Author Biography

Professor Vishal K. Gupta is on the faculty of the Department of Management at Culverhouse College of Business of The University of Alabama. His previous academic positions were at University of Mississippi, State University of New York at Binghamton, and University of Nebraska at Omaha. He also has been a visiting professor at Bahrain Institute of Banking and Finance, and the Indian Institute of Management (at Kashipur and Shillong). He has published 2 academic books and over 75 research articles. His work is regularly discussed in the popular press, including the Wall Street Journal, New York Times, and Business Insider, among others. Before embarking on an academic career, Professor Gupta worked in the family business (YESCO), making industrial grinding machines. He earned a PhD in Business Administration (concentration in Strategic Management with an emphasis on Entrepreneurship) from University of Missouri. His pedagogical approach combines theory and practice, which also informs the way the material in this book is presented.

Table of Contents

Preface vii 1 Understanding Small Business 1 1.0. Introduction 1 1.1. Describe Small Business 3 Comprehension Check 7 1.2. Define Small Business Management 7 1.2.1. Problems with (Rapid) Growth 11 Comprehension Check 13 1.3. Myths About and Benefits of Small Business Entrepreneurship 13 Comprehension Check 17 1.4. Identify Various Forms of Entrepreneurship 17 Comprehension Check 20 Summary 20 Live Exercise 21 World of Books 21 In the Movies 22 Things to Remember 22 Key Terms 23 Experiential Exercise 23 2 Starting a New Business 24 2.0. Introduction 24 2.1. Motivations for Starting a New Venture 26 Comprehension Check 29 2.2. Part-time and Full-time Startups 30 Comprehension Check 32 2.3. From Idea to Opportunity 32 Comprehension Check 39 2.4. The Universal Startup Model 39 Comprehension Check 42 2.5. Analyze the State of Startup in the United States 43 Comprehension Check 45 Summary 46 Live Exercise 46 World of Books 46 In the Movies 46 Things to Remember 47 Key Terms 48 Experiential Exercise 48 3 Family Business 49 3.0. Introduction 49 3.1. The Basics of Family Business 51 3.1.1. Definition of Family Business 51 3.1.2. Family Business System 53 Comprehension Check 54 3.2. Two Sides of the Family Business 54 3.2.1. Positives of a Family Business 55 3.2.2. Negatives of a Family Business 56 Comprehension Check 59 3.3. Types of Family Businesses 59 Comprehension Check 62 3.4. Succession Planning in Family Business 62 3.4.1. Enduring Family Firms 64 3.4.2. Best Practices for Family Firms 66 3.4.3. Next-Generation Challenge 67 3.4.4. Role of Offspring Gender 68 Comprehension Check 71 Summary 71 Live Exercise 71 World of Books 71 In the Movies 71 Things to Remember 72 Key Terms 73 Experiential Exercise 73 4 Franchising for Small Firms 74 4.0. Introduction 74 4.1. Meaning and History of Franchising 76 4.1.1. Historical Evolution 79 4.1.2. Forms of Franchising 81 Comprehension Check 83 4.2. Considerations in Franchising 83 4.2.1. Advantages of Franchising 84 4.2.2. Disadvantages of Franchising 86 Comprehension Check 88 4.3. Types of Franchise 88 4.3.1. Legal and Institutional Environment for Franchising 89 Comprehension Check 95 4.4. Decision to Become a Franchisee 96 4.4.1. Assess Your Situation 97 4.4.2. Start Your Research 97 Comprehension Check 100 Summary 100 Live Exercise 100 World of Books 101 In the Movies 101 Things to Remember 101 Key Terms 102 Experiential Exercise 102 5 Small Business Ownership Through Acquisition 103 5.0. Introduction 103 5.1. Business Acquisition and Its Two Sides 105 5.1.1. Bright Side of Acquisitions 107 5.1.2. Downsides of Acquisition 108 Comprehension Check 109 5.2. The Acquisition Process 110 5.2.1. Step 1: Raising Capital 110 5.2.2. Step 2: Identifying Targets 111 5.2.3. Step 3: Funding the Buyout 112 5.2.4. Step 4: Operating and Value Creation 113 Comprehension Check 114 5.3. Possible Acquisition Paths 114 5.3.1. Self-funded Search 114 5.3.2. Traditional Search Fund 115 5.3.3. Sponsored Search 116 5.3.4. Incubated Search 117 Comprehension Check 118 5.4. Valuing a Business 118 Comprehension Check 120 Summary 120 Live Exercise 121 World of Books 121 In the Movies 121 Things to Remember 121 Key Terms 122 Experiential Exercise 123 6 Small Business Marketing 124 6.0. Introduction 124 6.1. What Is Small Business Marketing? 