CHAPTER 1
The Entrepreneurial Life
Part 1
© 2008 Cengage Learning. All rights reserved.
Entrepreneurship: A World of Opportunity
1–1
Looking AHEAD
After you have read this chapter, you should be able to:
1. Discuss the availability of entrepreneurial opportunities and give
examples of successful businesses started by entrepreneurs.
2. Explain the nature of entrepreneurship and how it is related to
small business.
3. Identify some motivators or rewards of entrepreneurial careers.
4. Describe the various types of entrepreneurs and entrepreneurial
ventures.
5. Identify five potential advantages of small entrepreneurial firms.
6. Discuss factors related to readiness for entrepreneurship and
getting started in an entrepreneurial career.
7. Explain the concept of an entrepreneurial legacy and the
challenges involved in crafting a worthy legacy.
© 2008 Cengage Learning. All rights reserved.
1–2
Entrepreneurial Opportunities
• Entrepreneurial Opportunity
 An economically attractive and timely opportunity that
creates value for interested buyers or end users.
• Success Stories
 Latemodel Restoration Supply (Waco, Texas)
 http://www.latemodelrestoration.com
 Spanx (Atlanta, Georgia)
 http://www.spanx.com
 MP4 Solutions (San Antonio, Texas)
 http://www.airstripob.com
© 2008 Cengage Learning. All rights reserved.
1–3
Who Are Entrepreneurs?
• Entrepreneurs are:
 A person who starts and/or operates a business.
 Individuals who discover market needs and
launch new firms to meet those needs.
 Risk takers who provide an impetus
for change, innovation, and
progress.
 All active owner-managers
(founders and/or managers
of small businesses).
© 2008 Cengage Learning. All rights reserved.
1–4
The Contributions of Small Business
• Small Businesses:
 Produce 14 times as many patents per employee
than do large companies, and are twice as likely to
turn them into market successes.
 Account for half of the private gross domestic product.
 Create more than 60% of net new jobs annually.
 Pay 44.3% of private payrolls.
© 2008 Cengage Learning. All rights reserved.
1–5
What Is a Small Business?
• Criteria for Defining Smallness in Business
1. Financing supplied by one person or small group
2. Localized business operations (except marketing)
3. Business’ size small relative to larger competitors
4. Fewer than 100 employees
© 2008 Cengage Learning. All rights reserved.
1–6
1-2
Entrepreneurial Incentives
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1–7
Why People Become Entrepreneurs
• Reluctant Entrepreneur
 A person who becomes an entrepreneur as a result
of some severe hardship.
• Refugee
 A person who becomes an entrepreneur to
escape an undesirable situation.
© 2008 Cengage Learning. All rights reserved.
1–8
The Many Varieties of Entrepreneurship
• Founder (“Pure” Entrepreneur)
 A person who brings a new firm into existence.
• Administrative Entrepreneur
 An entrepreneur who overseas the operations of a
ongoing business.
• Franchisee
 An entrepreneur whose power is limited by the
contractual relationship with a franchising
organization.
• Entrepreneurial Team
 Two or more people who work together as
entrepreneurs.
© 2008 Cengage Learning. All rights reserved.
1–9
Small Business Growth Potential and Profits
• High-Potential Venture (Gazelle)
 A small firm that has great prospects for growth.
• Attractive Small Firm
 A small firm that provides
substantial profits to its owner.
• Microbusiness
 A small firm that provides
minimal profits to its owner.
• Lifestyle Business
 A microbusiness that permits the owner to follow a
desired pattern of living.
© 2008 Cengage Learning. All rights reserved.
1–10
Artisan Entrepreneurs
• Artisan Entrepreneur
 A person with primarily technical skills and little
business knowledge who starts a business.
• Characteristics:
 Technical training
 Paternalistic approach
 Reluctance to delegate
 Few sources of capital
 Narrow view of strategy
 Personal sales effort
 Short planning horizon
© 2008 Cengage Learning. All rights reserved.
1–11
Opportunistic Entrepreneurs
• Opportunistic Entrepreneur
 A person with both sophisticated managerial skills
and technical knowledge who starts a business.
• Characteristics:
 Broad-based education
 Scientific approach to problems
 Willing to delegate
 Broad view of strategy
 Diversified marketing approach
 Longer planning horizon
 Sophisticated accounting
and financial control
© 2008 Cengage Learning. All rights reserved.
1–12
Women Entrepreneurs
• More Women Entrepreneurs
 The number of women-owned firms grew nearly twice
as fast as that of all firms from 1997 to 2006.
 Females owned 30% of all businesses as of 2006.
 Women are moving into nontraditional industries.
• Problems Facing Female Entrepreneurs
 Newness of entrepreneurial role
 Lack of access to credit
 Lack of networking
connections
 Discrimination
© 2008 Cengage Learning. All rights reserved.
1–13
The Winning Hand of Entrepreneurship
Customer
Focus
Special
Niche
Innovation
© 2008 Cengage Learning. All rights reserved.
Competitive
Advantages of
Entrepreneurial
Firms
Quality
Performance
Integrity and
Responsibility
1–14
Getting Started
• Age and Entrepreneurial Opportunity
Early Career Concerns
Late Career Concerns
1. Getting an education
1. Fulfilling family
responsibilities
2. Gaining work experience
2. Attaining seniority
in employment
3. Acquiring financial
resources
20
3. Earning investment in
a retirement program
25
35
45
Age
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1–15
Getting Started (cont’d)
Strong Commitment
to the Business
(Tenacity)
Strong Internal
Locus of Control
(Self-Reliance)
Characteristics of
Successful
Entrepreneurs
Moderate Risk Takers
(Financial, Career,
Psychic Risks)
© 2008 Cengage Learning. All rights reserved.
1–16
Entrepreneurial Characteristics
(Timmons and Spinelli)
Commitment and
Determination
Motivation to
Excel
Creativity, SelfReliance, and
Adaptability
Leadership
Attitudes and
Behaviors of
Entrepreneurs
Opportunity
Obsession
Tolerance of Risk,
Ambiguity, and
Uncertainty
© 2008 Cengage Learning. All rights reserved.
1–17
Getting Started (cont’d)
• Taking the Plunge
 Precipitating event
 An
event, such as losing a job,
that moves an individual to
become an entrepreneur.
• Finding “Go-To” Persons
 Mentors for advice and counsel
• Growing and Managing the Business
© 2008 Cengage Learning. All rights reserved.
1–18
Living the Entrepreneurial Life
• Entrepreneurial Legacy
 The tangible items and intangible qualities passed on
not only to heirs but also to the broader society.
 Evaluating accomplishments
 Disappointments in winning the wrong game
• Crafting a Worthy Legacy
 The nature of the entrepreneurial endeavor reflects
personal goals and values.
• Beginning with the End in Mind
 Proper values and actions lead to a good exit.
© 2008 Cengage Learning. All rights reserved.
1–19
Key TERMS
• entrepreneurial
opportunity
• entrepreneur
• reluctant entrepreneur
• refugee
• founder
• franchisee
• high-potential venture
(gazelle)
• attractive small firm
© 2008 Cengage Learning. All rights reserved.
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microbusiness
lifestyle business
artisan entrepreneur
opportunistic entrepreneur
entrepreneurial team
internal locus of control
external locus of control
precipitating event
entrepreneurial legacy
1–20