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Chapter 5
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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.
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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
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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
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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
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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
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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!
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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
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Independent * Self-nurturing
Energetic *Action-Oriented
Self confident * Risk-Taker
Organized * Sense of urgency
Visionary * Flexible
Persistent * Stable
Optimistic * Problem Solver
Committed * Motivated
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Management
Labor
Financial resources
Undercapitalization
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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?
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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
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Manage your time
Avoid procrastinating
Judge your time
Schedule your time
Establish priorities
Break goals into manageable units
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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
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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