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Small Business Entry:Small Business Entry:Paths to Part-TimePaths to Part-TimeEntrepreneurshipEntrepreneurship

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Objectives:Objectives:• Know when and why part-time entrepreneurship

makes sense• Learn the four major paths to entrepreneurship• Understand what it takes to be successful in part-

time entrepreneurship• Learn how to optimize your delegation within the

firm• Learn the benefits of bootstrapping• Learn the ethical challenges of part-time

entrepreneurship• Find out about the challenges of moving from part-

time to full-time entrepreneurship

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• Focus on Small Business: Kathryn OtoshiKathryn Otoshi– BA in Graphic Design– Created her own design firm called KO

Design and worked part-time while freelancing with large corporations while working for George Lucas’ ILM full-time

– Quit ILM to publish illustrated children’s books

– Remains part-time between her book business and KO design with large corporations

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Why Part-time Businesses Are ImportantWhy Part-time Businesses Are Important• Part-time self-employmentPart-time self-employment: working for yourself

for 35 or fewer hours a week– Full-time self-employmentFull-time self-employment: 35 or more hours per

week

– This is the way most people start in entrepreneurship.

– About 3/43/4 of those starting a business already work full-time for someone else.

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• Part-time self-employment is a major portionmajor portion of all current entrepreneurial companies in the United States– Around half of 25.8 millionhalf of 25.8 million businesses

are part-time businesses.– VolatilityVolatility: frequency of business starts

and stops– 6 million6 million sellers online

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When to Consider Part-time When to Consider Part-time EntrepreneurshipEntrepreneurship

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What Kinds of Part-time What Kinds of Part-time Entrepreneurships Exist?Entrepreneurships Exist?

• 4 Major Categories– Stands

– Homes

– Consignment

– Mail Order

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• Stand retailStand retail: one of the most ancient forms of business– Mentioned in the BibleBible– Tend to be semi-permanentsemi-permanent– AdvantagesAdvantages: little investment, variety of

locations, quickly established, easily ended

– DisadvantagesDisadvantages: variable income, legal requirements

– Success FactorsSuccess Factors: location, inventory

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• Home retailHome retail: parties and door-to-door– Avon, Mary Kay, Pampered Chef– AdvantagesAdvantages: ease of setup, low cost of start-

up, ability to work away from home and employer

– DisadvantagesDisadvantages: working on the road, lack of a base to organize and work, variable income, finding ways for customers to reach you

– Success FactorsSuccess Factors: hosts with good contacts, matching product to community, closing the sale

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• Consignment stores and AuctionsConsignment stores and Auctions: giving your product to someone else to sell– Auctions are a variety of consignment stores– AdvantagesAdvantages: permit full-time sales with part-

time involvement, low cost, lack of risk, flexibility

– DisadvantagesDisadvantages: high potential for competing offerings, amount of time before payouts, low profitability due to seller’s fees

– Success FactorsSuccess Factors: location that attracts the right customers, condition of location and merchandise

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• Mail order / Catalog salesMail order / Catalog sales: offers customers a description and picture, and how to order by mail, phone, or online– AdvantagesAdvantages:

• ability to sell on your schedule

• low costs

• potential for selling to large markets

• low inventory investments

• targeted customers

– Success FactorsSuccess Factors: marketing, placing the ad where the target market sees it

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• Microinventory: A set of goods or services that consists of only one or a few items

• Just-in-time inventory: Having just enough product on your shelves to meet the immediate purchases. This usually requires frequent shipment from your supplier.

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Online Sales• eBay, largest online sales site, reports over 234

million members worldwide in 2007• Internet is an attractive setting for entrepreneurs

looking to create a business• Two major approaches

– eBay or other online site

– Web site of your own

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Example

Smarts From A Savvy eBay Seller• Selling on eBay is not a piece of cake

– Must fight to get sales in today’s eBay market• Cory Kossack – one of the 200 highest-grossing

eBay sellers– Started in his college dorm room– Pulled in more than $1 million in revenue with nice

profits as well

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Success Factors for Part-time Success Factors for Part-time BusinessesBusinesses

• BoundaryBoundary: 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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Keisner’s Six Key Ideas for SuccessKeisner’s Six Key Ideas for Success• Do not waste time complaining• Do not aim for perfection• Do not dwell on the past• Minimize time spent in meetings• Schedule and protect quality time with

family• Schedule and protect time for yourself

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• ExchangeExchange: dealing with others– Two key groups: GovernmentGovernment and

CustomersCustomers– GovernmentGovernment: registration, licensing,

taxes, zoning– CustomersCustomers: central to making sales

• “Sources for Network Connections” were seen in Chapter Two

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Pricing and CostingPricing and Costing• Price goods or services to make profitsprofits• Part-time owners often underestimateunderestimate

costs• Recognize that your own time has valuetime has value• Price against competitor’scompetitor’s offerings

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Delegation and OutsourcingDelegation and Outsourcing

• Key is leveragingleveraging other people’s time• DelegationDelegation: assigning work to those over

whom you have power• OutsourcingOutsourcing: contracting with people or

companies outside your business to do work for your business

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Making Do When You Are Starting OutMaking Do When You Are Starting Out• BootstrappingBootstrapping: using low-cost or free

techniques to minimize your cost of doing business

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

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ExampleWalk This Way• Most entrepreneurs must finance their own way, by

cutting corners and putting all their earnings back into the business

• Greg Easley, co-founder of Bottle Rocket Inc., poured everything back into his business for 8 months– Easley says “Bootstrapping is scary, but in retrospect,

it’s worth it– Learned to use the resources they had – Valuable lesson is learning how to function on a

shoestring budget– Can too much startup money be a bad thing?

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• Key Ideas of BootstrappingKey Ideas of Bootstrapping– Do without

– Cut expenses

– If you need something, borrowborrow, barterbarter, or rentrent it

– Substitute a lower-cost alternativealternative

– Ask to stretch out payments

– When using a credit card, limit limit purchasespurchases

– Always keep track of your cash!

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Ethics and Part-time Small BusinessEthics and Part-time Small Business• MoonlightingMoonlighting: working on your own part-time

after your regular job– Conflict of interestConflict of interest

– Cannibalizing salesCannibalizing sales

– Poisoning the wellPoisoning the well

• AggrandizingAggrandizing: making your business or yourself seem more accomplished than it is

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Moving from Part-time to Full-timeMoving from Part-time to Full-time• Key question is usually financialfinancial

– WaitWait until there is a solid income– Make use of any transition servicestransition services offered

by the former employer– RecognizeRecognize that initially, you will spend all

your time running and marketing the business

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