The Foundations of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall CHAPTER 1

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship The World of the Entrepreneur Every year U.S. entrepreneurs launch 550,000 new businesses. Every year U.S. entrepreneurs launch 550,000 new businesses. Entrepreneurial spirit - the most significant economic development in recent history. Entrepreneurial spirit - the most significant economic development in recent history. GEM study: 18.7% of adult population in the U.S. is actively involved in trying to start a new business. GEM study: 18.7% of adult population in the U.S. is actively involved in trying to start a new business.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship The World of the Entrepreneur Global Entrepreneurship Monitor (GEM) study reports: Global Entrepreneurship Monitor (GEM) study reports: Men are twice as likely to start a business as women. Men are twice as likely to start a business as women. Most entrepreneurs turn to family members and friends for capital. Most entrepreneurs turn to family members and friends for capital. Entrepreneurs are most likely to launch businesses when they are between the ages of 25 and 44. Entrepreneurs are most likely to launch businesses when they are between the ages of 25 and

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship What is an Entrepreneur? One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Characteristics of Entrepreneurs Desire for responsibility Desire for responsibility Preference for moderate levels of risk – risk eliminators Preference for moderate levels of risk – risk eliminators Confidence in their ability to succeed Confidence in their ability to succeed Desire for immediate feedback Desire for immediate feedback High level of energy High level of energy Future orientation – serial entrepreneurs Future orientation – serial entrepreneurs Skilled at organizing Skilled at organizing Value achievement over money Value achievement over money 1 - 6

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship 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)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Benefits of Entrepreneurship The opportunity to: Create your own destiny Create your own destiny Make a difference Make a difference 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 1 - 8

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Drawbacks of Entrepreneurship 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 1 - 9

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Feeding the Entrepreneurial Fire Entrepreneurs as heroes Entrepreneurs as heroes Entrepreneurial education Entrepreneurial education Demographic and economic factors Demographic and economic factors Shift to a service economy Shift to a service economy Technology advancements Technology advancements Independent lifestyle Independent lifestyle E-commerce and the Internet E-commerce and the Internet

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship FIGURE 1.3 U.S. Retail E-Commerce Revenues Source: Based on Forrester Research, 2008.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Feeding the Entrepreneurial Fire Entrepreneurs as heroes Entrepreneurs as heroes Entrepreneurial education Entrepreneurial education Demographic and economic factors Demographic and economic factors Shift to a service economy Shift to a service economy Technology advancements Technology advancements Independent lifestyles Independent lifestyles E-commerce and the Internet E-commerce and the Internet International opportunities International opportunities (continued)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship The Cultural Diversity of Entrepreneurship Young entrepreneurs Young entrepreneurs

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship The Cultural Diversity of Entrepreneurship Young entrepreneurs Young entrepreneurs Women entrepreneurs Women entrepreneurs (continued)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship FIGURE 1.4 Why Women Start Businesses Source: U.S. Small Business Administration, 2007.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship 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 (continued)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship The Cultural Diversity of Entrepreneurship Home-based businesses Home-based businesses Family businesses Family businesses Copreneurs Copreneurs Corporate castoffs Corporate castoffs Corporate dropouts Corporate dropouts Social entrepreneurs Social entrepreneurs Retiring Baby Boomers Retiring Baby Boomers (continued)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Small Businesses... Make up 99.7% of the million businesses in the U.S. Make up 99.7% of the million businesses in the U.S. Employ 51% of the nation’s private sector workforce. Employ 51% of the nation’s private sector workforce. Create more jobs than big businesses. Create more jobs than big businesses. 60% to 80% of net new jobs over the last decade 60% to 80% of net new jobs over the last decade Are leaders in offering training and advancement opportunities to workers. Are leaders in offering training and advancement opportunities to workers

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship 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. Create 13 times more patents per employees than large companies. Create 13 times more patents per employees than large companies. Zipper, light bulb, FM radio, laser, air conditioning, escalator, personal computer, automatic transmission, and many more! Zipper, light bulb, FM radio, laser, air conditioning, escalator, personal computer, automatic transmission, and many more! Small Businesses... (continued)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship FIGURE 1.5 Small Business by Industry Source: U.S. Small Business Administration, 2007.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Ten Deadly Mistakes of Entrepreneurship 1.Management mistakes 2.Lack of experience 3.Poor financial control 4.Weak marketing efforts 5.Failure to develop a strategic plan

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Ten Deadly Mistakes of Entrepreneurship 6.Uncontrolled growth 7.Poor location 8.Improper inventory control 9.Incorrect pricing 10.Inability to make the “entrepreneurial transition”

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Putting Failure Into Perspective 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

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Avoiding the Pitfalls of Small Business Failure Know your business in depth Know your business in depth Develop a solid business plan Develop a solid business plan Manage financial resources Manage financial resources Understand financial statements Understand financial statements Learn to manage people effectively Learn to manage people effectively Set your business apart from the competition Set your business apart from the competition Maintain a positive attitude Maintain a positive attitude

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship Conclusion Entrepreneurs: Are an important part of the free enterprise system Are an important part of the free enterprise system Are a diverse and talented group of people Are a diverse and talented group of people Represent a cross-section of society as a whole Represent a cross-section of society as a whole Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship What is Ahead? Section 1: The Challenge of Entrepreneurship Section 2: Building a Business Plan: Beginning Considerations Section 3: Building a Business Plan: Marketing Considerations Section 4: Building a Business Plan: Financial Matters Section 5: Putting the Business Plan to Work: Making the New Venture a Success

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 1: The Foundations of Entrepreneurship All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America