Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-1
The World of the Entrepreneur
■
Every year U.S. entrepreneurs launch
565,000 new businesses.
■
Entrepreneurial spirit - the most significant
economic development in recent history.
■
Global Entrepreneurship Monitor (GEM)
study: 12.3% of adult population in the
U.S. is actively involved in trying to start a
new business.
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-2
Entrepreneurial Activity
Across the Globe
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-3
Entrepreneurship-Friendly
Nations
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-4
The World of the Entrepreneur
■
Global Entrepreneurship Monitor (GEM)
study reports:
► Men
are twice as likely to start a business as
women.
► Most entrepreneurs turn to family members
and friends for capital.
► Entrepreneurs are most likely to launch
businesses when they are
between the ages of 35 and 44.
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-5
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.
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-6
Characteristics of Entrepreneurs
■
■
■
■
■
■
■
■
■
Desire for responsibility
Preference for moderate levels of risk – risk eliminators
Confidence in their ability to succeed
Determination
■ Define Determination:
Desire for immediate feedback
High level of energy
Future orientation – opportunity, necessity, and serial
entrepreneurs
Skilled at organizing
Value achievement over money
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-7
Characteristics of Entrepreneurs
■
Entrepreneurs tend to exhibit:
►A
high degree of commitment
► Tolerance
for ambiguity
► Flexibility
►A
willingness to work hard
► Tenacity
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-8
Sources of Entrepreneurial
Success
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1-9
Entrepreneurship
■
One characteristic of entrepreneurs stands
out:
Diversity!
■
Anyone – regardless of age, race, gender,
color, national origin, or any other
characteristic – can become an
entrepreneur (although not everyone
should).
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 10
Benefits of Entrepreneurship
The opportunity to:
► Create
your own destiny
► Make a difference
► Reach your full potential
► Reap impressive profits
► Contribute to society and to
be recognized for your efforts
► Do what you enjoy and to have fun at it
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 11
Drawbacks of Entrepreneurship
■
■
■
■
■
■
■
Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business gets
established
High levels of stress
Complete responsibility
Discouragement
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 12
Feeding the
Entrepreneurial Fire
■
■
■
■
■
■
■
Entrepreneurs as heroes
Entrepreneurial education
Demographic and economic factors
Shift to a service economy
Technology advancements
Independent lifestyle
The Internet and cloud computing
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 13
U.S. Retail E-Commerce
Revenues
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 14
Feeding the
Entrepreneurial Fire
(continued)
■
■
■
■
■
■
■
■
Entrepreneurs as heroes
Entrepreneurial education
Demographic and economic factors
Shift to a service economy
Technology advancements
Independent lifestyles
The Internet and cloud
computing
International opportunities
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 15
The Cultural Diversity
of Entrepreneurship
■
Young entrepreneurs
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 16
Entrepreneurial Activity by
Age Group
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 17
The Cultural Diversity
of Entrepreneurship
(continued)
■
■
■
Young entrepreneurs
Women entrepreneurs
Minority-owned enterprises
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 18
Growth in Minority–Owned
Businesses since 2002
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 19
The Cultural Diversity of
Entrepreneurship
(continued)
■
■
■
■
■
Young entrepreneurs
Women entrepreneurs
Minority-owned enterprises
Immigrant entrepreneurs
Part-time entrepreneurs
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 20
The Cultural Diversity of
Entrepreneurship
(continued)
■
■
■
■
■
■
■
Home-based businesses
Family businesses
Copreneurs
Corporate castoffs
Corporate dropouts
Social entrepreneurs
Retiring baby boomers
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 21
15 Entrepreneurial Key Success
Factors To Skyrocket Your Business
■
■
■
■
■
■
■
■
■
■
■
■
■
■
Willingness to take action. ...
Entrepreneurial knowledge. ...
Entrepreneurial creativity. ...
Entrepreneurial skills. ...
Entrepreneurial intelligence. ...
Patience. ...
Persistence. ...
The ability for teamwork.
Risk taking, but calculated risk.
The self-confidence as a key success factor.
To have enough experience.
Great talent.
Honesty.
Connections.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 22
Luck
Luck is a psychological factor.
There are some “lucky people” who just
accidentally found the right place at the
right time with the right idea.
However, it is a small percentage and
cannot be included as a serious factor for
success.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 23
https://www.inc.com/patrick-henry/wantto-launch-an-explosively-growingstartup-heres-why-timing-is-huge.html
https://keap.com/business-successblog/growth/productivity/the-role-oftechnology-to-an-entrepreneur
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 24
Small business
■
Small business owners are people who
own a major equity stake in a company
with fewer than 500 employees.
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 25
Small Businesses ...
■
■
■
Make up 99.7% of the 27.9 million
businesses in the U.S.
