Chapter 05 - Small Business Entry: Paths to Part-Time Entrepreneurship

CHAPTER 5: SMALL BUSINESS ENTRY: PATHS TO PART-TIME ENTREPRENEURSHIP

LEARNING OBJECTIVES

After you have read and studied this chapter, you should be able to:

Describe when and why part-time entrepreneurship makes sense.
Assess the feasibility of opportunities to enter into a part-time business..
Describe the major paths to part-time entrepreneurship.
Use the BRIE model to describe what it takes to be successful in part-time entrepreneurship..
Describe the advantages and pitfalls of delegating and outsourcing..
Explain the benefits of bootstrapping methods for entrepreneurs.
Describe the ethical challenges of part-time entrepreneurship.
Describe the challenges of moving from part-time to full-time entrepreneurship.

VOCABULARY REVIEW

Listed below are the important terms found in this chapter. Choose the correct term for each definition and write it in the space provided.

Aggrandizing / Full-time self-employment / Registration
Blog / Informational website / Reserve price
Bootstrapping / Intellectual property (IP) / Reverse auction
Business-to-Business (B2B) / Licensing / RSS feed
Business-to-Consumer (B2C) / Moonlighting / Search engine optimization
Cannibalizing / Multi-channel marketing / Sponsored link
Conflict of interest / Network marketing / Time to start-up
Consumer / Outsourcing / Tweet
Cost to start-up / Part-time self-employment / Undercapitalization
Covenants / Permanence / Variance
Delegation / Poisoning the well / Volatility
e-Commerce / Reciprocal links / Zoning laws
Equity

Working for yourself less than 35 hours per week is considered ______.
Part-time entrepreneurship is easy and low cost so many people start up a business, let it go, restart it and continue this cycle. This is known as ______.
______is working for yourself more than 35 hours per week

Amanda figured she needed $4000 to start her consignment business. That $4000 is her ______.
Laura got her business started and operation over the weekend. Those two days represent her ______.
SuAnn found that she sometimes had trouble getting customers for her part-time tax accounting business. They tell here that they were concerned that she might not make it and they’d have to look all over again for a new accountant. SuAnn’s customer were concerned about her ______.
______are government restrictions on if (or what kind of) business can be run at a particular location.
Kathy had wanted to start an at-home day care, but she found out that it was not permitted unless she could get a ______.
Shopping on-line is known as ______.
Esther buys all her books from Amazon.com. She is one of Amazon.com’s ______.
Patrick needed a new car. He went on-line to view the new models on the car manufacturer’s Website, but then went to the dealers to make his purchase. The web pages Patrick visited were most likely ______.
Blaze Color Printing wedding invitations for Karen. This transaction is an example of ______.
Blaze Color Printing also printed advertising flyers for Blossom City Antiques. This transaction is an example of ______.
Sue liked reading the E-Z Travel ______on their Website, because each day she got the latest travel news.
After subscribing, Theo got weekly updates sents to his e-mail from the Bounty Journal who used a(n) ______to make sure Theo got the information he wanted.
Gladys love that the messages she got were 140 characters or less. “Im so busy that I’ve only got the time to read a ______,” she said.
BlevensArcheryCenter had a Website and e-mail address. This information was found on their mailers, their newsletters and link to several other archery sites in

the area. Blevens Archery Center practiced ______.

BlevinsArcheryCenter not only had their Website linked to other archery sites, but they also put ______on their site to them.
Donna knew that if she wanted people to find her Website through searches she would have to design it carefully. This is called ______.
A priority listing on a search engine that was purchased is know as a(n) ______.
Roman bid the lowest amount and got the job to design a new logo for a city in Germany. Roman had participated in a(n) ______.
Neddie was confused. She had bid the highest amount on an eBay auction but did not get the product. Her friend, Gina, pointed out that she had not reached the ______.
______is a in-home or person-to-person sales system in which current salespeople are encouraged to recruit additional salespeople.
______is the way to let the government know you are running a business and is sometimes required.
______is special permission from the government needed for certain types of businesses.
When you assign your work to someone else in your business you are practicing ______.
When you hire your work to be done by others outside your business you are ______.
Marsha traded babysitting for getting her Website designed and used her brother’s volunteered time to get her business started. These are methods of ______.
______simply means not having enough ready cash to run your business.
______is the ownership of a portion of a business
______is working a part time job in addition to your full time job.

A(n) ______may occur if you are doing work for your part time job while at your full time employer.
______happens when you take work away from your full time employer.
If you cause your full time employer’s customers to think badly about the company (by pitching your own business, for example) you are ______.
Tarique knew it was ______when he indicated that his part time business was really full time.

