1. 6
Chapter
Starting Your Own Business: The Entrepreneurship Alternative

2. Learning Objectives Define what is an entrepreneur.
Identify the different categories of entrepreneurs.
Explain why people choose entrepreneurship as a career path.
Discuss the environment for entrepreneurs.
Identify the characteristics of entrepreneurs.
Summarize the process of starting a new venture.
Explain intrapreneurship. 1 5 2 6 3 7 4

3. What is Entrepreneurship?
An entrepreneur is a person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.
Differ from many small-business owners in their strong desire to make their business grow.
Differ from managers through their overriding responsibility to use the resources of the organization to accomplish their goals.
Willing to take risks.
Entrepreneurs differ from managers as they are willing to assume risk (financial, social, career). Entrepreneur.com is an excellent resource (click on link).
Class Activity: Ask students to share examples of friends or family members who operate their own businesses.
Lecture Enhancer: How do entrepreneurs view risk differently than managers in a large company?

4. Categories of Entrepreneurs
Classic Entrepreneurs
Serial Entrepreneurs
Social Entrepreneurs
Entrepreneurs range from classic entrepreneurs and serial entrepreneurs to social entrepreneurs. A classic entrepreneur pursues business opportunities and allocates resources. A serial entrepreneur starts one business, runs it, and then runs additional businesses in succession. Social entrepreneurs focus on solving society’s challenges through their businesses. Click on the Honest Tea logo to access the company’s mission statement that discusses its social responsibility.
Lecture Enhancer: Think of a hypothetical example for each type of entrepreneur.

5. Entrepreneurship as a Career
In a recent year, 560, 000 new businesses created in the United States, with highest rate in construction and service industries
The past two decades have shown a heightened interest in entrepreneurial careers.
People choose entrepreneurship for many reasons:
Heightened publicity surrounding celebrity entrepreneurs
Dissatisfaction with traditional work
Their ideas fulfill customer needs
The number of Americans choosing entrepreneurship as a career is growing. People decide to become entrepreneurs for a variety of reasons. See how many students want to become entrepreneurs, and discuss the types of businesses they want to start and their reasons for wanting to become entrepreneurs.
LECTURE ENHANCER: Share an example of a celebrity entrepreneur.

6. Why People Become Entrepreneurs
Many entrepreneurs want to be their own bosses, and self-management is their motivation. Entrepreneurs are wealth creators. Many entrepreneurs start ventures with the specific goal of creating a profitable business to reap financial rewards. As large companies continue to lay off employees, entrepreneurs find job security in their own ventures. Finally, quality of life (lifestyle entrepreneur) provides an attractive option for people to gain independence, freedom, and control.
Lecture Enhancer: Discuss the unique stresses and challenges being your own boss might present.

7. Why Entrepreneurship? Being Your Own Boss Financial Success
Self-management is the motivation that drives many entrepreneurs.
Financial Success
Entrepreneurs are wealth creators.
Job Security
Over the past ten years, large companies have eliminated more jobs than they have created.
Quality of Life
Starting a business gives the founder some choice over when, where, and how to work.
People have always wanted to be their own bosses and be rewarded for their efforts by keeping profits. As companies continue to restructure and downsize, many people consider entrepreneurship rather than seeking employment with a company. Lifestyle entrepreneurs are trying to achieve a balance between work and their other interests.
Lecture Enhancer: Why do many people choose entrepreneurship when considering job security?

8. The Environment for Entrepreneurship
Globalization, education, information technology, and demographic and economic trends create many opportunities for entrepreneurs. Growth in entrepreneurship is a worldwide phenomenon.

9. Globalization
Entrepreneurship activity across the world is growing. Entrepreneurs are the key to economic growth for many lesser-developed nations.
Lecture Enhancer: What factors may have contributed to the increased globalization of entrepreneurship?
The rapid globalization of business has created many opportunities for entrepreneurs.

10. Education / IT / Demographic and Economic Trends
100 U.S. colleges and universities offer entrepreneurship majors.
Universities are helping students launch businesses.
Many programs teach entrepreneurship to young people.
Information Technology
Technology has given entrepreneurs tools that help them compete.
Entrepreneurs have used information technology to revolutionize industries.
Demographic and Economic Trends
Aging of U.S. population.
Emergence of Hispanics as nation’s largest ethnic group.
Growth of two-income families.
Educational opportunities have grown for entrepreneurs, and information technology has provided a big boost for entrepreneurs. Trends like the aging population (Baby Boomers), the emergence of Hispanics, and the growth of two-income families create abundant opportunities for entrepreneurs. The link to census data can show the current demographic and economic data.
Class Activity: Survey the class to see how many students have taken at least one specialized course focusing on entrepreneurship.
Lecture Enhancer: What role does education play in encouraging students to start new businesses?
Lecture Enhancer: Share an example of a successful business that was started by a student.

