Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 11Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

The Foundations of Entrepreneurship

The Foundations of Entrepreneurship

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 22Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

The World of the EntrepreneurThe World of the Entrepreneur

In the U.S., entrepreneurs start between In the U.S., entrepreneurs start between 3 million and 4.5 million businesses a 3 million and 4.5 million businesses a year!year!

Study of influential Americans – Study of influential Americans – the the defining issue of the 21defining issue of the 21stst Century: Century: Entrepreneurship.Entrepreneurship.

Approximately 10.5% of Americans are Approximately 10.5% of Americans are actively involved in trying to start a new actively involved in trying to start a new business. business.

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 33Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

What is an Entrepreneur?What is an Entrepreneur?

One who creates a new business in the One who creates a new business in the face of risk and uncertainty for the face of risk and uncertainty for the purpose of achieving profit and growth purpose of achieving profit and growth by identifying opportunities and by identifying opportunities and assembling the necessary resources to assembling the necessary resources to capitalize on them. capitalize on them.

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 44Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Desire for responsibilityDesire for responsibility Preference for moderate riskPreference for moderate risk Confidence in their ability to succeedConfidence in their ability to succeed Desire for immediate feedbackDesire for immediate feedback High level of energyHigh level of energy Future orientationFuture orientation Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 55Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

EntrepreneurshipEntrepreneurship

One characteristic of entrepreneurs One characteristic of entrepreneurs stands out:stands out:

Diversity!Diversity!AnyoneAnyone – regardless of age, race, gender, – regardless of age, race, gender,

color, national origin, or any other color, national origin, or any other characteristic – can become an characteristic – can become an entrepreneur (although not everyone entrepreneur (although not everyone should). should).

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 66Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Benefits of Small Business Benefits of Small Business OwnershipOwnership

The opportunity to:The opportunity to: Create your own destinyCreate your own destiny Make a differenceMake a difference Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to be recognized for Contribute to society and to be recognized for

your effortsyour efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 77Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership

Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work

Small Business Owners' Work WeekNumber of Hours Worked per Week

Less than 30 hours11%

30 to 40 hours24%

41 to 50 hours28%

51 to 60 hours20%

More than 60 hours17%

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 99Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership

Lower quality of life until the business gets Lower quality of life until the business gets establishedestablished

9.8%

16.8% 16.7%15.9%

15.2%

9.3%8.5%

3.9%

2.2% 1.7%

0.0%

2.0%

4.0%6.0%

8.0%

10.0%

12.0%14.0%

16.0%

18.0%

Under25

25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Age

Owner Age at Business Formation

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1111Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership

Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the business gets establishedLower quality of life until the business gets established

High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1212Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic factorsDemographic and economic factors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide

WebWeb

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1313Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic factorsDemographic and economic factors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide

WebWeb International opportunitiesInternational opportunities

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1414Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

Young entrepreneursYoung entrepreneursWomen entrepreneursWomen entrepreneursMinority-owned enterprisesMinority-owned enterprises Immigrant entrepreneursImmigrant entrepreneursPart-time entrepreneursPart-time entrepreneurs

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1515Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

Home-based businessesHome-based businessesFamily businessesFamily businessesCopreneursCopreneursCorporate castoffsCorporate castoffsCorporate dropoutsCorporate dropouts

A Profile of Small Business by Industry

Service40%

Retail20%

Construction12%

Wholesale8% Manufacturing

6%Finance

8%

Other6%

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1717Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Small Businesses...Small Businesses...Make up 99% of all the businesses in Make up 99% of all the businesses in

the U.S.the U.S.Employ 51% of the nation's private Employ 51% of the nation's private

sector workforce.sector workforce.Create more jobs than big businesses.Create more jobs than big businesses.Are leaders in offering training and Are leaders in offering training and

advancement opportunities to advancement opportunities to workers.workers.

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 1818Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Produce 51% of the nation's private Produce 51% of the nation's private GDP.GDP.

Account for 47% of business sales.Account for 47% of business sales.Create 4X more innovations per R & D Create 4X more innovations per R & D

dollar spent than medium-sized firms dollar spent than medium-sized firms and 24X as many as large companies.and 24X as many as large companies.

Small Businesses...Small Businesses...(continued)(continued)

100%

81%

65%

54%46%

40%36%

32% 29% 27% 25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% o

f S

mal

l F

irm

s S

urv

ivin

g

New 1 2 3 4 5 6 7 8 9 10

# of Years in Business

Small Business Survival Rate

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 2020Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship

1.1. Management mistakesManagement mistakes

2.2. Lack of experienceLack of experience

3.3. Poor financial controlPoor financial control

4.4. Weak marketing effortsWeak marketing efforts

5.5. Failure to develop a strategic planFailure to develop a strategic plan

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 2121Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship

(continued)(continued)

6.6. Uncontrolled growthUncontrolled growth

7.7. Poor locationPoor location

8.8. Improper inventory controlImproper inventory control

9.9. Incorrect pricingIncorrect pricing

10.10. Inability to make the “entrepreneurial Inability to make the “entrepreneurial transition”transition”

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 2222Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Putting Failure Into PerspectivePutting Failure Into Perspective

Entrepreneurs are Entrepreneurs are notnot paralyzed by the paralyzed by the prospect of failure.prospect of failure.

Failure – a natural part of the creative Failure – a natural part of the creative process. process.

Successful entrepreneurs learn to fail Successful entrepreneurs learn to fail intelligentlyintelligently..

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 2323Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure

Know your business in depthKnow your business in depthDevelop a solid business planDevelop a solid business planManage financial resourcesManage financial resourcesUnderstand financial statementsUnderstand financial statementsLearn to manage people effectivelyLearn to manage people effectivelyKeep in tune with yourselfKeep in tune with yourself