Problems Entrepreneurs Face

June 2003
By Gwen Richtermeyer, Ph.D. Director

BRIDG

Problems Entrepreneurs Face .

Director BRIDG .Problems Entrepreneurs Face June 2003 by Gwen Richtermeyer. Ph.D.

............................................................. 2 Chart 3............................. Marketing: Problems THEN .... Financial: Problems THEN ............................... 1 Chart 2................................................................. 10 Methodology ......... Ideal Learning Environment: ............................................... 2 Marketing .................................................................... Financial: Problems NOW ........ Ideal Learning Environment: Activities ..... 1 Finance ...................................................................... 5 Chart 6............................................................................... Time Allocation ..................................................... 5 Finance .........Table of Contents Introduction ..................................................................................................................................................... 1 Problems in the Beginning ... Technology: Problems THEN .... 3 Technology ............. 9 Demographics ....... Management: Problems NOW ............. 4 Problems Now ............................... 9 Problems Entrepreneurs Face ............................................................................... 10 About Us ............................ Preferred Learning Format ....... 6 Chart 7...................... 9 Chart 11....................... 11 Charts and Graphs Chart 1...................... Marketing: Problems NOW ................. Technology: Problems NOW .................................................. Management: Problems THEN ............................ 8 Addressing the Problems ....... 9 Chart 10............................................................... 6 Marketing ..... 7 Chart 8...................................... 7 Technology ............. 5 Management ....... 8 Chart 9........................... 4 Chart 5........... 3 Chart 4............... 1 Management .......

Brian. This study focuses on four key operational areas: finance. we need to learn as much as possible to positively impact the success rate for new businesses. When starting a business. INSUFFICIENT SALES VOLUME. Chart 1 displays each finance topic and the corresponding percentage of respondents who indicated it as a problem. marketing. access to capital. Small Business Economics 21: 51-61. and relationships with lenders are integral to the success of any business. and technology. It is the first study in Missouri to take an in-depth look at the various types of operational problems entrepreneurs face when they begin their businesses and after they have been in business for a number of years. management. FINANCE. approximately one-third of the entrepreneurs found CASH FLOW. Redefining Business Success: Distinguishing Between Closure and Failure.Introduction The “Problems Entrepreneurs Face” study was undertaken in fall of 2002 by BRIDG. Finance A sound understanding of business finance. 2003. BRIDG -1- . Chart 1 Financial: Problems THEN 0% Cash Flow Finance Insufficient Sales Volume Pricing Goods & Services Delinquent Customer Accounts Understanding Financial Statements Obtaining Short-Term Loans Rent & Property Costs Obtaining Long-Term Loans Purchasing Obtaining Equity Capital Using Financial Information Obtaining a Line of Credit Building a Relationship with a Lender 10% 9% 23% 23% 21% 20% 19% 18% 17% 17% 32% 36% 43% 10% 20% 30% 40% 50% 54% 60% 1 Headd. and PRICING GOODS OR SERVICES to be the most problematic. Problems in the Beginning Given that only about one-half of new business ventures survive five years1. and 95 percent of all businesses are small (less than 500 employees).

about one-quarter of the entrepreneurs stated that their management problems were diverse and focused on themselves (CONTROLLING MY OWN TIME.Management In beginning their business. their employees (FINDING/RETAINING QUALIFIED EMPLOYEES). Health. and accessing helpful information (GETTING USEFUL BUSINESS INFORMATION). Chart 2 displays the management topics and the percent of respondents who indicated the topic was a problem when starting their business. & Safety Regulations Negotiating Leases & Other Contracts Effectively Using Contractors and Consultants Motivating Consultants & Contractors Abiding by a Code of Ethics Creating a Board of Directors Effectively Handling the Board/Advisors 4% 3% 3% 3% 6% 8% 11% 24% 22% 20% 18% 17% 16% 16% 15% 31% 5% 10% 15% 20% 25% 30% 35% 40% 37% 45% 50% -2- Problems Entrepreneurs Face . SETTING GOALS and MEASURING PERFORMANCE). Chart 2 Management: Problems THEN 0% Controlling My Own Time Finding & Retaining Qualified Employees Setting Goals & Measuring Performance Getting Useful Business Information Employee Turnover Leading the Company Motivating Employees Low Employee Productivity Preparing Strategic/Annual Business Plans Handling Business Growth Employment.

