Chapter 5

Explain the importance of small businesses.

Examine whether entrepreneurship is for you.

Describe the challenges of entrepreneurship.

Describe why agribusinesses fail.

Analyze a potential agribusiness venture.

Prepare a business plan.

Explain the 5 major areas of agribusiness

management.

Establish goals for an agribusiness.

Discuss the importance of problem solving and

decision making.

Be your own boss if you want to be!

Possible for a person to start with very

little capital and build a successful

business

Very difficult process

Important to understand the basic

processes involved in business planning

and organizing

Most agribusinesses are small businesses

Small Business Administration (SBA) defines

“small business” as one that is:

independently operated

is not dominant in its field

meets certain size standards

number of employees

annual receipts

Not in the number of people they employ!

90% of the nation’s new jobs in the

private sector are in small businesses

2/3 of all new jobs are in companies with

fewer than 25 employees

Very good chance that you will either work

in a small business someday or start one

25.4 million full-and part-time home-based businesses in US

97% of all non-farm businesses considered small by the SBA

Account for more than 40% of GDP Total number of employees who work in small

business is greater than the populations of Australia and Canada combined

First jobs of about 80% of all Americans are in small businesses

Number of women who own small businesses has increased elevenfold since 1960

Minority-owned businesses increased more than 64% between 1962 and 1987

Small companies produce 90% of the new jobs

Small businesses essential to US economy

Fill a jar with sand No spaces between sand

Fill a jar with rocks Big spaces between rocks

Small businesses fill in the empty areas Serve customer needs big businesses can’t!

Work for themselves

Income they earn above financial obligations is theirs to keep

Test their own theories and ideas on how to run a business

Set their own working hours

Set prices, determine production levels, and control inventory

Determine the product or service offered

Solve the problems

Hire, train, and fire employees

Set company policy

Independent * Self-nurturing

Energetic *Action-Oriented

Self confident * Risk-Taker

Organized * Sense of urgency

Visionary * Flexible

Persistent * Stable

Optimistic * Problem Solver

Committed * Motivated

Management

Labor

Financial resources

Undercapitalization

Several start-up factors to consider

What financial resources are needed?What labor does the agribusiness need?What management requirement exist?Does a market exist for the product or

service?Where should the agribusiness be located?Should you buy an agribusiness or start a

new one?

So is it better to buy an existing business?

Allows a quicker start

Provides ready-made customers

Eliminates some competition

Reduces cost of getting established

Has a base of financial information

estimating costs and profits

More capital resources needed in beginning

No time to learn while the business is

developing

Possibility of misjudging and buying a loser

Problem of having to either accept the location

or move the business

Loss of the safety that comes from expanding

and growing into a business as resources

permit

What resources are needed?

Are these resources available?

What are the costs of the resources?

What level of management is required?

Does the prospective owner have the

experience necessary to operate the

business?

Written description of a new business venture

Describes all aspects of the proposed

agribusiness

Focuses on:

what you want to do

how you will do it

what you expect to accomplish

Essential for receiving help from potential

investors and financial institutions

Agribusiness management refers to the

responsibility of a person to:

make decisions

organize resources to implement decisions

monitor the implementation of decisions

evaluate the effects of decisions on the

overall success of the operation

Agribusiness management has five major areas

of activity, as follows

Determining what is to be done and where, how,

and when to do it

Important functions:

Determining the present status of the business

Surveying the environment

Setting objectives

Forecasting future situations

Starting necessary actions and resources

Evaluating proposed actions

Revising plans in response to changing conditions

Communicating effectively

Grouping together activities, people, and other

resources to implement a plan

Organizing involves: Identifying

Breaking

Grouping

Defining

Grouping positions

Assigning work to be performed

Revising and adjusting

Communicating duties

Providing instruction and guidance to employees

Concerned with the relationship between

managers/leaders and employees

Involves: Communicating and explaining objectives to employees

Setting standards for performance

Providing motivation

Coaching employees

Rewarding employees

Praising and criticizing constructively and fairly

Communicating throughout all processes

Includes all activities involved in the recruitment,

selection, training, and retention of personnel

Hiring staff is the principal job of any leader

Involves:

Determining human resource needs

Recruiting excellent employee candidates

Selecting excellent employees from those recruited

Training and developing employees

Revising the number of employees according to

changing conditions of the agribusiness

Covers all the activities that are necessary to ensure that

the policies of the agribusiness are being carried out

Involves:

Establishing standards (achievement, performance, quality,

etc.)

Monitoring results and comparing them to standards

Correcting deviations from standards

Revising and adjusting methods in response to changes the

agribusiness experiences, on an ongoing basis

Communicating necessary changes throughout the

organization

People do not plan to fail

They fail to plan

Prior planning prevents poor performance!

Rules for setting goals:

Write down your goals

Organize your goals

Arrange your goals according to these three

groups: immediate, short term, and long term

Immediateaccomplish within a day, a week, or a

month or two

Short-termaccomplish in a year or two

Long-term intend to work toward for many yearsgive you an idea of where you want your

business to be several years from now

Manage your time

Avoid procrastinating

Judge your time

Schedule your time

Establish priorities

Break goals into manageable units

Numerous decisions to make and problems to solve

when starting an agribusiness

Decision making is the term that describes the

process used to choose the new and different action

May involve setting new goals to solve a problem

In extreme cases, when a problem cannot be

readily solved, the decision may actually be to do

nothing at all

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Reflexive-make decisions quickly

Reflective-consider all options and consequences

before making a decision

Consistent-consider all options and still make

decisions in a timely manner

Systematic approach to problem solving can be of great benefit

Steps are similar to the seven steps of the scientific method Recognize the problem Determine your alternatives Gather information Evaluate the alternatives Select a workable solution Carry out your solutions Evaluate your results