Chapter 1: Entrepreneurship1 Copyright 2002 Prentice Hall Publishing Company The Foundations of Entrepreneurship

Chapter 1: Entrepreneurship2 Copyright 2002 Prentice Hall Publishing Company The World of the Entrepreneur n A new business is born every 11 seconds in the United States n Study of influential Americans – the defining issue of the 21 st Century: Entrepreneurship! n One of 12 Americans is actively involved in trying to start a new business.

Entrepreneurial Activity Across the Globe

Chapter 1: Entrepreneurship4 Copyright 2002 Prentice Hall Publishing Company 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.

Chapter 1: Entrepreneurship5 Copyright 2002 Prentice Hall Publishing Company Characteristics of Entrepreneurs n Desire for responsibility n Preference for moderate risk n Confidence in their ability to succeed n Desire for immediate feedback n High level of energy n Future orientation n Skilled at organizing n Value achievement over money

Chapter 1: Entrepreneurship6 Copyright 2002 Prentice Hall Publishing Company The “Type E” Personality Common Traits of Entrepreneurs: p Aggressively pursues goals; pushes self and others p Seeks autonomy, independence and freedom from boundaries p Sends consistent messages; very focused p Acts quickly, often without deliberating p Keeps distance and maintains objectivity p Pursues simple, practical solutions p Willing to take risks; comfortable with uncertainty p Exhibits clear opinions and values; has high expectations p Impatient; “just do it” mentality p Positive, upbeat, optimistic; communicates confidence

Chapter 1: Entrepreneurship7 Copyright 2002 Prentice Hall Publishing Company Common Themes in Definitions of Entrepreneurship Defining Entrepreneurship The Entrepreneur Innovation Organization Creation Creating Value Profit or Nonprofit Growth Uniqueness Process

Chapter 1: Entrepreneurship8 Copyright 2002 Prentice Hall Publishing Company The Development of Entrepreneurship Theory 18th Century Richard Cantillon: Coins term entrepreneur (“go-between” or “between taker”) Entrepreneur bears risks and plans, supervises, organizes, and owns factors of production

Chapter 1: Entrepreneurship9 Copyright 2002 Prentice Hall Publishing Company The Development of Entrepreneurship Theory 19th Century Jean Baptiste Say: Proposed that profits from entrepreneurship were separate from profits of capital ownership Distinction made between those who supplied funds and earned interest and those who profited from managerial abilities

Chapter 1: Entrepreneurship10 Copyright 2002 Prentice Hall Publishing Company The Development of Entrepreneurship Theory 20th Century Joseph Schumpeter: Described the entrepreneur as someone who is an innovator and someone who “creatively destructs” Peter Drucker: Described the entrepreneur as someone who maximizes opportunity

Chapter 1: Entrepreneurship11 Copyright 2002 Prentice Hall Publishing Company Myths About Entrepreneurship 1. Successful entrepreneurship takes only a great idea. 2. Entrepreneurship is easy. 3. Entrepreneurship is a risky gamble. 4. Entrepreneurship is found only in small businesses. 5. Entrepreneurial ventures and small businesses are identical.

Chapter 1: Entrepreneurship12 Copyright 2002 Prentice Hall Publishing Company The Entrepreneurial Process Exploring the Entrepreneurial Context Identifying Opportunities/Possible Competitive Advantage Starting the Venture: p Researching Feasibility p Planning the Venture p Organizing the Venture p Launching the Venture Managing the Venture: p Managing Processes p Managing People p Managing Growth p Special Issues

Chapter 1: Entrepreneurship13 Copyright 2002 Prentice Hall Publishing Company Rewards of Being an Entrepreneur oHigh degree of independence—freedom from constraints oGet to use a variety of skills and talents oFreedom to make decisions oAccountable to only yourself oOpportunity to tackle challenges oFeeling of achievement and pride oPotential for greater financial rewards

Chapter 1: Entrepreneurship14 Copyright 2002 Prentice Hall Publishing Company Feeding the Entrepreneurial Fire n Entrepreneurs as heroes n Entrepreneurial education n Demographic and economic factors n Shift to a service economy n Technological advancements n Independent lifestyles n E-Commerce and the World Wide Web n International opportunities

