FEATURE PAPER

The Linkages between Cognition, Behavior, and Opportunity among HighGrowth Asian American Immigrant Entrepreneurs

The following paper was wrote by Dr. Suresh U. Kumar. He is the founder and CEO of NexAge Technologies USA Inc, an INC 500 firm based in New Jersey, USA. and was presented at the 2011 ICSB Conference in Sweden.

Abstract

Several recent studies have evidenced that Asian American immigrant entrepreneurs of Indian origin have been playing an increasingly important role in the economic growth in the United States. Despite their success, there are few holistic studies on this population. The current study involved an indepth qualitative exploration of entrepreneurial cognitions and behaviors and cultural factors that are involved with the seeing of and acting upon opportunities for this population. The cases were draw from a population of high-growth Asian Indian immigrant entrepreneurs who have established high-growth firms in the technology industry.The findings of the study indicated that the entrepreneurs obtained the start-up capital primarily from personal savings and through bootstrapping; persued a single known opportunity; experienced microentrepreneurial events at prior jobs; executed a lean startup model without realiance on instutional loans; adopted a patient approach in validating the opportunity; split self-effacay into entrepreneurial and technical components; and relied on collective efficacy. The entrepreneurs adopted a flexible and minimalistic approach to formal planning that helped them avoid an overcommitment of scarce resources. Financial discipline, patience, and frugal planning are sources of sustainable competitive advantage for successful Asian Indian immigrant entrepreneurs.

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TIP OF THE WEEK

Drawbacks of Buying a Franchise

Whereas purchasing a franchise has quite a few advantages, it is not without its drawbacks. Franchising is an excellent choice for many business startups, but it is not a good choice for many others. Franchising provides a higher probability of business success, but success is not guaranteed and it not without costs. Constraints on the creativity and freedom of the owner, high start-up and ongoing costs for franchise participations, and potential for termination of the agreement are all factors to be weighted. The quality and strength of the franchise brand and its program also matter.

Constraints on Creativity and Freedom

For the individual who wants to start a business to break away from the corporate mold and the rigors of a management and supervisory structure that restricted creativity and flexibility, franchising is unlikely to be the best option for a business startup. Franchisees are required to comply with franchise rules and processes, and autonomy is not a consideration. Products and services may not be altered, added, or dropped without franchisor agreement. In many instances, products or ingredients must be purchased from the franchisor or designated suppliers. Whereas the franchisor cannot require the individual franchisee to adhere to a pricing structure, purchasing requirements can lock in costs at higher than desired levels. The layout and design of the franchise outlet are often defined by the franchisor. While the formula provided by the franchise guarantees brand recognition, eases the issues of start-up development, and ensures ongoing support, it removes the creativity and freedom that many entrepreneurs crave. You will have to decide where the trade-off is worthwhile.

Costs

The costs of franchises vary significantly, depending upon the type of franchise, its brand recognition, popularity, and capacity to secure franchisees. Franchise costs are divided into initial franchise fees and ongoing fees. The typical franchisee can expect to pay start-up fees that range from about $3,300 for Jan-Pro, $950,200 to $1.8 million for a McDonald's outlet, or $161,000 to $1.4 million for a Circle K convenience store. Ongoing costs generally include royalties of 1 to 12 percent (most are between 3 and 7 percent) of top-line revenues payable weekly or monthly, regardless of profitability or cash flow. In addition, cooperative advertising fees of 1 to 5 percent (or a flat fee) are payable periodically. Some franchisors require franchisees to spend a minimum amount on local advertising as well. Additional start-up cost considerations are the legal costs required for franchise agreement review, and any required plant, property, equipment, inventory, or marketing requirements. It is important that you understand and fully identify all of the costs so that you completely understand the legal obligations and the financial projections that reflect them. This is particularly true for the fees that are payable regardless of profitability or cash flow. Franchisors are focused on creating wealth for themselves. Good faith franchisors are also focused on the success of their franchisees, but a word to the wise is to be wary of franchisors that have a track record of high turnover amount franchises and a reputation for "churning" their franchises for the fees. A quick search on the Internet will discloser such companies. Current required disclosures will reveal some of the legal issues as well.

