problems entrepreneurs face
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B R I D G
ProblemsEntrepreneursFace
June 2003
By Gwen Richtermeyer, Ph.D.Director
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Problems Entrepreneurs Face
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B R I D G
ProblemsEntrepreneursFace
June 2003
by
Gwen Richtermeyer, Ph.D.
Director
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Problems Entrepreneurs Face
Table of Contents
Int roduct ion..................................................................... 1
Problems in the Beginning .......................................... 1
Finance ...................................................................... 1
Management ............................................................ 2
Market ing.................................................................. 3Technology ............................................................... 4
Problems Now ................................................................ 5
Finance ...................................................................... 5
Management ............................................................ 6
Market ing.................................................................. 7
Technology ............................................................... 8
Addressing the Problems ............................................ 9
Demographics ...............................................................10
Methodology ................................................................. 10
About Us ........................................................................ 11
Charts and Graphs
Char t 1, Financial: Problems THEN .......................... 1
Char t 2, Management: Problems THEN .................. 2
Chart 3, Marketing: Problems THEN ....................... 3
Char t 4, Technology: Problems THEN ..................... 4
Chart 5, Financial: Problems NOW ......................... 5
Chart 6, Management: Problems NOW ................. 6
Chart 7, Marketing: Problems NOW ....................... 7Chart 8, Technology: Problems NOW ..................... 8
Chart 9, Preferred Learning For mat ........................ 9
Chart 10, Ideal Learning Environment:.......................
Time Allocation ...................................................... 9
Chart 11, Ideal Learning Environment: Activit ies... 9
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B R I D G
Introduction
The “Problems Entrepreneurs Face” study was
undertaken in fall of 2002 by BRIDG. 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 theirbusinesses and after they have been in business
for a number of years.
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), we need to learn as much as
possible to positively impact the success rate fornew businesses. This study focuses on four key
operational areas: finance, management,
marketing, and technology.
Finance
A sound understanding of business finance,
access to capital, and relationships with lenders
are integral to the success of any business. When
starting a business, approximately one-third of
the entrepreneurs found CASH FLOW,
FINANCE, INSUFFICIENT SALES
VOLUME, and PRICING GOOD S OR
SERVICES to be the most problematic. Chart 1
displays each finance topic and the
corresponding percentage of respondents who
indicated it as a problem.
- 1
Problems in the Beginning
Financial: Problems THEN
54%
43%
36%
32%
23%
23%
21%
20%
19%
18%
17%
17%
10%
9%
0% 10% 20% 30% 40% 50% 60%
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
PurchasingObtaining Equity Capital
Using Financial Information
Obtaining a Line of Credit
Building a Relationship with a Lender
1 Headd, Brian. 2003. Redefining Business
Success: Distinguishing Between Closure and
Failure. Small Business Economics 21: 51-61.
Chart 1
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Problems Entrepreneurs Face
Management
In beginning their business, about one-quarter
of the entrepreneurs stated that their
management problems were diverse and
focused on themselves (CONTROLLING MY
OWN TIME, SETTING GOALS andMEASURING PERFORMANCE), their
employees (FINDING/RETAINING
QUALIFIED EMPLOYEES), 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.
- 2 -
Management: Problems THEN
37%
31%
24%
22%
20%
18%
17%
16%
16%
15%
11%
8%
6%
4%
3%
3%
3%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
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, Health, & 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
Chart 2
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B R I D G
Marketing
The two top problems in the marketing area
focus on “how to” — ABILITY TO COST-
EFFECTIVELY ADVERTISE and ACTUAL
SELLING. Chart 3 displays the marketing
topics and respective percentage of entrepreneurs who found each topic a problem
in the beginning.
- 3
Marketing: Problems THEN
28%
26%
19%
19%
17%
17%
17%
16%
16%
16%
15%
14%
14%
12%
10%
0% 10% 20% 30% 40%
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
Chart 3
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Problems Entrepreneurs Face- 4 -
Technology
Technology in relationship to finance,
management, and marketing was not as much
of a problem area for entrepreneurs starting a
business. About one-fifth of the respondents
indicated SETTING UP A COMPUTERSYSTEM was a problem. Chart 4 displays the
topics within the technology area and
corresponding percentage of entrepreneurs who
indicated each was a problem.
Technology: Problems THEN
20%
16%
11%
11%
10%
7%
6%
6%
5%
4%
0% 5% 10% 15% 20% 25% 30%
Sett ing 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, Laboratories
Using Personal Data Assistants
Chart 4
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B R I D G
Problems N ow
One-half of the entrepreneurs participating in
this study have been in business for at least 17
years. About one-fourth have been in business
between two and eight years. The problems
these seasoned business owners face today areboth similar and different than those they faced
when starting their businesses.
Financial: Problems NOW
41%
32%
27%
23%
22%
20%
18%
14%
12%
11%
10%
9%
9%
8%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
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
Finance
While CASH FLOW and INSUFFICIENT
SALES VOLUME remain problems for many,
account receivables and capital enter into the
picture for one-fourth to one-third of the
entrepreneurs. Chart 5 displays the financetopics and corresponding percentages.
- 5
Chart 5
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Problems Entrepreneurs Face- 6 -
Management
Control of time and putting the right person in
the right job remain significant problems for
more than one-third of the entrepreneurs. In
addition, the role of manager and leader
emerge as entrepreneurs grow their companiesplacing MOTIVATING EMPLOYEES and
PREPARING STRATEGIC/ANNUAL
BUSINESS PLANS in the top five problems
for experienced business owners. Chart 6
displays the management topics and respective
respondent percentages.