126 Comprehension Check 128 6.2. Products: Goods and/or Services 128 Comprehension Check 131 6.3. Capturing the Attention of the Market 131 6.3.1. The Marketing Funnel 132 6.3.2. Digital Marketing 135 Comprehension Check 139 6.4. Locating Your Business in the Right Place 139 6.4.1. Is Your Customer the User? 140 6.4.2. Getting Through to the User or Customer 140 Comprehension Check 143 6.5. Pricing Is Crucial! 144 Comprehension Check 147 Summary 148 World of Books 148 In the Movies 149 Live Exercise 149 Things to Remember 149 Key Terms 150 Experiential Exercise 151 7 Small Business Accounting 152 7.0. Introduction 152 7.1. Why Accounting Matters 154 Comprehension Check 158 7.2. Basic Accounting Concepts 158 7.2.1. Business Entity Concept 158 7.2.2. Going Concern Concept 159 7.2.3. The Accounting Equation 159 7.2.4. Revenues and Expenses 161 7.2.5. Cash Flow 162 Comprehension Check 163 7.3. Accounting System and Financial Reports 163 7.3.1. Income Statement 164 7.3.2. Cash Flow Statement 164 7.3.3. Balance Sheet 165 7.3.4. Statement of Retained Earnings 166 7.3.5. Statement of Owner's Equity 166 Comprehension Check 167 7.4. Key Ratios for Financial Statement Analysis 167 7.4.1. Profitability Analysis 168 7.4.2. Leverage Ratio 170 7.4.3. Activity Ratios 171 7.4.4. Liquidity Ratios 172 Comprehension Check 174 Summary 174 World of Books 175 In the Movies 175 Live Exercise 175 Things to Remember 175 Key Terms 176 Experiential Exercise 177 8 Small Business Finance 178 8.0. Introduction 178 8.1. Introduction to Small Business Financing 180 Comprehension Check 182 8.2. Types of Funding 182 8.2.1. Debt Funds 182 8.2.2. Equity Funds 184 8.2.3. Funding Growth Internally 185 Comprehension Check 186 8.3. Financing from Personal Resources 186 Comprehension Check 191 8.4. Formal Sources of Financing 191 8.4.1. Financing from Debt 191 8.4.2. Financing from Equity 194 8.4.3. Other Financing Sources 197 Comprehension Check 199 8.5. Crowdfunding and Its Appeal 199 Comprehension Check 202 Summary 202 World of Books 203 In the Movies 203 Live Exercise 203 Things to Remember 203 Key Terms 205 Experiential Exercise 205 9 Small Business and the Law 206 9.0. Introduction 206 9.1. Legal Structures for Small Businesses 208 9.1.1. Proprietorship: Most Common Legal Form for American Businesses 209 9.1.2. Partnerships: Formed by Many Hated by Many 211 9.1.3. Corporation: They Are People Too! 211 Comprehension Check 215 9.2. Fundamentals of Contracts 215 9.2.1. Types of Contracts 217 Comprehension Check 219 9.3. Introduction to Intellectual Property 219 9.3.1. Trademark (or Service Mark) 220 9.3.2. Trade Secret 221 9.3.3. Copyright 221 9.3.4. Patents 222 Comprehension Check 223 9.4. Basics of Bankruptcy Laws 224 Comprehension Check 226 Summary 226 World of Books 227 In the Movies 227 Live Exercise 227 Things to Remember 228 Key Terms 229 Experiential Exercise 229 10 Ethics and Social Responsibility 230 10.0. Introduction 230 10.1. Why Behave Ethically? 230 Comprehension Check 235 10.2. Legal and Moral Criteria for Ethical Behavior 236 10.2.1. Law and Morality as Two Criteria in Making Business Decisions 237 10.2.2. Ethics and the Role of Time and Place 240 Comprehension Check 240 10.3. Should Ethics Be Taught? 241 Comprehension Check 243 10.4. Corporate Social Responsibility 243 Comprehension Check 247 10.5. Introduction to Ethical Frameworks 248 Comprehension Check 251 Summary 251 World of Books 251 In the Movies 251 Live Exercise 251 Things to Remember 252 Key Terms 254 Experiential Exercise 254 11 Leadership and Its Challenges 255 11.0. Introduction 255 11.1. Qualities of Successful Entrepreneurs 257 11.1.1. Passion 257 11.1.2. Perseverance 259 11.1.3. Humility 261 Comprehension Check 262 11.2. Leadership Styles of Entrepreneurs 263 Comprehension Check 266 11.3. Stress and Well-being 266 11.3.1. Financial Stressors 267 11.3.2. Interpersonal Stressors 268 11.3.3. Self-regulation Problems 268 11.3.4. Nature of Work 269 11.3.5. Uncertainty 269 11.3.6. Work–Life Conflict 269 Comprehension Check 272 11.4. Delegation and Professional Management 273 Comprehension Check 275 Summary 275 World of Books 276 In the Movies 276 Live Exercise 276 Things to Remember 277 Key Terms 278 Experiential Exercise 278 12 Human Resources Management 279 12.0. Introduction 279 12.1. Making the Decision to Hire 281 12.1.1. Using Independent Contractors 283 