1. ENTREPRENEURS RECOGNIZE OPPORTUNITIES
UNIT 1• ENTREPRENEURIAL PATHWAYS
ENTREPRENEURS RECOGNIZE OPPORTUNITIES
Class Name
Instructor Name
Date, Semester

2. Performance Objectives
After this lecture, you should be able to complete the following Performance Objectives
1. Explain what entrepreneurs do. 2. Describe how free enterprise economies work and how entrepreneurs fit into them. 3. Find and evaluate opportunities to start your own business. 4. Explain how profit works as a signal to the entrepreneur.

3. 1 What Is Entrepreneurship?
Entrepreneurship—a person who assumes the risks of organizing and managing a business for the sake of potential rewards.
Product—a tangible item that exists in nature or is made by people.
Service—intangible work that provides time, skills, or expertise in exchange for money.

4. 1 The Economic Questions What will be produced?
When will it be produced?
How will it be produced?
Who will produce it?
Who will get what is produced?
An economy is a region’s or nation’s financial structure. It is the system that produces and distributes wealth.

5. 1 Free Enterprise System
Free Enterprise System-economic system in which businesses are privately owned and operate relatively free of government interference.
Capitalism – the free-market system.
Capital-money or property owned or used in business.
Voluntary Exchange-a transaction between two parties who agree to trade money for a product or service

6. 1 What is a Small Business? 0 to 500 full time employees
Annual sales < $5 million

7. 1 Why Be an Entrepreneur? Control over time Fulfillment
Creation/Ownership
Control over compensation
- Salary - Wage
- Dividend - Commission
Control over working conditions

8. 1
Business Success
The Desire to Make Money Is Not the Only Reason to Start a Business.
Definitions of Success-Monetary and Other
Taking the Long View

9. Benefits and Costs of Becoming an Entrepreneurship1
Benefits
Independence
Satisfaction
Financial reward
Self-esteem
Contribution to society
Costs
Business failure
Obstacles
Loneliness
Financial insecurity
Long hours/hard work
Strain on personal relationships

10. 1 Cost/Benefit Analysis
Cost/Benefit Analysis—a decision-making process in which the costs of taking an action are compared to the benefits.
Costs—money and time invested
Benefits—money earned and knowledge and experience gained
Opportunity Cost— the value of what must be given up in order to obtain something else
For cost/benefit analysis to be accurate, opportunity cost must be included.

11. 1 Entrepreneurial Options Social entrepreneurship Venture philanthropy
Green entrepreneurship

12. Shumpeter’s Five Basic Ways for Sources of Opportunities1
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 and cheaply.
Develop a new market for an existing product.

13. 1 Entrepreneurs Creatively Exploit Changes in Our World
Where Others See Problems, Entrepreneurs Recognize Opportunities
How Do Entrepreneurs Create Business Ideas?
- they listen, observe & think
Train Your Mind to Recognize Business Opportunities
Entrepreneurs Use Their Imaginations

14. An Idea Is Not Necessarily an Opportunity1
An Idea Is Not Necessarily an Opportunity
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.

15. Timmon’s Business Opportunity= Idea + 4 Characteristics1
Attractive to customers
Will work in the business environment
Can be executed in the window of opportunity that exists
Resources and skills to create the business available to the entrepreneur

16. 1 Use SWOT to Evaluate Business Ideas Strengths Weaknesses
Opportunities
Threats

17. 1 Five Roots of Opportunity in the Marketplace Problems Changes
Inventions
Competition
Technological advances

18. 1 Integrating Internal and External Opportunities
Internal Opportunities-comes from inside you; from a personal hobby, interest, passion or organization.
External Opportunities-is generated by a noticeable out-side circumstance.

19. 1 Establishing Strategies
Strategy-a plan for how an organization or individual plans to perform and outdo competitors.
Porter’s “Strategy Framework”-this framework delineates “cost leadership” and “differentiation” as low-cost and product- uniqueness strategies.

20. 1 Paths to Small Business Ownership Start from the beginning
Buy an existing business
Secure a franchise rights
License technology
(Do not steal someone else’s creativity)

21. 1 Paths to Small Business Ownership (cont.)
Franchise-a business that markets a product or service developed by a franchisor, typically in the manner specified by that franchisor.
Acquisition-the purchase of a business.
Due Diligence-the exercise of reasonable care in the evaluation of a business opportunity

22. 1 The Many Faces of Entrepreneurship
Gazelle-a company that achieves an annual growth rate of 20% or greater, typically measured by the increase of sales revenue.
Microenterprise-a firm with five or fewer employees, initial capitalization requirements of under $35,000, and the consistent operational involvement of the owner.
Lifestyle Business-are microenterprise that permits its owners to follow a desired pattern of living!

23. Trade-off-the act of giving up one thing for another.
Making the Business Work Personally and Professionally 1
Profit—amount of money remaining from the revenue of a business after all costs are deducted.
Profit signals that an entrepreneur is adding value to scarce resources.
Trade-off-the act of giving up one thing for another.

24. Seven Rules for Building a Successful Business1
Seven 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

25. Key Terms acquisition capital capitalism commission
cost/benefit analysis
dividend
due diligence
entrepreneur
franchise
free enterprise system
gazelle
green entrepreneurship
lifestyle business
microenterprise
opportunity cost
product
profit
salary
service
social entrepreneurship
strategy
trade-off
venture philanthropy
voluntary exchange
wage