Entrepreneurship
Chapter 12
Do you want to see an entrepreneur? Look for the organizer
of a school car wash or someone selling customized T-shirts
outside a ball game or a concert. In every case some
enterprising person decided that there was a need for a
certain product and acted to fill that need.
These entrepreneurs also hoped that they would make
enough money to cover the costs of, for instance, the Tshirts and the screen-printing materials, with some money
left over-profit. Every entrepreneur who starts a business
does the same thing: identifies an opportunity based on a
need, takes the risk of producing a product or a service to
meet that need, and hopes for a profit.
Entrepreneurship And Small Business
An entrepreneur is a person who recognizes a
business opportunity and who organizes, manages
and assumes the risks of a business enterprise
focusing on that business opportunity. Every year
thousands of entrepreneurs start small businesses.
Many of these small businesses won’t last more
than three years. In 1994, almost 25 percent of
businesses failed three years or less after they had
begun.
If those businesses do succeed, their owners
often hope that someday their companies will
become industry giants like Microsoft,
Kodak, or McDonald’s All of those were
started by single entrepreneurs and became
more successful than anyone ever imagined.
However, there are many entrepreneurs who
do not dream of great fame or riches. They
simply are people who want to be their own
bosses and make their own business
decisions.
We usually think of local businesses such
as service stations, print shops, appliance
stores, restaurants and video stores as small
businesses. A small business is an
independently owned and managed
business that serves a limited geographic
area and is not dominant in its industry.
Though these businesses are small, they
are started and maintained by people with
an entrepreneurial spirit.
Small businesses have a tremendous impact
on our economy. There are small businesses
in all industries, however, the service and
retail industries dominate the small business
area. More than half of small businesses are
found in these two areas. As you may recall,
service industries are the fastest growing part
of a country’s economy. It is likely that the
number of small businesses in the service
industry may increase.
QUICK CHECK
• 1. What is an entrepreneur?
Characteristics of an Entrepreneur?
Not everyone is suited to be an entrepreneur–
which may be a good thing. After all, if
everyone started their own business, there
would not be anyone left to work at those
businesses! Entrepreneurs are take-charge
people who want to work for themselves. Even
though they know that many small businesses
fail, they are willing to take the risk and face
the uncertainty.
Desire for Independence
Of all the characteristics of entrepreneurs, the
most consistent one is this: They are very
independent. Entrepreneurs simply rather
work for themselves than for someone else.
They want to make their own decisions. In
fact, some say that people who have been
fired are good candidates to become
entrepreneurs because they may have proven
that they are independent enough to run their
own businesses.
Self-Confidence
Entrepreneurs have confidence in their ability to
meet the challenges of running a business. They
have a great deal of self-motivation, that is, they
set their own goals rather than having them set
by a manager or boss. They work hard to reach
their goals, which shows they have selfdiscipline. They correct errors and prove their
own performance without any prompting from
someone else. These are confident people who
believe in what they are doing and believe that
the job is worth doing.
Willingness to Take Risks
Another characteristic of entrepreneurs is their willingness to
take risks. Most successful entrepreneurs say that they do not
take risks, they take calculated risks. That means that they have
thought about their project carefully and tried to figure out in
advance the the probability of success is high. Either formally
or informally, entrepreneurs conduct market research to be sure
that there is a need for their product. There are some questions
that an entrepreneur may ask themselves when they are
calculating risks. That preliminary work can lead them to the
concluding that their business has a good change to succeed.
Here are a few sample questions:
•Is the goal worth the risk?
•How can I minimize my risks?
•What information do I need to take before I take the
risk?
•Why is it risk important?
•Am I willing to try my best to achieve the goal?
•What preparation do I need to make before I take the
risk?
•What are the biggest obstacles to achieving my goal?
Even though entrepreneurs work very
hard to succeed, they also are willing to
fail. They would rather take the risk and
learn from their failures than never take
the risk at all. And very often, if they
fail, they turn around and try again.
Many entrepreneurs fail four or five
times before they finally become
successful.
Ability to Recognize Opportunity
Entrepreneurs are individuals who recognize
opportunities on which to build a business. In many
instances, they are opportunities that are bypassed by
others. These opportunities may include meeting a
demand that is not currently being met, putting out a
product that is much better than what is currently on the
market, or solving a problem or annoyance that
consumers have. An entrepreneur not only has the
ability to recognize the opportunity, but also has the
ability to develop a business that provides goods or
services consistent with the opportunity.
QUICK CHECK
1. What are four important characteristics
entrepreneurs?
2. Define self-motivation, self-discipline and
calculated risk?
