Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 1 Entrepreneurs: The Driving Force Behind Small Business

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 2 The World of the Entrepreneur In the U.S., entrepreneurs start more than 6 million businesses a year! In the U.S., entrepreneurs start more than 6 million businesses a year! Global Entrepreneurship Monitor (GEM) Global Entrepreneurship Monitor (GEM)  Approximately 10% of U.S. population is actively involved in trying to start a new business  Approximately 9.5% of people in 42 GEM countries studied are involved in starting a new business

Source: 2006 Global Entrepreneurship Monitor. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 1 Entrepreneurs Defining Entrepreneurship? Nexus of … Nexus of … Opportunity. Opportunity. Individual. Individual. 4

Chapter 1 Entrepreneurs 5 What Is an Entrepreneur? Who - Someone who creates a new business despite the risk and uncertainty for the purpose of achieving profit and growth. How - identifies opportunity and assembles the necessary resources to realize goals.

What Is an Entrepreneur? An entrepreneur is someone who is willing to work 16 hours a day to keep from working 8 hours a day for someone else! Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 1 Entrepreneurs Banana Slug String Band Banana Slug String Band xs xs xs xs Urban Krag Urban Krag

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 8 Characteristics of Entrepreneurs Survey: 72% of adults in the U.S. have considered starting their own businesses Willingness to take initiative Willingness to take initiative Preference for moderate risk Preference for moderate risk Confidence in their ability to succeed Confidence in their ability to succeed Self-reliance Self-reliance Perseverance Perseverance Desire for immediate feedback Desire for immediate feedback

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 9 High level of energy High level of energy Competitiveness Competitiveness Future orientation Future orientation  Serial entrepreneurs Skilled at organizing Skilled at organizing Value achievement over money Value achievement over money Characteristics of Entrepreneurs

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 10 Entrepreneurship One characteristic of entrepreneurs stands out: One characteristic of entrepreneurs stands out:Diversity! Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should) Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should)

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 11 How to Spot Entrepreneurial Opportunities Creativity vs. Innovation Creativity vs. Innovation  Creativity – the ability to develop new ideas and to discover new ways of looking at problems and opportunities  Innovation – the ability to apply creative solutions to problems and opportunities to enhance or to enrich people’s lives

Chapter 1 Entrepreneurs Opportunity discovery… Find a need… Find a need…  Creative Solution. Fill it… Fill it…  Implementation of Solution. Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 12

Chapter 1 Entrepreneurs 13 How to Spot Entrepreneurial Opportunities Monitor trends and exploit them early on Monitor trends and exploit them early on  Starwich Take a different approach to an existing market Take a different approach to an existing market  Goodwin Heart Pine Put a new twist on an old idea Put a new twist on an old idea  PODS -

Chapter 1 Entrepreneurs 14 How to Spot Entrepreneurial Opportunities Creative re-use of existing resources Creative re-use of existing resources  Alaska Glacial Mud Company Others have the same problem that you do Others have the same problem that you do  Stroller Strides Notice what is missing Notice what is missing  Dogs on Wheels -

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 15 Benefits of Small Business Ownership The opportunity to: Control your own destiny Control your own destiny Make a difference Make a difference  Social entrepreneurs Reach your full potential Reach your full potential Reap impressive profits Reap impressive profits Contribute to society and to be recognized for your efforts Contribute to society and to be recognized for your efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 16 Drawbacks of Small Business Ownership Uncertainty of income Uncertainty of income Risk of losing your entire investment Risk of losing your entire investment Long hours and hard work Long hours and hard work Lower quality of life until the business gets established Lower quality of life until the business gets established

Source: MasterCard Global Small Business Survey, Average workweek = 54 hours

Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002.

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 19 Drawbacks of Small Business Ownership Uncertainty of income Uncertainty of income Risk of losing your entire investment Risk of losing your entire investment Long hours and hard work Long hours and hard work Lower quality of life until the business gets established Lower quality of life until the business gets established High levels of stress High levels of stress Complete responsibility Complete responsibility Discouragement Discouragement

Chapter 1 Entrepreneurs 20 Feeding the Entrepreneurial Fire Entrepreneurs as heroes Entrepreneurs as heroes Entrepreneurial education Entrepreneurial education Demographic and economic factors Demographic and economic factors  Independent lifestyles Dynamic Business Environment Dynamic Business Environment  Shift to a service economy  Technological change/advancement  E-Commerce / Internet  Globalization - International Biz.

Chapter 1 Entrepreneurs Entrepreneur Motivation 21 Source: Dun & Bradstreet 19 th Annual Small Business Survey, 2000.

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 22 The Cultural Diversity of Entrepreneurship Young entrepreneurs Young entrepreneurs Women entrepreneurs Women entrepreneurs Minority-owned enterprises Minority-owned enterprises Immigrant entrepreneurs Immigrant entrepreneurs Part-time entrepreneurs Part-time entrepreneurs

Source: Milken Institute, 2003.

Source: National Federation of Women Business Owners, 2003.

Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 2006.

Chapter 1 Entrepreneurs Small Business Focus Start-up Start-up Management – Various aspects. Management – Various aspects. SBA definition – varies SBA definition – varies  SBA Definitions SBA Definitions SBA Definitions 26

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 27 Small Businesses... Make up 99.7% of all the 29.3 million businesses in the U.S. Make up 99.7% of all the 29.3 million businesses in the U.S. Employ 52% of the nation’s private sector workforce Employ 52% of the nation’s private sector workforce Pay 45% of total private payroll Pay 45% of total private payroll Create more jobs than big businesses Create more jobs than big businesses  1996 to 2006: Between 60% and 80% of all net new jobs in the U.S.

Source: Small Business Administration, 2006.

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 29 Are leaders in offering training and advancement opportunities to workers Are leaders in offering training and advancement opportunities to workers  Provide 67% of workers with their first jobs Produce 51% of the nation’s private GDP Produce 51% of the nation’s private GDP Account for 47% of business sales Account for 47% of business sales Key role in innovation: Key role in innovation:  Produce 13X to 14X more patents per employees than large companies Small Businesses...

Source: National Federation of Independent Businesses Business Policy Guide, 2003.

Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 31 Putting Failure into Perspective Median age of U.S. companies = 12 years Median age of U.S. companies = 12 years Entrepreneurs are not paralyzed by the prospect of failure Entrepreneurs are not paralyzed by the prospect of failure Failure – a natural part of the creative process Failure – a natural part of the creative process Successful entrepreneurs learn to fail intelligently Successful entrepreneurs learn to fail intelligently

Chapter 1 Entrepreneurs 32 Avoiding the Pitfalls of Small Business Failure Know your business in depth (Drucker’s – Theory of the Business) Know your business in depth (Drucker’s – Theory of the Business) Prepare a business plan Prepare a business plan Manage financial resources Manage financial resources Understand financial statements Understand financial statements

Chapter 1 Entrepreneurs 33 Avoiding the Pitfalls of Small Business Failure Learn effective people management Learn effective people management Set your business apart from the competition Set your business apart from the competition Maintain a positive attitude (focus on solutions not problems) Maintain a positive attitude (focus on solutions not problems)