Small Business Entry

Paths to Part-Time
Entrepreneurship

Chapter 05

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

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 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

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 Why Part-time Businesses Are
Important
 Part-time self-  Full-time self-
employment employment
– working for yourself – 35 or more hours per
for 35 or fewer hours week
a week

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 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

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 Question

Of 25.8 million U.S. businesses, what

percentage are part time?
A. 25
B. 50
C. 75
D. 10

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 When to Consider Part-Time
Entrepreneurship

Figure 5.1

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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.

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 Home-based Business

 There were about 14.4 million home-based

businesses in the United States in 2007, 9 and
they 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 and you can get your business
going where you live in a moment.

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 Home-based Business

 Zoning laws  Covenants

– Government – The limitations
specifications for imposed on your
acceptable use of property by your
land and buildings in neighborhood
particular areas. group.

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 Home-based Business

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

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 Issues Important to Running a
Home-based Business
 Choose a work location inside your home that is
away from noise, distractions, and family traffic.
 Be realistic about the amount of space you’ll
need for your equipment.
 An office door can 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.

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 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.

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 Equipment for a Home-based
Business
 Comfortable,  High-speed desktop
usable desk and computer
chair and  Fax machine
adequate lighting  Copier
 Telephone  Appropriate
 High-capacity software
Internet service
 Business e-mail
account

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 Twenty
Questions to
Ask Before
Planning
Your Home
Office

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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.

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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.

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 E-Commerce as Percent of Total
Value: 2002–2007

Figure 5.2

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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.

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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.

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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.

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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.

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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.

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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.

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 Search Engine Rankings
April 2009

Figure 5.3

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E-Commerce and eBay Web Sites

 eBay reports over 4 million sellers in the United

States alone, and seven out of every eight
sellers work on eBay only part time
 For part-timer entrepreneurs the online
approach makes a highly attractive
opportunity because it offers the advantages
of a large market, 24/7 availability of your
products, and a start-up which is quickly done
and potentially inexpensive.

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E-Commerce and eBay Web Sites

 Payment  Chargebacks
– Most online – This is a fee the
transactions use a service levels on you
credit card or an for any of a variety
online payment of problems related
system like PayPal. to the sale

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E-Commerce and eBay Web Sites

 Reverse auction  Reserve price

– An auction in which – A minimum
the low bid gets the acceptable selling
business or wins. price in an auction.
If the bidding does
not exceed the
price, the sale will
not go through.

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 The Multiple Channels
of Business Promotion

Figure 5.5

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The Next Best Things to a Home-
Based Business
Home retail: parties and door-to-door
– Avon, Mary Kay
Success Factors
– hosts with good contacts, matching
product to community, closing the sale

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 Home Retail

 Advantages  Disadvantages
– ease of setup, low – working on the road,
cost of start-up, lack of a base to
ability to work away organize and work,
from home and variable income,
employer finding ways for
customers to reach
you

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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.

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The Next Best Things to a Home-
Based Business
Stand retail
– one of the most ancient forms of business
Mentioned in the Bible
Tend to be semi-permanent
Success Factors: location, inventory

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 Stand Retail

 Advantages  Disadvantages
– little investment, – variable income,
variety of locations, legal requirements
quickly established,
easily ended

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The Next Best Things to a Home-
Based Business
Mobile Offices
Virtual Offices, Executive Offices, and
Incubators
Doing Business without a Business
Organization

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 Success Factors for Part-time
Businesses
Boundary
– separating and balancing business and
home
 Time management
 Use a to-do list
 Prioritize
 Keep it in its own space (home based)

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 Question

Using low-cost or free techniques to

minimize your cost of doing business
refers to
A. Bootstrapping
B. Undercapitalization
C. Outsourcing
D. Moonlighting

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 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

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 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

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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

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