Management: Problems NOW
43%
37%
21%
20%
18%
17%
16%
16%
15%15%
10%
7%
6%
6%
2%
2%
2%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
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 TurnoverEmployment, Health, & 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
Chart 6
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B R I D G
Marketing
At this point in the business, entrepreneurs
have learned how to handle some of the
foundational marketing tasks, although
ABILITY TO COST-EFFECTIVELY
ADVERTISE remained the number oneproblem for entrepreneurs. In addition, 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. Chart 7 displays the marketing
topics and respondent percentages.
Marketing: Problems NOW
34%
28%
26%
22%
21%
20%
20%
15%
14%
14%
13%
13%
12%
11%
8%
0% 10% 20% 30% 40%
Ability to Cost-Effectively Advert ise
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
- 7
Chart 7
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Problems Entrepreneurs Face
Technology
Current technology problems reveal
sophistication in the technology field and in
how businesses use technology. The top
problems faced currently by entrepreneurs are
EFFECTIVE BUSINESS USE OF THEINTERNET, CREATING A WEB SITE, and
INTEGRATING TECHN OLOGY INTO
TH E FIRM. Chart 8 displays technology
topics and corresponding percentages.
Technology: Problems NOW
24%
19%
18%
16%
15%
9%
9%
6%
6%
5%
0% 5% 10% 15% 20% 25% 30%
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, Laboratories
- 8 -
Chart 8
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B RI D G - 9
A better understanding of the problems
entrepreneurs face at varying points in their
business lives provides tremendous
opportunities to shape programs, products,
services, and tools to meet these needs.Just as problems change over time, preferred
ways of learning have also changed. The pressures
and stresses of owning your own business,
Addressing the Problems
information overload, and lack of time are
ingredients that need to be factored into any
attempt to assist the business owner whether they
are starting, operating, or growing a business.
We found that entrepreneurs PREFER ashort, to-the-point learning format and a
blended learning experience. Charts 9 through
11 display these preferences.
Chart 9
Chart 10
Chart 11
Preferred Learning Format
40%
25%
15%11%
9%
0% 10% 20% 30% 40% 50%
One Day Seminar or W orkshop
Topical W orkshop - 4 Hours or Less
Class Using Web or ITV TechnologySeries of 1-3 Hour Topical W orkshops
Class for Several W eeks
Ideal Learning Environment: Time Allocation
29%
28%
27%
22%
21%
25%
20%
20%
20%
20%
0% 5% 10% 15% 20% 25% 30% 35%
Lecture
Individual Application
Experts from the Field
Networking with Peers
Small Group Discussion
Mean MedianWhat percentage of timewould be allotted to:
Ideal Learning Environment: Activities
63%
25%
24%
21%
60%
20%
20%
20%
0% 10% 20% 30% 40% 50% 60% 70%
Face-to-Face with Others
In a Workbook
On a Computer
Online
Mean Median
What percentageof time would be:
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Problems Entrepreneurs Face
Demographics
The entrepreneurs in this study closely match
the population of small business owners in
Missouri. Approximately three-fourths of the
respondents are white males with an average
age of 52. Almost one-half (48 percent) arecollege degreed. Most of the businesses
represented are services (38 percent), retail (19
percent), and construction (13 percent).
Methodology
These findings are based on an industry sector
stratified, random survey study of small business
owners in the State of Missouri. A total of 1,352
surveys were completed, providing a response
rate of 14 percent. A series of focus groups andinterviews with small business owners,
entrepreneurs, and business assistance providers
were held in summer 2002 to gather
information about educational needs and wants,
learning preferences, learning styles, and
concerns or problems faced in starting,
operating, and growing a business. To be eligible
to participate, small business owners and
entrepreneurs must have been in business at
least two years. From this information, a survey
instrument was drafted and reviewed bynumerous small business owners, entrepreneurs,
business assistance providers, and academics.
We used the Dun & Bradstreet Marketplace
database for our sample, initially sending our
survey to 10,000 small business owners in the
state. We followed the Dillman Method for
maximizing our mailed survey response. In
addition to the mailed survey, a sub-database of
1,200 non-respondents was pulled and follow-
up telephone interviews were conducted,
increasing our final response rate by three
percent.
- 10 -
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B RI D G - 11
© 2003 BRIDG
About U s
BRIDG, a University of Missouri Outreach &
Extension group, focuses solely on researching
small business and entrepreneurship. Its
research lays the foundation for the creation
and delivery of quality programming, products,services, and organizational processes
specifically developed for small business owners
and entrepreneurs to start, operate, and grow
their businesses.
Other recent reports include a study of
technology companies in Missouri and a study
of Latino/a Business Owners in Greater Kansas
City. For further information or detail, please
direct your questions to Dr. Gwen
Richtermeyer, Director, BRIDG-UMKC, 4747
Troost, #217, Kansas City, MO 64110,816-235-6343, [email protected].
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Problems Entrepreneurs Face © 2003 BRIDG, 4747 Troost, Suite 217, Kansas City, Missouri 64110
816-235-6343 | www.bridg.org
BRIDG is supported by theUniversity of Missouri Outreach and Extension Outreach Development Fund
and is located on the Kansas City, Rolla and St. Louis campuses.