The Entrepreneurial Life PART 1 Entrepreneurship: A World of Opportunity © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Looking Ahead After studying this chapter, you should be able to: Distinguish between an entrepreneur and a small business owner. Explain the characteristics of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs. Describe some motivators or rewards of entrepreneurial careers. Identify the various types of entrepreneurs and entrepreneurial ventures. Identify five potential competitive advantages of small entrepreneurial companies as compared to large firms. Discuss factors related to readiness for entrepreneurship and getting started in an entrepreneurial career. Explain the concept of an entrepreneurial legacy and the challenges involved in crafting a worthy legacy. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

The Contributions of Small Business Small Businesses: Comprise 99.7% of all firms with employees. Employ over 50% of employees in the private sector. Account for 45% of private payrolls. Generated 60 to 80% of net new jobs in past decade. Create more than half of the country’s GDP. Hire 40% of high-tech employees Represent 97.3% of all exporters. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Exhibit 1.1 The Independent Entrepreneur Source: © Johnny Hart/Creators Syndicate Inc. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

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). © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

What Is a Small Business? Criteria for Defining Smallness in Business Business’ size small relative to larger competitors (fewer than 100 employees) Localized business operations (except marketing) Financing supplied by one person or small group Has the potential to become more than a “one-person show” © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Entrepreneurial Opportunities Entrepreneurial Opportunity An economically attractive and timely opportunity that creates value for interested buyers or end users Success Stories Table Occasions (El Paso, Texas) Life is Good (Boston, Massachusetts) The Fruitguys (San Francisco, California) © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Exhibit 1.2 Entrepreneurial Incentives © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

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. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

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 working together as entrepreneurs © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Small Business Growth Potential and Profits High-Potential Venture (Gazelle) Has great prospects for growth Attractive Small Firm Provides substantial profits to its owner Microbusiness Provides minimal profits to its owner Lifestyle Business Permits the owner to follow a desired pattern of living © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Artisan Entrepreneurs A person with primarily technical skills and little business knowledge who starts a business Characteristics: Take a paternalistic approach Are reluctant to delegate Use few sources of capital Have a traditional marketing strategy Focus on personal sales effort Have a short planning horizon © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Opportunistic Entrepreneurs 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 © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Exhibit 1.3 Changes in U.S. Women-Owned Businesses between 2006 and 2008 Source: Center for Women’s Business Research, http://www.cfwbr.org/national/index.php, accessed January 31, 2007; and “New Numbers Show Women-Owned Firms Comprise Forty Percent of All Firms,” Center for Women’s Business Research, September 11, 2008, pp. 2 and 3, http://www.womensbusinessresearch.org, accessed September 30, 2008. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Women Entrepreneurs More Women Entrepreneurs More women than men are starting new businesses 40% of all businesses are now majority female-owned Movement of women into nontraditional industries Problems Facing Female Entrepreneurs Discrimination and difficulties related to gender Lack of access to credit Lack of networking connections Balancing work and family life © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Entrepreneurial Teams Two or more people who work together as entrepreneurs on one endeavor Becoming more common © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

The Competitive Edge of Entrepreneurship Customer Focus Special Niche Competitive Advantages of Entrepreneurial Firms Quality Performance Innovation and Globalization Integrity and Responsibility © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Age and Entrepreneurial Opportunity Getting Started Age and Entrepreneurial Opportunity Age Early Career Concerns 1. Getting an education 2. Gaining work experience 3. Acquiring financial resources Late Career Concerns 1. Fulfilling family responsibilities 2. Attaining seniority in employment 3. Earning investment in a retirement program 25 35 45 20 © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Millennial Entrepreneurs Have no fear of technology Are idealistic and optimistic Are more collaborative Build elements of community in the business Start companies while studying entrepreneurship Fail fast, learn a lot, and keep going © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

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) © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Entrepreneurial Characteristics (Timmons and Spinelli) Commitment and Determination Motivation to Excel Leadership Attitudes and Behaviors of Entrepreneurs Creativity, Self-Reliance, and Adaptability Opportunity Obsession Tolerance of Risk, Ambiguity, and Uncertainty © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

How to Fail as an Entrepreneur Overestimate what you can do Lack an understanding of the market Hire mediocre people Fail to be a team player Be a domineering manager Not share ownership in the business in an equitable way © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

The Importance of Mentors A knowledgeable person who can offer guidance from their experience in a given field. The “Go-To” Team © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Success in Business and Success in Life Beginning with the End in Mind Proper values and actions lead to a good exit. Evaluating accomplishments Winning the Wrong Game The nature of the entrepreneurial endeavor reflects personal goals and values. Crafting a Worthy Entrepreneurial Legacy The tangible items and intangible qualities passed on not only to heirs but also to the broader society. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

Key Terms entrepreneur small business entrepreneurial opportunity bootstrapping reluctant entrepreneur refugee founder franchisee high-potential venture (gazelle) attractive small firm microbusiness lifestyle business artisan entrepreneur opportunistic entrepreneur entrepreneurial team niche market internal locus of control external locus of control mentor entrepreneurial legacy © 2010 South-Western, Cengage Learning, Inc. All rights reserved.