ASSESSMENT CHECK

Learning Objective 1

When does part-time entrepreneurship make sense?
______
______
______

Learning Objective 2

What are the three key metrics for assessing part-time business approaches?
a.______
b.______
c.______

Learning Objective 3

What are the two major paths to part-time entrepreneurship discussed in the text?

______
______

When does a home-based business outgrow the home?
______
______
______
______
What are the two types of Websites a business may have?
______
______

Name four approaches to part time small business besides home-based or Internet-based.
______
______
______
______

Learning Objective 4

Using the BRIE model, name four “B” issues for part-time businesses.
______
______
______
______
Using the BRIE model, name four “E” issues for part-time business.
______
______
______
______

Learning Objective 5

What are the four challenges faced by part-time businesses?
______
______
______
______
What is the difference between delegating and outsourcing?
______
______
______
______

Learning Objective 6

What are three bootstrapping techniques? (Text lists many more.)
______
______
______

Learning Objective 7

What are four ethical challenges of part-time entrepreneurship?
______
______
______
______

Learning Objective 8

What are three things to help with the part-time to full-time transition?
______
______
______

CRITICAL THINKING EXERCISES

Learning Objective 1

Bill and Bob, both part-time entrepreneurs, were discussing their businesses over lunch one day. “I took that auctioneering class and decided to try it out on a part time basis,” Bill said. I wanted to perfect my auctioneering skills and see how I felt about all the other stuff – the paper work, the advertising and such. Maybe I wouldn’t like it. Maybe I couldn’t do it well. I really need to test myself first. Maybe I can sign up for an accounting class or something before I really decide to do this full time.”
Bob replied, “That wasn’t so much my reasoning. Hey, I started a machine shop, because that’s all I do at my full time job; I know metalworking inside and out. I also

ran my own business some time ago, so I know how to keep books, how to advertise and all that. The reason I’m doing this part time is because I can’t afford to. Do you know how expensive it is to by a lathe, even a used one? I need to really build my client base and I can’t even consider quitting until my wife goes back to work and we have one guaranteed source of income.”
Bernice was passing by and added her opinion, “Well, the only small business opportunity I had was part time because I knew it wouldn’t last. You know when the PGA had their tournament here last fall? I rented out rooms in my house which overlooks the tenth fairway. Even with all the practice rounds and stuff that was only about a week. Nice money, but certainly not enough to quit my job and wait for the next time,” she added with a laugh.
Bill, Bob and Bernice all had some good reasons for seeking part-time small business opportunities. Can you identify them?

Learning Objective 2

James, Jeffrey and Jason were discussing they businesses they had started. James went first, “I knew I could do graphic design on my own, but I didn’t know Web design or accounting or writing a business plan or anything else so it took weeks before I was really ready.”
Jeffrey chimed in, “What I had trouble with was once my consignment store was open, I couldn’t get people to use it. No one wanted to be my first client at first and even after I had a few people really didn’t like the idea that I was running this out of my home.”
Jason stated, “At least your businesses didn’t cost so much to get going. Do you know how much equipment is needed to really do a good job with a lawn care service?”
All three of these entrepreneurs were experiencing some of the problems of start-ups assessed by the three metrics you learned in this chapter. Can you pair the entrepreneur with the metric?

Learning Objective 3

3.The following entrepreneurs have set up home-based businesses. Which ones followed good home-based business rules?

Janet sometimes had a dozen or more clients parked in her driveway or on the street in front of her house.
Kacie used a spare bedroom to assemble her “back-to-school” packages.
Marla Rae is four-years-old and likes to answer her mother’s business phone.
Laurel figured her bedroom was an off limits place for the kids and a good place to set up her office.

Renee used the kitchen table while her kids were in school and simply boxed up everything each evening.
Tammy had a separate business line installed.
Bruce figured he’d use his son’s computer while his son was at school.
Joy decided that she really needed a file cabinet and a desk lamp.
Olive liked being able to squeeze in chores between business calls.
Keith’s wife often dropped by his desk with a cup of coffee, the latest gossip, a well-needed neck rub, or an update on what the kids were doing.
Toni’s sister was miffed because Toni wouldn’t watch her kids for her while she ran errands.
Gene couldn’t handle the distractions of working from home and moved to a business incubator.

Below are a number of entrepreneurs pursuing part time small business opportunities. Can you identify if their business would be considered home-based, internet, home retail, stand, mobile office or without a business organization?