12.1.2. Recruiting Employees 284 Comprehension Check 287 12.2. Finding New Employees 287 12.2.1. Referrals 288 12.2.2. Relatives and Friends 289 12.2.3. Advertisements 290 12.2.4. Internet Job Sites 290 12.2.5. Social Media 291 12.2.6. Employment Agencies 291 12.2.7. Company Websites 292 12.2.8. Other Sources 292 Comprehension Check 294 xx Contents 12.3. Selecting and Training Employees 294 12.3.1. Tools for Screening Applicants 296 12.3.2. Training Employees 301 Comprehension Check 302 12.4. Rewarding and Disciplining Employees 303 12.4.1. Wages 303 12.4.2. Benefits 304 12.4.3. Disciplining Employees 305 Comprehension Check 306 Summary 306 World of Books 306 In the Movies 306 Live Exercise 307 Things to Remember 307 Key Terms 309 Experiential Exercise 309 13 Operations and Supply Chain Management 310 13.0. Introduction 310 13.1. Basics of Managing Operations 312 13.1.1. Productivity 316 Comprehension Check 318 13.2. The Fundamental Concept of Inventory 318 13.2.1. Just-in-Time Inventory Management 320 13.2.2. No Inventory 322 Comprehension Check 323 13.3. Introduction to Scheduling 323 Comprehension Check 325 13.4. Issues of Quality 325 Comprehension Check 328 Summary 328 World of Books 329 In the Movies 329 Live Exercise 329 Things to Remember 330 Key Terms 331 Experiential Exercise 331 14 Global Opportunities for Small Firms 332 14.0. Introduction 332 14.1. Motivation for Competing Internationally 333 Comprehension Check 338 14.2. Common Modes of International Expansion 338 14.2.1. Types of Exporting 340 14.2.2. Licensing 341 14.2.3. Franchising 342 14.2.4. Foreign Partnerships 343 Comprehension Check 344 14.3. Challenges to Overseas Expansion 344 14.3.1. Demographic and Cultural Factors 345 14.3.2. Government Policies and Regulatory Framework 346 14.3.4. Political and Economic Risks 347 14.3.5. Adverse Exchange Rate Shifts 348 Comprehension Check 349 14.4. Main Approaches to International Strategy 349 Comprehension Check 351 14.5. Contemporary Issues in Globalization 351 Comprehension Check 354 Summary 354 World of Books 354 In the Movies 354 Live Exercise 355 Things to Remember 355 Key Terms 356 Experiential Exercise 357 15 Strategic Thinking for Small Firms 358 15.0. Introduction 358 15.1. Strategy of Small Business 360 Comprehension Check 362 15.2. Thinking Strategically! 362 Comprehension Check 364 15.3. SWOT Analysis 364 15.3.1. Looking Outward 366 15.3.2. Looking Inward 370 15.3.3. Aligning Internal with External 371 15.3.4. Common Mistakes in SWOT Analysis 373 Comprehension Check 374 15.4. Generic Strategies for Small Firms 374 Comprehension Check 378 Summary 378 World of Books 378 In the Movies 378 Live Exercise 378 Things to Remember 379 Key Terms 380 Experiential Exercise 380 16 Business Planning for Small Firms 381 16.0. Introduction 381 16.1. What Is a Business Plan? 382 16.1.1. To Provide Direction 384 16.1.2. To Determine Feasibility 384 16.1.3. To Attract Capital and Other Resources 385 Comprehension Check 386 16.2. What Is a Business Model? 386 16.2.1. Coming Up with a Business Model 387 Comprehension Check 390 16.3. Writing a Business Plan 390 16.3.1. Cover Page 390 16.3.2. Table of Contents 390 16.3.3. Executive Summary 392 16.3.4. Company Description 392 16.3.5. Environmental and Industrial Analysis 393 16.3.6. Manufacturing and Operations 396 16.3.7. Financial Analysis 396 16.3.8. Critical Assumptions and Risks 399 16.3.9. Appendix 400 Comprehension Check 401 16.4. Customizing the Business Plan 401 16.4.1. Things to Watch Out for in Business Plans 402 Comprehension Check 404 Summary 405 World of Books 405 In the Movies 405 Live Exercise 405 Things to Remember 406 Key Terms 407 Experiential Exercise 408 17 Harvesting the Business 409 17.0. Introduction 409 17.1. Approaches to Harvesting a Business 410 17.1.1. Harvest Through Sale of the Firm 412 17.1.2. Sales to Rivals 414 17.1.3. Sales to Employees 415 17.1.4. Sales to Other Buyers 416 Comprehension Check 418 17.2. Valuing a Firm 418 Comprehension Check 422 17.3. Challenges to Harvesting 422 17.3.1. Anticipating the Harvest 423 17.3.2. Post-harvest Planning 424 Comprehension Check 426 17.4. Harvesting by Going Public 426 Comprehension Check 428 Summary 428 World of Books 428 In the Movies 429 Live Exercise 429 Things to Remember 429 Key Terms 431 Experiential Exercise 431 Index I-1

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