Employ 50% of the nation’s private sector
workforce.
Create more jobs than big businesses.
► 65%
■
of net new jobs over the last decade
3% of small companies create
70% of net new jobs in the
economy.
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 26
Employee Satisfaction
■
■
■
In companies with less than 50 employees,
44% were satisfied.
In companies with 50-999 employees, 31%
are satisfied.
Business with more than 1000, only 28% are
satisfied.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Small Businesses by Industry
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 28
Small Businesses ...
(continued)
■
■
■
Produce 51% of the nation’s GDP.
Account for 47% of business sales.
Create 13 times more patents per
employees than large companies.
■
Zipper, light bulb, FM radio, laser,
air conditioning, escalator,
personal computer,
automatic transmission,
and many more!
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 29
Advantages of a Small
Business
■
■
■
■
Greater
Opportunity to get
rich through stock
options
Feel more
important
Feel more secure
Comfort Level
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Disadvantages of a Small
Business
■
■
■
■
■
■
Lower guaranteed pay
Fewer benefits
Expected to have many skills
Too much cohesion
Hard to move to a big company
Large fluctuations in income possible
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Putting Failure Into Perspective
■
Entrepreneurs are not paralyzed by the
prospect of failure.
■
Failure – a natural part of the creative
process.
■
Successful entrepreneurs learn to fail
intelligently.
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 32
Business Starts and Closures
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 33
Avoiding the Pitfalls of
Small Business Failure
■
■
■
■
■
■
■
Know your business in depth
Develop a solid business plan
Manage financial resources
Understand financial statements
Learn to manage people effectively
Set your business apart from the competition
Maintain a positive attitude
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 34
Conclusion
■
Entrepreneurs:
► Are
an important part of the free enterprise
system
► Are a diverse and talented group of people
► Represent a cross-section of society as a
whole
► Are able to enhance the profitability of their
businesses through acquiring additional
knowledge and experience
Ch. 1: The Foundations of Entrepreneurship
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
1 - 35
Start or Buy?
■
Start – cheapest, but very difficult
-requires most planning/research
■
Buy – expensive – may be out or reach
-requires less planning and research
Franchise (middle ground) – a business
run by an individual (the franchisee) to
whom a franchiser grants the right to
market a certain good or service.
■
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
The Market???
■
■
■
Planning & Research essential
Extensive market surveys (family,
friends, neighbors…)
Magazines and Polls offer some
information on the market
-Businessweek, Harris Poll
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
What about the cost?
■
Plan realistically, not optimistically
■
■
■
Don’t overestimate your profits
Don’t underestimate your costs
Sources of Funds
■
■
■
Banks
Venture Capitalists – filthy rich, high risk investors
looking for a many-times-over yield
Angels – seem to have altruistic motives and less
stringent demands than venture capitalists
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Domestic or Global?
■
■
Drawbacks to Global – more research
and less accessible connections in
startup phase, more travel time
required, more considerations.
Advantages to Global – more human
resources, more demand, more
financing, easier to start global than go
from domestic to global.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Entrepreneurship: Growth Pressures
Entrepreneurs often find that as their business grows, they feel
more pressure to use formal methods to lead their
organizations.
Although this formalization process may compromise some
entrepreneurs spirit, it often leads to more focus, organization,
and greater financial returns.
Basically, it’s a movement from a “seat-of-the-pants” operation
to a more structured, legitimate and recognizable business.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Entrepreneurship: Managing a Family
Business
Two reasons not to go into business with your family or
friends.…
Families fight
Friends fight.
Often, it involves money. So a business environment could
potentially breed arguments, disagreements, and feuds.
Fighting can occur during early developmental stages when
hours are long and pay is low. Or, after success has been
achieved.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Entrepreneurship: Managing a Family
Business
Six steps to help lead you to a successful Family Business:
▪
▪
▪
▪
▪
▪
Clear job responsibilities
Clear hiring criteria
Clear plan for management transition
Agreement on whether and when to sell business
Commitment to resolving conflicts quickly
Outside advisors are used to mediate conflicts.
Clarity is key…. but NO GUARANTEE.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Entrepreneurship: Managing a Family
Business
Operational vs. Survival Issues….
Operational = Decisions about the economics of the business
and how to balance that with rational and family obligation
criteria.
THINK: Day-to-day grind.
Survival = Develop out of a lack of attention on the operational
issues within the business.
THINK: Festering problems; ultimately compromise livelihood.
Copyright
© 2014 Pearson Education, Inc. Publishing as Prentice Hall
Entrepreneurship: Managing a Family
Business
FAMILY FEUD:
Severed
relationships
Divorce
Copyright
Poor business
performance
Low morale,
motivation
© 2014 Pearson Education, Inc. Publishing as Prentice Hall