Nancy’s sculptures are sold in a gallery. The gallery charges her a percentage of the sales.
Tom enjoys being out of doors and the ability to locate his hotdog cart anywhere in the city he wishes.
Kevin is an eBay Power Seller.
Earl found out a variance wasn’t needed for the part time tax return business he ran.
Shelby hardly has time to go to friend’s parties, as she is busy organizing so many Baby Dearest parties
Eric did mobile veterinary work. His clients could reach him anywhere via his cell phone and loved the way that Eric’s van was equipped with everything he needed to help their pets in the comforts of their own home.
When Herman’s strawberries are at their peak, he has dozens of customers waiting by the roadside.
Margo found out that going door-to-door to sell her ecological cleaners was a great way to get some exercise and make a little extra cash.
Willard tweeted celebrity sightings to subscribers of his “I Spy” service.

Learning Objective 4

Donna has been canning and selling her secret recipe spaghetti sauce for a few months on a part time basis and is running into problems. Her neighbor, Shari, made it seem so easy with her part time tax preparation business. Donna finally asked Shari for a spaghetti dinner (of course) and a chance to pick her brain. “Oh, Shari,” Donna sighed. “How do you do it? I can’t ever seem to get organized. I run out to mail bottles of sauce and then when I’m back home I remember I forgot to pick up more boxes or labels or sealing tape. I’m halfway through a batch of spaghetti sauce and I find I’m out of oregano. And it’s not just business stuff. Last week, I thought my husband, Paul, was picking the boys up from soccer practice and he thought I was

picking them up. I’m out buying supplies and they finally had to get a ride home with the coach.”
She continued, “I try to get some things done at work. I’ll call in an order when I’m on break, but even that’s getting to be a headache. Last week my supplier phoned back while my boss was in my office. What a mess!”
Before Shari could offer any comments, Donna went on, “I’m keeping all my work invoices separate, but I’m not sure if I’m really making money. I’ve tried to figure out what price is best, but if I set it here, the orders drop off. If I drop it, I’ve got more orders than I can handle. And since I’ve changed prices some of my repeat customers are getting confused or angry.”
Shari smiled, “I had similar problems when I started off – as a matter of fact, many part timers do. Let me tell you about Boundaries and Exchanges.”
What advice is Shari likely to offer Donna?

Learning Objective 5

Shari also told Donna that maybe she needed to think about delegating some of the work to others. Donna’s two sons, Percy and Tony, were 14 and 16 years old and the main reason Donna started this business was to save towards their college. It was only reasonable that they help out, too.
At a family meeting later that evening, Donna’s sons and her husband all agreed that they’d be happy to pitch in and they divided up the tasks. Paul said, “I can take over the books of the business.” Percy stated that he’d be able to run the orders to the post office and pick up boxes and other supplies if they’d let him borrow the car. Tony didn’t really know what he could do, but finally settled on printing address labels and boxing up the orders.
As the meeting ended, Donna said, “Great! Now I’ll get back to ordering supplies and making and canning the sauce. I can forget about everything else.”
Use the list of delegation tips in the textbook to give Donna some advice on what she REALLY should do in order to successfully delegate these jobs.

Learning Objective 6

The following entrepreneurs just completed a seminar in bootstrapping. Some of them listened well, while others must have slept through the lecture. Which ones did well?

Jerre offered to clean his neighbor’s garage if the neighbor, an artist, would paint a sign for him.
Annette cleaned out a corner of her basement to set up her office.
Mary Ellen figured she’d buy all her supplies up front so she wouldn’t run out.
Jon found a used van to use for his painting business.
Milton figured he was well worth the $10,000 a year salary he paid himself from his part time business.
Cathy charged everything she could up to the credit cards’ maximums.
Frances offered everybody equity in her company in exchange for services they provided.
Gil was running a little short of cash so he got a cash advance from one of his credit cards.
Geraldine figured she really didn’t need the special cake pan for her bakery as long as she could meet orders with what she had at hand.
August’s motto was “To Be Successful, You Must Look Successful” so he always bought the best.

Learning Objective 7

The following entrepreneurs were eager to start up their part time businesses – too eager because they breeched ethical standards. Of what were they guilty?

Pam was just about to get her first order, but the customer was reluctant to commit. “Of course,” Pam said, “I’d be happy to provide you with letters of recommendation from a number of happy customers.”
Charlie started his sales pitch, “Hey Ken, you know me through McAllister Manufacturing, but I’ve started a tax preparation business and I’d love to have the opportunity to do your taxes for you.”
Rae’s boss wanted those sales figures ready by morning, but Rae really needed to get some supplies on order for her part-time eBay store.
Cindy mentioned to the client whose hair she was styling, “If you are flexible in your times, I can do your hair at my home for $5 less than what you are paying here.”

Learning Objective 8