Chapter 1: Entrepreneurship15 Copyright 2002 Prentice Hall Publishing Company Challenges of Being an Entrepreneur oMust be comfortable with change and uncertainty oMust make a bewildering number of decisions oMay face tough economic choices oMust be comfortable with taking risks oNeed many different skills and talents oMust be comfortable with the potential for failure

Chapter 1: Entrepreneurship16 Copyright 2002 Prentice Hall Publishing Company The Cultural Diversity of Entrepreneurship n Young entrepreneurs n Women n Minority-owned enterprises n Immigrant entrepreneurs n Part-time entrepreneurs n Home-based businesses n Family businesses n Copreneurs n Corporate castoffs n Corporate dropouts

Chapter 1: Entrepreneurship17 Copyright 2002 Prentice Hall Publishing Company Nine Deadly Mistakes of Entrepreneurship 1. Management incompetence 2. Lack of experience 3. Poor financial control 4. Failure to develop a strategic plan 5. Uncontrolled growth

Chapter 1: Entrepreneurship18 Copyright 2002 Prentice Hall Publishing Company Nine Deadly Mistakes of Entrepreneurship (continued) 6. Poor location 7. Improper inventory control 8. Incorrect pricing 9. Inability to make the “entrepreneurial transition”

Chapter 1: Entrepreneurship19 Copyright 2002 Prentice Hall Publishing Company Differences Between Small Businesses and Entrepreneurial Ventures oIndependently owned, operated, and financed oLess than 100 employees oDoesn’t emphasize new or innovative practices oLittle impact on industry oInnovative practices oGoals are profitability and growth oSeeks out new opportunities oWillingness to take risks

Chapter 1: Entrepreneurship20 Copyright 2002 Prentice Hall Publishing Company Benefits of Small Business Ownership The opportunity to: n create your own destiny n make a difference n reach your full potential n reap unlimited profits n contribute to society and be recognized for your efforts n do what you enjoy and have fun at it

Chapter 1: Entrepreneurship21 Copyright 2002 Prentice Hall Publishing Company Drawbacks of Small Business Ownership n Uncertainty of income n Risk of losing your entire investment n Long hours and hard work n Lower quality of life until the business gets established n High levels of stress n Complete responsibility n Discouragement

Chapter 1: Entrepreneurship22 Copyright 2002 Prentice Hall Publishing Company Small Businesses n Make up 99% of all businesses in the United States. n Employ 53% of the nation's private sector workforce. n Create more jobs than big businesses. n Are leaders in offering training and advancement opportunities to workers.

Chapter 1: Entrepreneurship23 Copyright 2002 Prentice Hall Publishing Company n Produce 51% of the nation's private GDP. n Account for 47% of business sales. n Create 4X more innovations per R & D dollar spent than medium-size firms and 24X as many as large companies. Small Businesses (continued)

Chapter 1: Entrepreneurship25 Copyright 2002 Prentice Hall Publishing Company The Small Business Failure Record n 24% of new businesses fail after two years. n 51% fail within four years. n 63% fail within six years.

Chapter 1: Entrepreneurship27 Copyright 2002 Prentice Hall Publishing Company Avoiding the Pitfalls of Small Business Failure n Know your business in depth n Develop a solid business plan n Manage financial resources n Understand financial statements n Learn to manage people effectively n Keep in tune with yourself

Chapter 1: Entrepreneurship28 Copyright 2002 Prentice Hall Publishing Company 10 Tips of Utah’s Fastest Growing Companies 1. Stop paying lip service to customer service 2. Be willing to share the pie with your employees 3. Make your own luck 4. Be prepared to make sacrifices 5. Spread yourself out, not thin

Chapter 1: Entrepreneurship29 Copyright 2002 Prentice Hall Publishing Company 10 Tips of Utah’s Fastest Growing Companies (continued) 6. Break down the walls 7. Stay one step ahead 8. Invest in yourself 9. Be different 10. Look where you’re going

Chapter 1: Entrepreneurship30 Copyright 2002 Prentice Hall Publishing Company Motto for Entrepreneurs n Conceive it n Believe it n Achieve it!