Advantages of Entrepreneurship
Entrepreneurs are not necessarily people who go into
businesses because they like danger. There are many
advantages to having their own business. For instance,
many people who have discovered that they do not have
enough opportunities in their professions solve the
problems by starting businesses of their own. This is
especially true for women and members of minority
groups. In the 1980s, there was a dramatic, increase in the
number of women-owned firms. And that trend has
continued. The National Foundation for Women Business
Owners reported that in 1994 women owned at least 7.7
million businesses and provided employment for 15.5
million people. There are clear benefits to starting a small
business.
Satisfaction
Many people start a business when they discover
a service or product that can fill a need or want in
society. That is true whether the business is a
catering service for parties and weddings a refuge
for injured wild animals and birds, or a computer
software company. Transforming an idea into a
successful business is very rewarding. Owners
often think that the reward is well worth the time
an effort they devote to their businesses. They
like the feeling that they alone have built a
business and make it successful.
Full Use of Skills
Many entrepreneurs work for other businesses before
they go off on their own. They accumulate experience in their
specialty, and they often also gain skills in management,
planning, and finances. At some point in their careers, they
decided that they want to use those skills in businesses of their
own. A hairdresser opens his own shop. A chef opens her own
restaurant. A financial manager opens an account business.
For similar reasons artistic people also may open their
own businesses. They know that they may never make a great
deal of money from their paintings, sculptures, jewelry, or
music. Nonetheless they have decided that they prefer to use
their talents as a business.
Profit
If you work for someone else, you may have the
security of a regular paycheck. But the profit from
the product you produce, whether it is a new hairdo
or an automobile, goes to the company. Your salary
is paid out of the money the company makes. Many
entrepreneurs decide that they no longer want to
work to make a profit for someone else. Even
though they are fully responsible for the finances and
bills of their own business, many business owners
decide they want the full benefits of their own
labours.
QUICK CHECK
1. What are three advantages of
entrepreneurship?
2. Which advantage is most attractive to you?
Disadvantages of Entrepreneurship
Being successful is not easy. You do not just start a
business and watch the profits roll in. Consider
large businesses. There are officers—each has a
president, vice presidents, and managers. There are
departments that are responsible for everything
from ordering supplies to setting the work schedule
for employees. The person who cleans the floor
does not usually have the responsibility of boxing
up the product and shipping it to customers. If you
begin your own business, however, those
descriptions do not apply.
Total Responsibility
An entrepreneur just starting out is in charge of everything. That
means that the company’s success or failure depends on just one
person—the owner. The owner must manage workers,
manufacturing, and shipping. He or she has to find customers,
sell the product, and be certain that orders are met. The owner of
a restaurant must acquire the licenses and permits from the city
handle the advertising, order supplies, make sure the food is of
high quality, schedule the wait staff and so on,. No matter what
the size the business is, the owner still has all of the
responsibility. If the business grows, the owner may hire people
to carry out some of these duties. Even then the owner is the one
who is ultimately responsible.
Long, Irregular Hours
Being your own boss is a lot of work. Studies
show that people who start their own businesses
work more hours than those who work for
someone else. It is not unusual for their
schedules to extend to more than 60 hours a
week. Weekends are often time for work, just
as week days are. This should not be surprising.
If you are responsible for everything, your work
is going to take a great deal of time.
Financial Risks
The most serious disadvantage of a small business is
the need for money. It takes money to get a business
going. The owner has to obtain space for the business;
furnish it with things such as desks, filing cabinets, and
computers; and employ workers. While the business is
struggling to get established, the owner has to pay bills
and wages. The owner may try to borrow money from
the bank, but banks are often unwilling to lend to a
new business because the risks are high. What’s more,
if the business fails, the owner may have to pay the
company’s debts out of his or her own pocket.
QUICK CHECK
1. What are three disadvantages of
entrepreneurship?
2. Which disadvantage is the greatest?
Summary
• An entrepreneur is a
person who recognizes an
opportunity
and
organizes, manages, and
assumes the risk of a
business enterprise
focused on that
opportunity.
• Entrepreneurs are
independent, selfconfident, self-motivated,
and self-disciplined people
who take calculated risks
to open a new business.
Summary
• The advantages of
starting a business are
the satisfaction of
filling a need, the full
use of the person’s
skills and the profits
secured from the
enterprise.
• The disadvantages of
starting a business are
that the owner has all
the responsibility,
must work long hours,
and may have
difficulties finding the
money to get started.
Summary
• Entrepreneurs start
businesses that may
become very
successful companies.
They also provide
more employment
than larger businesses.
• Making informed
judgments based on
reliable information
and reason is
especially important
for entrepreneurs.
Group Project
Choose an entrepreneur that all of you admire. He or she may
be a well-known historical or current figure, or someone in
your community. Write a one hundred word biography of the
person and examine the characteristics that made him or her
successful. Include graphics in the biography if possible.
Create a power point display with the results.