Marketing The two top problems in the marketing area focus on “how to” — ABILITY TO COSTEFFECTIVELY ADVERTISE and ACTUAL SELLING. Chart 3 displays the marketing topics and respective percentage of entrepreneurs who found each topic a problem in the beginning. Chart 3 Marketing: Problems THEN 0% Ability to Cost-Effectively Advertise Actual Selling Developing a Marketing Plan Identifying New Opportunities Branding the Firm Competition from Large Businesses Getting Positive Publicity Identifying the Customer Implementing Marketing Strategies Understanding the Customer Overcoming Negative Perceptions Effectively Networking Getting Business from Large Corporations Getting to the Decision Maker Developing New Products & Services 19% 19% 17% 17% 17% 16% 16% 16% 15% 14% 14% 12% 10% 10% 20% 30% 28% 26% 40% BRIDG -3- .

About one-fifth of the respondents indicated SETTING UP A COMPUTER SYSTEM was a problem. Chart 4 Technology: Problems THEN 0% Setting Up a Computer System Selecting the Best Software Creating a Web Site Effective Business Use of the Internet Integrating Technology into the Firm Setting Up Information Systems Creating a Data Warehouse Product Development & Testing Effective Facilities. Chart 4 displays the topics within the technology area and corresponding percentage of entrepreneurs who indicated each was a problem. management. Laboratories Using Personal Data Assistants 7% 6% 6% 5% 4% 11% 11% 10% 16% 5% 10% 15% 20% 20% 25% 30% -4- Problems Entrepreneurs Face . and marketing was not as much of a problem area for entrepreneurs starting a business.Technology Technology in relationship to finance.

Finance While CASH FLOW and INSUFFICIENT SALES VOLUME remain problems for many. Chart 5 Financial: Problems NOW 0% Cash Flow Delinquent Customer Accounts Insufficient Sales Volume Obtaining Long-Term Loans Pricing Goods & Services Obtaining Equity Capital Finance Using Financial Information Understanding Financial Statements Rent & Property Costs Obtaining Short-Term Loans Obtaining a Line of Credit Purchasing Building a Relationship with a Lender 14% 12% 11% 10% 9% 9% 8% 23% 22% 20% 18% 27% 32% 5% 10% 15% 20% 25% 30% 35% 40% 45% 41% BRIDG -5- .Problems Now One-half of the entrepreneurs participating in this study have been in business for at least 17 years. The problems these seasoned business owners face today are both similar and different than those they faced when starting their businesses. About one-fourth have been in business between two and eight years. Chart 5 displays the finance topics and corresponding percentages. account receivables and capital enter into the picture for one-fourth to one-third of the entrepreneurs.

the role of manager and leader emerge as entrepreneurs grow their companies placing MOTIVATING EMPLOYEES and PREPARING STRATEGIC/ANNUAL BUSINESS PLANS in the top five problems for experienced business owners. & Safety Regulations Leading the Company Negotiating Leases & Other Contracts Effectively Using Contractors and Consultants Motivating Consultants & Contractors Abiding by a Code of Ethics Creating a Board of Directors Effectively Handling the Board/Advisors 2% 2% 2% 7% 6% 6% 10% 21% 20% 18% 17% 16% 16% 15% 15% 37% 5% 10% 15% 20% 25% 30% 35% 40% 45% 43% 50% -6- Problems Entrepreneurs Face . Health.Management Control of time and putting the right person in the right job remain significant problems for more than one-third of the entrepreneurs. Chart 6 Management: Problems NOW 0% Controlling My Own Time Finding & Retaining Qualified Employees Motivating Employees Preparing Strategic/Annual Business Plans Setting Goals & Measuring Performance Handling Business Growth Getting Useful Business Information Low Employee Productivity Employee Turnover Employment. Chart 6 displays the management topics and respective respondent percentages. In addition.

Marketing At this point in the business. Chart 7 displays the marketing topics and respondent percentages. entrepreneurs have learned how to handle some of the foundational marketing tasks. the continued need to set one’s business apart from others surfaces in that COMPETITION FROM LARGE BUSINESSES and IDENTIFYING NEW OPPORTUNITIES are the second and third most mentioned problems. In addition. Chart 7 Marketing: Problems NOW 0% Ability to Cost-Effectively Advertise Competition from Large Businesses Identifying New Opportunities Developing a Marketing Plan Getting Business from Large Corporations Actual Selling Implementing Marketing Strategies Developing New Products & Services Getting Positive Publicity Overcoming Negative Perceptions Effectively Networking Understanding the Customer Getting to the Decision Maker Identifying the Customer Branding the Firm 8% 15% 14% 14% 13% 13% 12% 11% 22% 21% 20% 20% 28% 26% 10% 20% 30% 34% 40% BRIDG -7- . although ABILITY TO COST-EFFECTIVELY ADVERTISE remained the number one problem for entrepreneurs.

