The Foundations of Entrepreneurship Edited by: Noémi Piricz Based on: Thomas W. Zimmerer – Norman M. Scarborough: Essentials of Entrepreneurship and Small Business Management, Pearson Education International 2005, Chapter 1

Who is an Entrepreneur? Let’s collect his/her most important characteristics! Entrepreneur is one who creates a new business, taking certain risks and uncertainty, for the purpose of achieving profit and growth, by identifying opportunities and assembling the necessary resources

Personal Benefits of Entrepreneurship 1. Opportunity to create your own destiny – „being able to follow his/her own interests, desire and fun” 2. Opportunity to reap more profits (e.g. Bill Gates, M. Dell) 3. Opportunity to contribute to society – trust and respect

Drawbacks of Entrepreneurship Uncertainty of income Risk of losing your entire investment Long hours and hard work High level of stress Complete responsibility Discouragement and disillusionment

The Cultural Diversity of Entrepreneurship Young entrepreneurs – comparing with other generations they are 3 times more likely to launch businesses Women entrepreneurs - still certain discrimination in work market, - the rate of women entrepreneurs is growing dynamically

Part-time entrepreneurs - popular gateway to entrepreneurship, - lower risk Family business: two or more members of the same family have the financial control of the company - deep roots in family values, long term plans, trust etc. - bitter disputes, business and private life mixed, problem of finding a good leader after retirement

The Power of „Small” Business Small business: employs fewer than 100 people (US) In the US small firms employ 51 % of the nation’s private sector workforce, even though they posses less than one-fourth of total business assets! Small businesses produce 51% of the American private GDP.

Small companies create four times more innovation per research and development dollar than medium-sized firms

The 10 Deadly Mistakes of Entrepreneurship 1. Management mistakes – capacity, leadership ability, knowledge etc. 2. Lack of experience – professional, economic, organizational, dealing with human resources etc. 3. Poor financial control – undercapitalization (consequence: the firm runs out of capital before it is able to generate positive cash flow)

4. Weak marketing efforts – mistake: if the entrepreneurs dream it, customers will automatically come; instead of providing them with value, quality, convenience, service and fun! 5. Failure to develop a strategic plan – „I don’t have time for it” 6. Uncontrolled growth – expansion should be financed by the profit they generate or by capital contributions from the owners

7. Poor location – they often choose a vacant building 8. Improper inventory control – neglected in many cases, problems: too much or too few inventory, and even too much of the wrong type of inventory 9. Incorrect pricing – costs, aims, methods 10. Inability to make the „entrepreneurial transition” – after the start up, growth usually requires radical changes in several fields…

Key Definitions (of Chapter 1): Entrepreneur Part-time entrepreneurs Family business Small business undercapitalization cash flow