The Entrepreneurial Life Part 1 Entrepreneurship: A World of Opportunity

Looking Ahead After studying this chapter, you should be able to: Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs. Explain the nature of entrepreneurship and how it is related to small business. Identify some motivators or rewards of entrepreneurial careers. Describe the various types of entrepreneurs and entrepreneurial ventures. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Looking Ahead (cont’d.) Identify five potential advantages of small entrepreneurial 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. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Entrepreneurial Opportunities Entrepreneurial Opportunity A value-creating innovation with market potential A desirable and timely innovation that creates value for interested buyers and end users Success stories SLR Contracting & Service Company http://www.slrcontracting.com FlavorX http://www.flavorx.com Auntie Anne’s http://www.auntieannes.com Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Who Are Entrepreneurs? Entrepreneurs are: People who start and/or operate 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). Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

The Independent Entrepreneur Source: John L. Hart FLP, and Creators Syndicate, Inc. Exhibit 1.1 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

The Contributions of Small Business Small Businesses: Represent more than 99.7 percent of all employers. Employ more than half of all private-sector employees. Pay 44.5 percent of total U.S. private payrolls. Generate 60 to 80 percent of net new jobs annually. Produce 13 to 14 times more patents per employee than do large patenting firms. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

What Is a Small Business? Criteria for Defining Smallness in Business Financing supplied by one person or small group Localized business operations (except marketing) Business’ size small relative to larger competitors Fewer than 100 employees Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Entrepreneurial Incentives Exhibit 1.3 Copyright © 2006 Thomson Business & Professional Publishing. 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 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Varieties of Entrepreneurship Founder (“Pure” Entrepreneur) A person who brings a new firm into existence Administrative Entrepreneur An entrepreneur who oversees 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 who work together as entrepreneurs Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Small Businesses, Growth, and Profits High-Potential Venture (Gazelle) A small firm that has great prospects for growth Attractive Small Firm A small firm that provides substantial profits to its owner Microbusiness A small firm that provides minimal profits to its owner Lifestyle Business A microbusiness that permits the owner to follow a desired pattern of living Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Artisan Entrepreneurs A person with primarily technical skills and little business knowledge who starts a business Characteristics Technical training Paternalistic approach Reluctance to delegate Narrow view of strategy Personal sales effort Short planning horizon Simple record keeping Copyright © 2006 Thomson Business & Professional Publishing. 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 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Women Entrepreneurs More Women Entrepreneurs Represent 38% of entrepreneurs in U.S. Revenues at female-owned firms have grown 33% from 1976 to 2000. Women are moving into nontraditional industries. Problems Facing Female Entrepreneurs Newness of entrepreneurial role Lack of access to credit Lack of networking connections Discrimination Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Competitive Advantages of Entrepreneurial Firms Customer Focus Firms lack bureaucracy. Quality Performance Quality is not limited to large firms. Integrity and Responsibility A solid reputation builds loyal customers. Innovation Small firms are the leading source of innovation. Special Niche Providing uniquely specialized services can be a powerful competitive advantage. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Age and Entrepreneurial Opportunity 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 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Characteristics of Successful Entrepreneurs Strong commitment to the business (tenacity) Strong internal locus of control (self-reliant) Moderate risk takers (financial, career, psychic risks) Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Entrepreneurial Characteristics (Timmons and Spinelli) Commitment and determination Tenacious, decisive, and persistent in problem solving Leadership Self-starters and team builders who focus on honesty in their business relationships Opportunity obsession Aware of market and customer needs Tolerance of risk, ambiguity, and uncertainty Risk takers, risk minimizers, and uncertainty tolerators Creativity, self-reliance, and adaptability Open-minded, flexible, uncomfortable with the status quo, and quick learners Motivation to excel Goal oriented and aware of their weaknesses and strengths Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Taking the Plunge Precipitating Event An event, such as losing a job, that moves an individual to become an entrepreneur Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Living the Entrepreneurial Life Entrepreneurial Legacy The tangible items and intangible qualities are passed on not only to heirs but also to the broader society. Evaluating accomplishments The disappointments in winning the wrong game Crafting a Worthy Legacy The nature of the entrepreneurial endeavor reflects personal goals and values. Beginning with the End in Mind Proper values and actions lead to a good exit. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

Key Terms entrepreneurial opportunity entrepreneur reluctant entrepreneur refugee founder franchisee high-potential venture (gazelle) attractive small firm microbusiness lifestyle business entrepreneurial team artisan entrepreneur opportunistic entrepreneur internal locus of control external locus of control precipitating event entrepreneurial legacy Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.