Laboratories 6% 6% 5% 9% 9% 16% 15% 19% 18% 5% 10% 15% 20% 25% 24% 30% -8- Problems Entrepreneurs Face . Chart 8 Technology: Problems NOW 0% Effective Business Use of the Internet Creating a Web Site Integrating Technology into the Firm Selecting the Best Software Setting Up a Computer System Creating a Data Warehouse Setting Up Information Systems Product Development & Testing Using Personal Data Assistants Effective Facilities. CREATING A WEB SITE. Chart 8 displays technology topics and corresponding percentages. and INTEGRATING TECHNOLOGY INTO THE FIRM. The top problems faced currently by entrepreneurs are EFFECTIVE BUSINESS USE OF THE INTERNET.Technology Current technology problems reveal sophistication in the technology field and in how businesses use technology.

The pressures and stresses of owning your own business. information overload. or growing a business.Addressing the Problems A better understanding of the problems entrepreneurs face at varying points in their business lives provides tremendous opportunities to shape programs. Chart 9 Preferred Learning Format 0% One Day Seminar or Workshop Topical Workshop . and tools to meet these needs. to-the-point learning format and a blended learning experience. and lack of time are ingredients that need to be factored into any attempt to assist the business owner whether they are starting. Just as problems change over time.4 Hours or Less Class Using Web or ITV Technology Series of 1-3 Hour Topical Workshops Class for Several Weeks 9% 11% 15% 25% 10% 20% 30% 40% 40% 50% Chart 10 Ideal Learning Environment: Time Allocation What percentage of time would be allotted to: 0% Lecture Individual Application Experts from the Field Networking with Peers Small Group Discussion 20% 27% 20% 22% 20% 21% 20% 5% 10% 15% 20% Mean 25% 25% 28% Median 30% 29% 35% Chart 11 Ideal Learning Environment: Activities What percentage of time would be: Face-to-Face with Others In a Workbook On a Computer Online 25% 20% 24% 20% 21% 20% 0% 10% 20% 30% Mean 40% Median 50% 60% 63% 60% 70% BRIDG -9- . products. services. We found that entrepreneurs PREFER a short. operating. preferred ways of learning have also changed. Charts 9 through 11 display these preferences.

Demographics The entrepreneurs in this study closely match the population of small business owners in Missouri. Most of the businesses represented are services (38 percent). A total of 1. providing a response rate of 14 percent.200 non-respondents was pulled and followup telephone interviews were conducted.000 small business owners in the state. From this information. and business assistance providers were held in summer 2002 to gather information about educational needs and wants. initially sending our survey to 10. and construction (13 percent). retail (19 percent). a sub-database of 1. We followed the Dillman Method for maximizing our mailed survey response. To be eligible to participate.352 surveys were completed. and concerns or problems faced in starting. and growing a business. random survey study of small business owners in the State of Missouri. increasing our final response rate by three percent. Methodology These findings are based on an industry sector stratified. . small business owners and entrepreneurs must have been in business at least two years. Almost one-half (48 percent) are college degreed. operating. We used the Dun & Bradstreet Marketplace database for our sample. Approximately three-fourths of the respondents are white males with an average age of 52.10 - Problems Entrepreneurs Face . learning styles. A series of focus groups and interviews with small business owners. a survey instrument was drafted and reviewed by numerous small business owners. entrepreneurs. learning preferences. In addition to the mailed survey. business assistance providers. and academics. entrepreneurs.

Its research lays the foundation for the creation and delivery of quality programming. Director. richtermeyerg@umkc.edu. 4747 Troost. For further information or detail. Kansas City.11 - . 816-235-6343. a University of Missouri Outreach & Extension group. © 2003 BRIDG BRIDG . services. operate. please direct your questions to Dr. and organizational processes specifically developed for small business owners and entrepreneurs to start. Gwen Richtermeyer.About Us BRIDG. #217. BRIDG-UMKC. Other recent reports include a study of technology companies in Missouri and a study of Latino/a Business Owners in Greater Kansas City. and grow their businesses. products. MO 64110. focuses solely on researching small business and entrepreneurship.

BRIDG is supported by the University of Missouri Outreach and Extension Outreach Development Fund and is located on the Kansas City. 4747 Troost. Kansas City. Problems Entrepreneurs Face © 2003 BRIDG. Missouri 64110 816-235-6343 | www. Suite 217. Louis campuses. Rolla and St.org .bridg.

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