Chapter 6 part III Starting Your Own Business: The Entrepreneurship Alternative

Chapter Objectives 1.Define the term entrepreneur and distinguish among entrepreneurs, small-business owners, and managers. 2.Identify three different types of entrepreneurs. 3.Explain why people choose to become entrepreneurs. 4.Discuss conditions that encourage opportunities for entrepreneurs. 5.Describe the role of entrepreneurs in the economy. 6.Identify personality traits that typically characterize successful entrepreneurs. 7.Summarize the process of starting a new venture. 8.Explain how organizations promote intrapreneurship.

Chapter Overview People are increasingly choosing the path of entrepreneurship To become an entrepreneur, learn as much as possible by: –Completing academic programs –Gaining practical experience working –Reading newspaper and magazine articles and biographies of successful entrepreneurs

What Is An Entrepreneur? A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business. Websites –Entrepreneurial Leadership –Entrepreneur –EntreWorld

Categories of Entrepreneurs

Classic entrepreneurs—person who identifies a business opportunity and allocates available resources to tap that market.

Categories of Entrepreneurs Intrapreneur—entrepreneurially oriented person who develops innovations within the context of a large organization. Change Agent—manager who tries to revitalize an established firm to keep it competitive.

Why People Become Entrepreneurs

U.S. Adults Currently Engaged in Starting a Business

Reasons to Choose Entrepreneurship as a Career Path Desire to Be Your Own Boss –Self-management is the motivation of many entrepreneurs Financial Success –Entrepreneurs: Are wealth creatorsAre wealth creators Believe they won’t get rich working for othersBelieve they won’t get rich working for others –Path to riches can be long and uncertain

Reasons to Choose Entrepreneurship as a Career Path Job Security –Many workers lack job security –Growing percentage of Americans create their own by starting their own firms Quality of Life –Gives the founder some choice over when, where, and how to work –Many work extraordinarily long hours... often at the whim of their customers

Factors Supporting and Expanding Opportunities for Entrepreneurs

The Environment for Entrepreneurs Globalization –Creates many opportunities for entrepreneurs –Allows products to be sold overseas –Provides international talent pool

The Environment for Entrepreneurs Education –Tremendous growth in educational opportunity for would-be entrepreneurs via: College Classes Business schools helping students start businesses Other organizations like the Center for Entrepreneurial Leadership

The Environment for Entrepreneurs Information Technology –Provided a big boost for entrepreneurs –Helps entrepreneurs work quickly and efficiently, provide attentive customer service, increase sales, and project a professional image –Has created demand for new products –Internet is also a challenge for entrepreneurs –Customers can go online, quickly get needed information, and buy from anywhere in the world

The Environment for Entrepreneurs Demographic and Economic Trends –Demographic trends create opportunities for new goods and services

The Environment for Entrepreneurs Entrepreneurship around the World –Growth of entrepreneurship is a worldwide phenomenon –Level of entrepreneurship varies considerably even among industrialized nations

Levels of Entrepreneurial Activity in 10 Countries

Influence of Entrepreneurs on the Economy American entrepreneurs have given the world goods and services that have changed the way people live, work, and play Products include: –Ball-point pens –Netscape Navigator software –Fiberglass skis –Velcro fasteners –FedEx delivery service –MacDonald's

Influence of Entrepreneurs on the Economy

Innovation –Entrepreneurs: Create new products Build new industries Bring new life to old industries –Since WWII, behind: 2/3rds of Inventions 95% of major innovations

Influence of Entrepreneurs on the Economy Job Generation –Vital source of new jobs –Typically hire small numbers of employees per firm... spread over many companies –See potential employees where established firms overlook them –Gazelles

Influence of Entrepreneurs on the Economy Diversity –Entrepreneurship offers excellent economic opportunities for women and minorities

Characteristics of Entrepreneurs

Vision –Have an overall idea for how to make a business inspiration a success High Energy Level –Willingly work hard to realize their visions Need to Achieve –Need to work hard because they want to excel

Characteristics of Entrepreneurs Self-Confidence and Optimism –Believe in ability to succeed, and they instill their optimism in others Tolerance for Failure –Entrepreneurs view setbacks and failures as learning experiences –Not easily discouraged or disappointed when things don’t go as planned

Characteristics of Entrepreneurs Creativity –Entrepreneurs typically conceive new ideas for goods and services –Devise innovative ways to overcome difficult problems and situations Tolerance for Ambiguity –Take the uncertainties associated with launching a venture in stride

Characteristics of Entrepreneurs Internal Locus of Control –Believe that they control their own fates –Take personal responsibility for the success or failure of their actions rather than believing in luck or fate

Think You Might Be a Good Entrepreneur?

Starting a New Venture Selecting a Business Idea –Finding something you love to do and are good at doing –Determining whether your idea can satisfy a need in the market –Success also depends on your offering being appealing to the marketplace

Starting a New Venture Buying an Existing Business –Some prefer not to assume the risks of starting a new firm Buying a Franchise –Another less risky way to begin a business

Starting a New Venture Creating a Business Plan –Online Resources for Preparing a Business Plan

Starting a New Venture Finding Financing –Seed Capital—initial funding needed to launch a new venture. –Debt Financing—borrowed funds that entrepreneurs must repay.

Starting a New Venture Finding Financing –Equity Financing—funds invested in new ventures in exchange for part ownership. –Venture Capitalists—business firm or group of individuals who invest in new and growing firms.

Starting a New Venture Finding Financing –Angel Investors—wealthy individuals who invest directly in a new venture in exchange for an equity stake.

Intrapreneurship Intrapreneurship—process of promoting innovations within the structure of an existing organization. –Helps retain employees who might otherwise leave to start their own businesses –Intrapreneurship practiced in: 3M (e.g. skunkworks) Thermo Electron Xerox Intuit