SMALL BUSINESSMANAGEMENT ANDENTREPRENEURSHIP

David Stokes andNick Wilson

r> SOUTH-WESTERNCENGAGE Learning-

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

CONTENTS

Case Studies xiAbout the Authors xiiPreface xiiiWalk-through Tour xviAbout the Website xviii

PART 1 UNDERSTANDING SMALL BUSINESS AND ENTREPRENEURSHIP 1

1 Small Business in the Economy 3Introduction 31.1 What is a small business? 31.2 Why bother with small businesses? 71.3 The revival of the small enterprise 91.4 Interpretations of the small business revival 141.5 Entrepreneurial churn in the business population 181.6 Transition and emerging economies 191.7 Summary and activities 211.8 Notes, references and further reading 28

2 Entrepreneurship, the Entrepreneur and theOwner-manager 30Introduction 302.1 Entrepreneurship and the entrepreneur: some definitions 302.2 Motivations for starting a business 372.3 The search for the entrepreneurial archetype 442.4 Towards the entrepreneurial path 492.5 The 'Model' entrepreneur 502.6 Summary and activities 562.7 Notes, references and further reading 63

3 The Small Business and Entrepreneurial Environment esIntroduction 683.1 A matter of life and death 693.2 The birth of new businesses 723.3 Sink or swim 863.4 Hostile and benign environments 90

3.5 Critical survival factors 943.6 Summary and activities 963.7 Notes, references and further reading 101

^4 Innovation and the Marketplace 103

Introduction 1034.1 Defining innovation 1044.2 Innovation in more detail 1064.3 Product innovation in small firms 1124.4 Innovation and the entrepreneurship dynamic 1164.5 Managing innovation - some issues 1174.6 The seven sources for innovative opportunity 1184.7 Innovating for the marketplace 1214.8 Who is the customer? 1234.9 Why will the customer buy from me? 1254.10 Summary and activities 1284.11 Notes, references and further reading 136

5 Information and Help 139Introduction 1395.1 Entrepreneurial information-gathering 1405.2 Market research for small firms 1425.3 Secondary data 1455.4 Primary data 1465.5 Help for small business 1525.6 The effects of government policy 1585.7 Summary and activities 160 /5.8 Useful sources of information for entrepreneurs 1675.9 Notes, references and further reading 169

PART 2 CREATING THE ENTREPRENEURIAL SMALL BUSINESS 173

6 Business Planning 175Introduction 1756.1 The purpose of a business plan 1766.2 When to plan? 1786.3 Who can benefit? 1806.4 Why produce a plan? 1816.5 The format of a business plan 1836.6 Summary and activities 2056.7 Notes, references and further reading 213

7 Successful Small Business Strategies 215Introduction 2157.1 Strategy and the small business 2157.2 New venture strategy 2197.3 Survival strategy 2257.4 Growth strategy 2297.5 A composite model of successful strategies 2377.6 Summary and activities 2397.7 Notes, references and further reading 248

8 Start-ups and Franchises 251Introduction 2518.1 The alternative routes to market entry 2518.2 The start-up 2538.3 What is franchising? 2578.4 The franchising market 2598.5 The pros and cons of franchising 2638.6 Why do small business founders choose business format franchising? 2668.7 But is it a small business? 2678.8 Summary 2688.9 Case studies and activities 2688.10 Notes, references and further reading 272

9 Buying an Existing Business 275Introduction 2759.1 The scope for buying an existing business 2769.2 Small business buyers 2799.3 Assets for sale 2829.4 Liabilities to be avoided 2889.5 Basis of valuation of an existing business 2899.6 Taxation aspects of a small business purchase 2939.7 For and against buying an existing business 2949.8 Summary and activities 2969.9 Notes, references and further reading 304

10 Forming and Protecting a Business aoeIntroduction 30610.1 Choice of business organization 30710.2 Limited company 30710.3 Sole trader 31210.4 Partnership 31410.5 Choosing the appropriate business form: sole trader vs.

partnership vs. limited company 317

10.6 Co-operatives 31910.7 Intellectual property rights 32210.8 Summary and activities 32510.9 Notes, references and further reading 333

PART 3 MANAGING THE ENTREPRENEURIAL SMALL BUSINESS 337

11 Management of People and Resources 339Introduction 33911.1 Total management 34011.2 Premises 34111.3 Materials and equipment 34411.4 Insurance 34511.5 Business processes and information and communications technology 34611.6 Management of people 34811.7 Summary and activities 35611.8 Notes, references and further reading 363

12 Marketing 365Introduction 365 5

12.1 Small business marketing issues 36612.2 Marketing defined 36812.3 Entrepreneurial marketing 37012.4 Word of mouth marketing methods 38012.5 The impact of the internet on entrepreneurial marketing 38312.6 Personal marketing communications 38512.7 Impersonal marketing communications 38812.8 Marketing channels 39012.9 Summary and activities 392

12.10 Notes, references and further reading 399

13 Money 402

Introduction 40213.1 Financial needs - the uses of funds 40313.2 Accessing finance 40513.3 Public initiatives in the UK 41113.4 Control of financial resources 41313.5 Managing finance 41713.6 Entrepreneurial finance - some issues 42613.7 Case studies and activities: part 1 42813.8 Financial analysis 43113.9 Summary and activities (part 2) 442

13.10 Notes, references and further reading 445

14 Business Exits and Realizing Value 448Introduction 44814.1 Business exits and closures 44914.2 What adds value to a business? 45414.3 Succession issues 45714.4 The family business 45914.5 Creating value for society 46114.6 Summary and activities 46114.7 Notes, references and further reading 467

Glossary of terms 469

Index 473