11. Characteristics of Entrepreneurs
There are key characteristics that make up the entrepreneurial personality. Many entrepreneurs had parent role models and/or always wanted to be entrepreneurs. These traits may increase a person’s chances of being a successful entrepreneur.
Class Activity: Ask students why optimism is an important trait for potential entrepreneurs.
Lecture Enhancer: What are some personal-life issues that might hinder an entrepreneur’s success?

12. Entrepreneurial Characteristics
Vision - entrepreneurs begin with an overall idea for how to make their business ideas successful
High Energy Level - a willingness to work hard
Need to Achieve - entrepreneurs work hard because they want to excel
Self-Confidence - fearlessness in the face of difficult odds
Tolerance for Failure - entrepreneurs are not easily discouraged
Creativity - entrepreneurs devise innovative ways to overcome difficult problems and situations
Tolerance for Ambiguity - entrepreneurs take in stride uncertainties
Internal Locus of Control - entrepreneurs believe they can control their own fates
The combination of these characteristics is important to an entrepreneur who is willing to take risks. These eight traits are especially important for people who want to succeed as entrepreneurs.
Lecture Enhancer: What type of ambiguity might an entrepreneur face in the fashion retail industry?

13. Entrepreneurial Quiz
Are you ready to be an entrepreneur? This quiz will assess if the student has the personality traits to be an entrepreneur. This is an excellent class assignment and discussion topic.

14. Starting a New Venture Selecting a Business Idea
Find something you love to do and are good at doing
Can your idea satisfy a need in the marketplace?
Entrepreneurs must be sure that the idea they choose has interest in the marketplace.
Business Plan
There are a lot of ways to think about who you are and how that might translate into a business. You will also want to think about buying an existing business or operating a franchise.
Lecture Enhancer: Why is it important that both of these criteria be considered before starting a business?
Class Activity: Ask students to think about a basic service or product needed in their immediate community. Then obtain their comments and discuss their ideas.

15. Buying an Existing Business
Advantages:
Established customers
Deal with familiar suppliers
Good/service known in marketplace
Necessary permits and licenses are already secured
Financing may be easier
Seller financing
There are many advantages to purchasing an existing business. Financing may be easier as the businesses has a “track record” and financial data. The seller of the business may set up an installment sale. To find businesses for sale, contact a business broker.
Lecture Enhancer: What are some possible disadvantages of buying an existing business?

16. Creating a Franchise Advantages:
Less risky than establishing entirely new firm
Firms in franchises showing growth include those targeting children and parents (i.e. photography, tutoring, security)
Although creating a franchise comes with certain risks (refer back to Chapter 5), it is still a less risky business endeavor that establishing an entirely new firm. Particular franchises, such as those based on firms that cater to the needs of children and their parents (photography, tutoring, security) demonstrate growth.

17. Creating a Business Plan
58% of the most recent Inc. CEOs did not create a formal written plan.
But business plans do help entrepreneurs prepare enough resources and stay focused on key objectives.
The SBA offers resources to develop a business plan. There may be workshops in your area put on by SCORE, the SBDC, economic development agencies, colleges, and private businesses that cover the development of a business plan.
Class Activity: Discuss the benefits of developing a business plan, even if funds are already available.

18. Finding Financing Seed capital Debt Financing Equity Financing
Credit Cards
Family and Friends
Bank Loans (SBA backed)
Equity Financing
Venture Capitalists
Angel Investors
Seed capital is funds used to launch a company, depend on the nature of the business. You need to assess your start-up and initial operating costs and identify how you will obtain funding. Debt financing is a “debt” (contractual obligation) in which you incur a liability to pay someone back. Equity financing is the sale of ownership in which you have sold investors a piece of your firm. They are invested in your success and expect to be rewarded accordingly. Angel investors focus more on start-up businesses than venture capitalists. Each group invests directly in a business for an equity stake.
Lecture Enhancer: What are the drawbacks to depending upon debt financing to start a business?
Class Activity: Lead a discussion of possible pitfalls of having friends or family invest in your business.

19. Government Support for New Ventures
Business Incubators are a key way government supports new ventures
Clean Energy Incubator (CEI)
Enterprise Zones
Encourage entrepreneurship in specific geographic areas
Government Legislation
Immigration Act of 1990
In addition to the SBA and state/local agencies, the government makes a variety of efforts to support new ventures. Business incubators help build new ventures. Enterprise zones help build entrepreneurship in specific localities. Government legislation serves to address specific issues that have an impact on new ventures.
Lecture Enhancer: What are some advantages to starting a business in an enterprise zone?

20. Intrapreneurship Promoting innovation within organizational structures
An idea to promote creativity
Companies promote in a variety of ways
Skunkworks
Access to resources
Many companies want to retain entrepreneurial spirit within their organizations. Many organizations encourage intrapreneurship and can benefit from the practice. 3M and the Post-it note is a great example. 3M encourages creativity in its employees.
Lecture Enhancer: What is another possible reason for companies to support rather than discourage intrapreneurship?