospitals | 4% |
Home Builders | 97% | Paper Mills | 22% |
Florists | 97% | Nursing Homes | 23% |
Hair Salons | 96% | Oil Pipelines | 25% |
Auto Repair | 96% | Electric utilities | 39% |
Funeral homes | 95% | Railroad Car Makers | 44% |
Source: USA Today analysis of U.S Small Business Administration data; reported by Jim Hopkins, “Big Business Can’t Swallow These Little Fish” | |||
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