Small Business 2002 Challenges and Perspectives
Farm Business Management Update, October-November 2002
By David M. Kohl, Heidi Baitis, Alicia Morris, Megan Green, and Zack Mundy
This year's small business and entrepreneurship class has 140 students from five colleges within Virginia Tech and 54 percent of the enrollment is females. Currently, 25 million small businesses operate in America - 38 percent of which are operated by females. Nearly 50 percent start with under $20,000 in capital and 30 percent are initially financed by a credit card. Forty percent continue beyond 4 years. The United States is the world leader population being employed in personal enterprises, with over 5 percent of the adult population.
The students' first assignment was to interview small business managers and entrepreneurs to gain insight and perspectives in operating a personal enterprise.
The students discovered that the current business climate is very challenging and that passion and energy for the business was critical. Many of the owners were working between 60 and 114 hours per week. Many businesses stated that increased health care premiums, government regulation, and paperwork are very burdensome in both startup and everyday operations. Furthermore, as one of the people surveyed indicated, in days of tight margins theft is one of the major reasons that a small business fails. One small business owner commented that these factors are hindering the economic recovery and could place the United States in another recession.
Labor continues to be a challenge. Finding capable, qualified individuals who have a commendable work ethic was noted as the most common headache of the small business owner.
Attracting and paying back loans was another challenge mentioned in operating a successful small business. Finding a lender that will talk one-on-one and knows your industry is very important. It's important to have a community bank that serves the community and invests back into the area. Many of the business owners interviewed said they had started up the business with a credit card. However, one businessman failed, and the resultant credit problem hindered his ability to obtain additional credit for nearly seven years.
A number of the small business owners surveyed are tracking customers and customer service via the computer. The information gained is being used to adjust product and service selection. Many are using the computer as a tool in inventory and receivables management. Some small businesses are using the computer data base system as a means of tracking employee output and employee security management. Marketing was frequently mentioned as the dividing line between whether a small business makes it.
Depending upon the business, one-fourth to one-third of a person's time must be focused on new customer or product and service development. As one owner stated, high-quality work can be as profitable as the prices you charge, so price is not everything.
More of this year's group of small businesses and entrepreneurs had gone through the formality of developing a business plan than in previous years. The benefits included not only being able to obtain capital, but also to provide a logical format in thinking through the business model process and taking the emotion out of the business decisions.
Finally, networking and education were key perspectives in operating a successful business. Attending trade shows, word-of-mouth, pamphlets, and even playing golf with the right people are the networking secrets that can give the businessperson the competitive edge.
As students embark on their final business plan projects in this class, they have taken the first critical step. One must survey the landscape, embrace the challenges, find what works, then match their resources with the business concept, and forge ahead.
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