© 2008 Cengage Learning. All rights reserved.1–1 CHAPTER 1 The Entrepreneurial Life Entrepreneurship: A World of Opportunity Part 1

© 2008 Cengage Learning. All rights reserved.1–2 Looking AHEAD 1.Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs. 2.Explain the nature of entrepreneurship and how it is related to small business. 3.Identify some motivators or rewards of entrepreneurial careers. 4.Describe the various types of entrepreneurs and entrepreneurial ventures. 5.Identify five potential advantages of small entrepreneurial firms. 6.Discuss factors related to readiness for entrepreneurship and getting started in an entrepreneurial career. 7.Explain the concept of an entrepreneurial legacy and the challenges involved in crafting a worthy legacy. After you have read this chapter, you should be able to:

© 2008 Cengage Learning. All rights reserved.1–3 Entrepreneurial Opportunities Entrepreneurial Opportunity  An economically attractive and timely opportunity that creates value for interested buyers or end users. Success Stories  Latemodel Restoration Supply (Waco, Texas)   Spanx (Atlanta, Georgia)   MP4 Solutions (San Antonio, Texas) 

© 2008 Cengage Learning. All rights reserved.1–4 Who Are Entrepreneurs? Entrepreneurs are:  A person who starts and/or operates a business.  Individuals who discover market needs and launch new firms to meet those needs.  Risk takers who provide an impetus for change, innovation, and progress.  All active owner-managers (founders and/or managers of small businesses).

© 2008 Cengage Learning. All rights reserved.1–5 The Contributions of Small Business Small Businesses:  Produce 14 times as many patents per employee than do large companies, and are twice as likely to turn them into market successes.  Account for half of the private gross domestic product.  Create more than 60% of net new jobs annually.  Pay 44.3% of private payrolls.

© 2008 Cengage Learning. All rights reserved.1–6 What Is a Small Business? Criteria for Defining Smallness in Business 1. Financing supplied by one person or small group 2. Localized business operations (except marketing) 3. Business’ size small relative to larger competitors 4. Fewer than 100 employees

© 2008 Cengage Learning. All rights reserved.1–7 Entrepreneurial Incentives 1-2

© 2008 Cengage Learning. All rights reserved.1–8 Why People Become Entrepreneurs Reluctant Entrepreneur  A person who becomes an entrepreneur as a result of some severe hardship. Refugee  A person who becomes an entrepreneur to escape an undesirable situation.

© 2008 Cengage Learning. All rights reserved.1–9 The Many Varieties of Entrepreneurship Founder (“Pure” Entrepreneur)  A person who brings a new firm into existence. Administrative Entrepreneur  An entrepreneur who overseas the operations of a ongoing business. Franchisee  An entrepreneur whose power is limited by the contractual relationship with a franchising organization. Entrepreneurial Team  Two or more people who work together as entrepreneurs.

© 2008 Cengage Learning. All rights reserved.1–10 Small Business Growth Potential and Profits High-Potential Venture (Gazelle)  A small firm that has great prospects for growth. Attractive Small Firm  A small firm that provides substantial profits to its owner. Microbusiness  A small firm that provides minimal profits to its owner. Lifestyle Business  A microbusiness that permits the owner to follow a desired pattern of living.

© 2008 Cengage Learning. All rights reserved.1–11 Artisan Entrepreneurs Artisan Entrepreneur  A person with primarily technical skills and little business knowledge who starts a business. Characteristics:  Technical training  Paternalistic approach  Reluctance to delegate  Few sources of capital  Narrow view of strategy  Personal sales effort  Short planning horizon

© 2008 Cengage Learning. All rights reserved.1–12 Opportunistic Entrepreneurs Opportunistic Entrepreneur  A person with both sophisticated managerial skills and technical knowledge who starts a business. Characteristics:  Broad-based education  Scientific approach to problems  Willing to delegate  Broad view of strategy  Diversified marketing approach  Longer planning horizon  Sophisticated accounting and financial control

© 2008 Cengage Learning. All rights reserved.1–13 Women Entrepreneurs More Women Entrepreneurs  The number of women-owned firms grew nearly twice as fast as that of all firms from 1997 to  Females owned 30% of all businesses as of  Women are moving into nontraditional industries. Problems Facing Female Entrepreneurs  Newness of entrepreneurial role  Lack of access to credit  Lack of networking connections  Discrimination

© 2008 Cengage Learning. All rights reserved.1–14 The Winning Hand of Entrepreneurship Customer Focus Quality Performance Competitive Advantages of Entrepreneurial Firms Innovation Integrity and Responsibility Special Niche

© 2008 Cengage Learning. All rights reserved.1–15 Age Early Career Concerns 1. Getting an education 2. Gaining work experience 3. Acquiring financial resources Late Career Concerns 1. Fulfilling family responsibilities 2. Attaining seniority in employment 3. Earning investment in a retirement program Getting Started Age and Entrepreneurial Opportunity

© 2008 Cengage Learning. All rights reserved.1–16 Getting Started (cont’d) Characteristics of Successful Entrepreneurs Strong Commitment to the Business (Tenacity) Moderate Risk Takers (Financial, Career, Psychic Risks) Strong Internal Locus of Control (Self-Reliance)

© 2008 Cengage Learning. All rights reserved.1–17 Entrepreneurial Characteristics (Timmons and Spinelli) Commitment and Determination Leadership Motivation to Excel Creativity, Self- Reliance, and Adaptability Opportunity Obsession Tolerance of Risk, Ambiguity, and Uncertainty Attitudes and Behaviors of Entrepreneurs

© 2008 Cengage Learning. All rights reserved.1–18 Getting Started (cont’d) Taking the Plunge  Precipitating event  An event, such as losing a job, that moves an individual to become an entrepreneur. Finding “Go-To” Persons  Mentors for advice and counsel Growing and Managing the Business

© 2008 Cengage Learning. All rights reserved.1–19 Living the Entrepreneurial Life Entrepreneurial Legacy  The tangible items and intangible qualities passed on not only to heirs but also to the broader society.  Evaluating accomplishments  Disappointments in winning the wrong game Crafting a Worthy Legacy  The nature of the entrepreneurial endeavor reflects personal goals and values. Beginning with the End in Mind  Proper values and actions lead to a good exit.

© 2008 Cengage Learning. All rights reserved.1–20 Key TERMS entrepreneurial opportunity entrepreneur reluctant entrepreneur refugee founder franchisee high-potential venture (gazelle) attractive small firm microbusiness lifestyle business artisan entrepreneur opportunistic entrepreneur entrepreneurial team internal locus of control external locus of control precipitating event entrepreneurial legacy