Standards and Termination

Franchisors have standards and obligations that franchisees and prospective franchisees must comply with, initially and on a long-term basis. The start-up standards may include specific types of experience and skills, as well as net worth and liquidity requirements. The ongoing constraints typically are financial and performance based. Each franchisor establishes specific experience requirements for new franchisees. Typically, these are based upon the type of franchise and experience with success and failure among franchisees. Some of the more established and successful franchisors require less education and experience prior to becoming a franchisee because of their highly developed and effective training programs. For example, Circle K, Jani-King, and Liberty Tax do not require specific industry experience but do want a general business experience. The financial requirements for becoming a franchisee depend upon the nature of the franchise and the type of franchise agreement. For example, home-based franchises have far lower net worth and liquidity requirements than retail establishments. Jan-Pro requires a net worth of $1000 to $14,000-plus, and a liquid assets of greater than $1000 for franchisees who will expect to have a total investment of $3,300 to $54,000. At the other end, Dunkin' Donuts requires a net worth of $1.5 million and liquid assets of $750,000, and is requiring a potential franchisee to commit to opening a minimum of five units. Master franchisees and area franchisees (such as those associated with Dunkin' Donuts) must play larger upfront fees and must have substantially greater net worth and liquidity than single-unit franchisees. The ongoing compliance and performance standards and requirement of franchises also come with penalties and termination options for noncompliance. Franchisors may conduct periodic inspections, announced or unannounced, to evaluate compliance and conditions of the unit. Franchisees that stray from the company formula, fail to comply with quality standards, or do not pay their fees are subject to termination and repurchase. Franchisors cannot afford to tarnish their brands with underperforming or noncompliant franchises. Also, they must produce revenue and earnings, manage their finances successfully, and are dependent upon the financial returns from their franchises for success.

ANNOUNCEMENTS

ICSB

The International Council for Small Business will be hosting their World Conference during June 10-13, 2012 in Wellington, New Zealand. For more information,click here.

Allied Academy

Allied Academy will be hosting 2 upcoming conferences soon. The Summer International Internet Conference will be held during July 24-31, 2012. And the Fall International Conference will be held during October 10-12, 2012 in Las Vegas. For more information,click here.

New SBI Website

We are excited to inform you the new SBI website is Live and Ready!

Now that the website is up and running, there are a couple of housekeeping items that need to be addressed. Please read below:

Password: One of the key features of the new website is that it allows members to set up a personal password..Don't worry if you forget it you can also reset it. Please click the following link to reset your password: http://smallbusinessinstitute.biz/Sys/ForgottenPasswordRequest.

Profile: Another one of the key features is that you will now have access to update your profile information at any time. Please review your profile and make changes as needed.

E-mail: Due to the change of website providers the @smallbusinessinstitute.biz emails are no longer active. If you need to reach the board members or administrative staff you can find contact information on the CONTACT US tab or click here.

As Mike Harris stated in his announcement earlier this week, we want to do a better job of promoting the success of our members. Please send us your recent accomplishments, articles or good news, so we can share it with all SBI members.

We invite you to visit the new and improved website http://smallbusinessinstitute.biz/, tell us what you think!

SBIJ Journal

The Small Business Institute® Journal has just published its latest issue at www.sbij.org. We invite you to review the Table of Contents here and then visit our web site to review articles and items of interest.

International Journal of Business and Social Science

The International Journal of Business and Social Science is now taking manuscript submissions. All manuscripts must be submitted electronically through the e-mail to the editor at editor@ijbssnet.com, or editor.ijbss@hotmail.com. For more information, click here.

Call for Panelists

The Marketing Management Association is accepting panelists for the Fall Educators' Conference on Sept 19-21, 2012 by the Mall of America in Minneapolis. Panelists are needed in the following areas:

. Effectively Using Social Media to Enhance Student Learning
. Building Information Literacy in Classroom Instruction
. Mentoring Junior Faculty: Expectations and Outcomes
. Wiki Class Applications
. Productivity in a Small or One-Person Department
. Activities to Prepare Students for the Job Placement Process
. The Millennial Mindset: Constructive Faculty Responses
. Using LinkedIn as a Teaching Tool
. Interdisciplinary Instruction: Reaching Across Business Disciplines
. Active Learning Innovations
. Managing Millennial Expectations in Team Activities
. Assurance of Learning and Student Internships
. Class Apps with Twitter, Tumblr, StumbleUpon
. Using Teaching Evaluations Effectively
. Advances in Teaching with Simulations
. Innovations in Case Instruction
. Business Ethics: Classroom Exercises with Personal Application
. Teaching Sustainability Across the Business Curriculum
. Student Learning in Undergraduate Research
. Teaching Base of Pyramid Marketing: Global Perspectives on Developing Countries
For more information, you can e-mail Dr. Brian A. Vander Schee at bvanders@aurora.edu or click here.

BABSON

The registration deadline is rapidly approaching for Family Entrepreneurship: Growing the Family Business Across Generations. This new Babson Executive Education program will take place from May 16-17, 2012. We encourage you to register, if appropriate, and to forward this message to colleagues and family members who would benefit from participating.

Built upon Babson's deep experience with family businesses, the program content covers key aspects of entrepreneurship and entrepreneurial leadership and will include a combination of lectures, case studies, and action learning projects. For more information, click here.

ICSB 2012 Public Agencies Forum

How can government bodies - such as policy departments, advisory services, regulators and service agencies - develop the most effective means of engagement, communication and information sharing with small businesses?

CONFERENCES

CALLS FOR PAPERS