The Foundations of Entrepreneurship

Copyright 2008 Prentice Hall Publishing 2 Chapter 1: Entrepreneurship The World of the Entrepreneur Every year in the U.S., entrepreneurs launch 850,000 new businesses. Every year in the U.S., entrepreneurs launch 850,000 new businesses. Entrepreneurial spirit - the most significant economic development in recent history. Entrepreneurial spirit - the most significant economic development in recent history. GEM study: 11.3 percent of adult population in the U.S. is actively involved in trying to start a new business. GEM study: 11.3 percent of adult population in the U.S. is actively involved in trying to start a new business.

Source: 2004 Global Entrepreneurship Monitor.

Copyright 2008 Prentice Hall Publishing 4 Chapter 1: Entrepreneurship The World of the Entrepreneur GEM study GEM study Globally 9.4 percent of adults are actively engaged in trying to start a business. Globally 9.4 percent of adults are actively engaged in trying to start a business. Men are twice as likely as women to start a business (exactly the opposite trend in the U.S., however). Men are twice as likely as women to start a business (exactly the opposite trend in the U.S., however). Nearly one-third of global entrepreneurs are between the ages of 25 and 44. Nearly one-third of global entrepreneurs are between the ages of 25 and 44.

Copyright 2008 Prentice Hall Publishing 5 Chapter 1: Entrepreneurship What Is an Entrepreneur? One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

Copyright 2008 Prentice Hall Publishing 6 Chapter 1: Entrepreneurship Characteristics of Entrepreneurs Desire for responsibility Desire for responsibility Preference for moderate risk – risk eliminators Preference for moderate risk – risk eliminators Confidence in their ability to succeed Confidence in their ability to succeed Desire for immediate feedback Desire for immediate feedback High level of energy High level of energy Future orientation – serial entrepreneurs Future orientation – serial entrepreneurs Skilled at organizing Skilled at organizing Value achievement over money Value achievement over money

Copyright 2008 Prentice Hall Publishing 7 Chapter 1: Entrepreneurship Entrepreneurship One characteristic of entrepreneurs stands out: One characteristic of entrepreneurs stands out:Diversity! Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should). Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should).

Copyright 2008 Prentice Hall Publishing 8 Chapter 1: Entrepreneurship Benefits of Entrepreneurship The opportunity to: Create your own destiny Create your own destiny Make a difference Make a difference Reach your full potential Reach your full potential Reap impressive profits Reap impressive profits Contribute to society and to be recognized for your efforts Contribute to society and to be recognized for your efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it

Copyright 2008 Prentice Hall Publishing 9 Chapter 1: Entrepreneurship Drawbacks of Entrepreneurship Uncertainty of income Uncertainty of income Risk of losing your entire investment Risk of losing your entire investment Long hours and hard work Long hours and hard work

Source: Adapted from Dun & Bradstreet 21 st Annual Small Business Survey Summary Report, 2002, p. 35.

Copyright 2008 Prentice Hall Publishing 11 Chapter 1: Entrepreneurship Drawbacks of Entrepreneurship Uncertainty of income Uncertainty of income Risk of losing your entire investment Risk of losing your entire investment Long hours and hard work Long hours and hard work Lower quality of life until the business gets established Lower quality of life until the business gets established

Source: 2004 Global Entrepreneurship Monitor.

Copyright 2008 Prentice Hall Publishing 13 Chapter 1: Entrepreneurship Drawbacks of Entrepreneurship Uncertainty of income Uncertainty of income Risk of losing your entire investment Risk of losing your entire investment Long hours and hard work Long hours and hard work Lower quality of life until the business gets established Lower quality of life until the business gets established High levels of stress High levels of stress Complete responsibility Complete responsibility Discouragement Discouragement

Copyright 2008 Prentice Hall Publishing 14 Chapter 1: Entrepreneurship Feeding the Entrepreneurial Fire Entrepreneurs as heroes Entrepreneurs as heroes Entrepreneurial education Entrepreneurial education Demographic and economic factors Demographic and economic factors Shift to a service economy Shift to a service economy Technological advancements Technological advancements Independent lifestyles Independent lifestyles E-commerce and the World Wide Web E-commerce and the World Wide Web International opportunities International opportunities

Copyright 2008 Prentice Hall Publishing 15 Chapter 1: Entrepreneurship The Cultural Diversity of Entrepreneurship Young entrepreneurs Young entrepreneurs Women entrepreneurs Women entrepreneurs Minority-owned enterprises Minority-owned enterprises Immigrant entrepreneurs Immigrant entrepreneurs Part-time entrepreneurs Part-time entrepreneurs

Copyright 2008 Prentice Hall Publishing 16 Chapter 1: Entrepreneurship The Cultural Diversity of Entrepreneurship Home-based businesses Home-based businesses Family businesses Family businesses Copreneurs Copreneurs Corporate castoffs Corporate castoffs Corporate dropouts Corporate dropouts Social entrepreneurs Social entrepreneurs

Copyright 2008 Prentice Hall Publishing 17 Chapter 1: Entrepreneurship Small Businesses... Make up 99.7 percent of all businesses in the U.S. Make up 99.7 percent of all businesses in the U.S. Employ 51 percent of the nation’s private sector workforce. Employ 51 percent of the nation’s private sector workforce. Create more jobs than big businesses. Create more jobs than big businesses. 3% of small businesses created 70% of these jobs. (Gazelles, mice, elephants) 3% of small businesses created 70% of these jobs. (Gazelles, mice, elephants) Are leaders in offering training and advancement opportunities to workers. Are leaders in offering training and advancement opportunities to workers.

Copyright 2008 Prentice Hall Publishing 18 Chapter 1: Entrepreneurship Produce 51 percent of the nation’s private GDP. Produce 51 percent of the nation’s private GDP. Account for 47 percent of business sales. Account for 47 percent of business sales. Create 13X more innovations per employee than large companies. Create 13X more innovations per employee than large companies. Zipper, FM radio, laser, air conditioning, escalator, light bulb, personal computer, automatic transmission, and many more! Zipper, FM radio, laser, air conditioning, escalator, light bulb, personal computer, automatic transmission, and many more! Small Businesses...

Source: NFIB Business Policy Guide, 2003, p. 16.

Copyright 2008 Prentice Hall Publishing 20 Chapter 1: Entrepreneurship Ten Deadly Mistakes of Entrepreneurship 1. Management mistakes 2. Lack of experience 3. Poor financial control 4. Weak marketing efforts 5. Failure to develop a strategic plan

Copyright 2008 Prentice Hall Publishing 21 Chapter 1: Entrepreneurship Ten Deadly Mistakes of Entrepreneurship 6. Uncontrolled growth 7. Poor location 8. Improper inventory control 9. Incorrect pricing 10. Inability to make the “entrepreneurial transition”

Copyright 2008 Prentice Hall Publishing 22 Chapter 1: Entrepreneurship Putting Failure into Perspective Entrepreneurs are not paralyzed by the prospect of failure. Entrepreneurs are not paralyzed by the prospect of failure. Failure – a natural part of the creative process. Failure – a natural part of the creative process. Successful entrepreneurs learn to fail intelligently. Successful entrepreneurs learn to fail intelligently.

Copyright 2008 Prentice Hall Publishing 23 Chapter 1: Entrepreneurship Avoiding the Pitfalls of Small Business Failure Know your business in depth Know your business in depth Develop a solid business plan Develop a solid business plan Manage financial resources Manage financial resources Understand financial statements Understand financial statements Learn to manage people effectively Learn to manage people effectively Keep in tune with yourself Keep in tune with yourself