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Entrepreneurship Process of initiating a business venture Organizing the necessary resources Assumes associated risks and rewards

Five types of Small Business Owners Rewarded by chance to work on something new and creative Thrive on the challenge of building a larger, more profitable business Enjoy chance to balance work and personal life Hard Workers 20% Idealists 24% Optimizers 21% Jugglers 20% Sustainers 15% Get personal satisfaction from being a business owner High energy people who enjoy handling every detail of their own business SOURCE: Study conducted by Yankelovish Partners, reported in Mark Henricks, “The-Cast,” Entrepreneur (March 2000), 14-16.

Why Small Business Today? Economic changes Globalization Increased competition Advancing technology New market niches

Definition of Small Business Definition used by SBA is detailed and complex, 37 pages of SBA regulations Independently owned and operated Minor player in its field Depending on the industry the number of employees Annual sales consideration, depends on the industry

Impact of Entrepreneurial Companies Between 1989 and 1995 2.9 million new businesses were started Approximately 600,000 new businesses each year Only 16,000 businesses employ more than 500 people Job Creation Created 76.5% of net new jobs between 1990 and 1995 Created 75.8% of net new jobs between 1996 and 1997 Diversity Approximately 9.1 million women-owned businesses Women owned businesses employ about 30 million people Women owned businesses contribute $3.6 trillion to U.S. economy U.S. Department Of Labor, Women’s Bureau, goal is to promote profitable employment opportunities for women.

Characteristics of Entrepreneurs Internal Locus of Control Tolerance for Ambiguity High Energy Level Entrepreneurial Personality Awareness of Passing Time Need to Achieve Self-Confidence Source: Adapted from Charles R. Kuehl and Peggy A. Lambing, Small Business: Planning and Management (Ft. Worth: The Dryden Press, 1994),45.

Hours Worked per Week by Owners of New Businesses 30 25 20 Percent % of New Business Owners 15 10 5 Less than 50 50-59 60-69 70-79 More than 80 SOURCE: National Federation of Independent Business, Reported in Mark Robichaux, “Business First, Family Second,” The Wall Street Journal, May 12, 1989,B1.

Sources of Entrepreneurial Motivation and New-Business Ideas Reasons for Starting a Business Source of New-Business Ideas Joined Family Business In-depth Understanding of Industry/Profession 41% 41% 37% 36% To Control My Future 36% Market Niche Spotted 27% To Be My Own Boss 7% Brainstorming 25% To Fulfill a Dream Copying Someone Else 4 5% Downsized/Laid Off Hobby 4 Other 11% Source: “The Rewards,” Inc. State of Small Business, 2001, May 29 2001, 50-51; and Leslie Brokaw, “How To Start an Inc. 500 Company,” Inc. 500, 1994, 51-65.

Financial Resources One-third were started on less than $10,000 One-third needed from $10,000 to $50,000 One-third needed more than $50,000 Debt Financing borrowing that has to be repaid at a later date banks provide some 25% of all financing Equity Financing money invested by owners funds that are invested in exchange for ownership

Starting an Entrepreneurial Firm Starts with a business idea Need to develop a business plan Select a legal form of business Start a business from scratch Buy an existing business 7

Becoming A Business Owner Sole Proprietorship, business that is owned by an individual for profit Partnership, business owned by two or more people Franchising, an agreement to sell a product or service of another. Corporation, artificial entity created by the state and existing apart from its owners.

Launching an Internet Business Have a viable idea Write a business plan Acquire financing Building and Testing the Product or Service Launch company Be prepared to obtain additional financing Develop partnerships Consider going public

Five Stages of Growth For an Entrepreneurial Company

Early Stage of Business Formal planning tends to be nonexistent except for the business plan Primary goal, just to survive

Business Plan Business Plans Characteristics: Demonstrate a clear, compelling vision Understand the target market Include detailed information about the industry and competitors Provide evidence of an effective entrepreneurial team Keep the plan short Highlight critical risks Spell out the sources and uses of funds Provide clear and realistic financial projections Capture the reader’s interest with a killer summary