1. Chapter 1 Entrepreneurs Recognize Opportunities
Entrepreneurship
Chapter 1
Entrepreneurs Recognize Opportunities

2. What Is Business?
Business—buying and selling of products and services.
Product—exists in nature or is made by human beings and is tangible.
Service—work that provides time, skills, or expertise and is intangible.

3. What Is an Entrepreneur?
Employees—earn their living working for someone else’s business.
Entrepreneurs—earn their living starting, owning, and working for their own business.

4. Entrepreneurs Add Value to Scarce Resources
A scarce (limited) resource is something of value that can be used to make something else or fill a need.
Entrepreneurs add value to scarce resources by shifting them from areas of lower to higher productivity.

5. The Economic Questions
What should be produced?
When will it be produced?
How will it be produced?
Who will produce it?
Who gets what is produced?
An economy is a country’s financial structure. It is the system that produces and distributes wealth.

6. What Is a Small Business?
0 to 500 full-time employees
Approximately 99.9% of the 26.8 million U.S. businesses are small.
Small businesses employ about 50% of the U.S. private workforce.
Annual sales < $5 million

7. Why Be an Entrepreneur? Control over time Fulfillment
Creation/Ownership
Control over compensation
Control over working conditions

8. Costs and Benefits of Entrepreneurship
Business failure
Obstacles
Loneliness
Financial insecurity
Long hours/hard work
Benefits
Independence
Satisfaction
Financial reward
Self-esteem

9. Cost/Benefit Analysis
Cost/Benefit Analysis—listing costs and benefits in order to make decisions that are not emotional
Costs—money and time invested
Benefits—money earned and knowledge and experience gained
Opportunity Cost—cost of the next-best investment
For cost/benefit analysis to be accurate, opportunity cost must be included.

10. Entrepreneurship Options
Traditional for-profit enterprise
Social entrepreneurship including venture philanthropy
Green entrepreneurship

11. Shumpeter’s Sources of Opportunity
Use a new technology to produce a new product.
Use an existing technology to produce a new product.
Use an existing technology to produce an old product in a new way.
Find a new source of resources to produce more efficiently.
Develop a new market for an existing product.

12. Not All Ideas Are Opportunities
An opportunity is an idea that is based on what customers need or want and are willing to buy sufficiently often at a high enough price to sustain the business.

13. Timmon’s Business Opportunity= Idea + 4 Characteristics
Attractive to customers
Will work in the business environment
Can be executed in an existing window of opportunity
Resources and skills to create the business available to the entrepreneur

14. Use SWOT to Evaluate Business Ideas
Strengths
Weaknesses
Opportunities
Threats

15. Roots of Opportunity Problems Changes Inventions Competition
Technological advances
Where others see problems, entrepreneurs recognize opportunities.

16. Pathways to Entrepreneurship
Start from the beginning
Buy an existing business
Secure franchise rights
License technology
(Do not steal someone else’s creativity)

17. Profit Is the Signal
Profit—amount of money earned after costs are paid
Profit signals that an entrepreneur is adding value to scarce resources.
Entrepreneurs try to make choices (trade-offs) that will increase profit.

18. Rules for Building a Successful Business
Recognize an opportunity
Evaluate it with critical thinking (SWOT)
Build a team
Create a business plan
Gather resources
Establish ownership
Create wealth