Chapter 1 The Foundation of Entrepreneurship All About Entrepreneurship

What Creates Entrepreneurs? Entrepreneur: ◦ Someone who  Gathers resources  Accepts risk  Exploits opportunities  Creates new value ◦ An easier definition?  Someone who starts a new business

Who Are the Entrepreneurs? People who see opportunities People who are tired of working for someone else People who have been laid off from working somewhere else Currently, most exist in North and South America ◦ Why do you think this is? ◦ Why do entrepreneurs also appear in developing countries? ◦ Countries with 10% or more citizens as business owners: U.S., Canada, Peru, Iceland, Ecuador, Brazil, Australia, Argentina

Who Is the Typical Entrepreneur? High level of energy and tenacity Willingness to accept educated risk High level of self-motivation High level of optimism Skill at seeing opportunities Skill at assembling resources

Entrepreneur of the Day Mark Davis ◦ Founded Insert Therapeutics  Makes a drug, TI-101, that goes through blood stream and attacks cancer cells without producing side effects ◦ Founded the company because of his wife’s breast cancer ◦ Started out as a chemical engineer at Cal Tech ◦ Sold to Arrowhead Research Corp.

What’s So Great About Entrepreneurship? Carving your own path Making a difference Reaching your full potential Possibly starting something with large returns Doing what you love

Entrepreneurship – The Dark Side You can lose everything you own. You can fail. Little downtime Little family time High stress levels Responsibility and …. BLAME!

What Is Driving Entrepreneurship? Trend toward a service economy Low cost technology access WWW Growing access to international markets Degrees in entrepreneurship Societal acceptance of entrepreneurship

Who Are the Newest Entrepreneurs? Teens, twenties, and thirties Women ◦ Own nearly half of all businesses! Minorities ◦ Growing faster than national average

Home Based Businesses 53% of businesses are home based ◦ 91% are only one employee Keeps operating costs to a minimum On average, makes $63,000/year and works 61 hours/week.

Family-Owned Businesses 90% of all businesses are family-owned and managed They account for the majority of U.S. employment, wages and GDP Succession plans are the biggest problem

Small Business’s Effect on the Economy 99.7% of all businesses are small businesses A “small business” employs less than 100 people Just 3% of small businesses created 70% of the jobs Create 13 to 14 times the innovations per employee than larger companies

The Down Side: Small Business Failure After 3 years, about ½ of the small businesses are still open After 10 years, about ¼ are still open Remember, not everyone opening a business is college-trained, or trained at all, for that matter. Why do you think businesses fail?

Most Common Mistakes No management skills No financial plan Undercapitalization Not enough marketing No strategy Uncontrolled growth Poor location Poor inventory control Pricing not compatible with costs

Handling Failure Accept failure for what it practically is – you lost some money, and you didn’t have a good idea, or you implemented it poorly Must learn from mistakes Ford started 3 companies before Ford worked. Hershey had 6. Dick’s came from 20 tries.

How to Avoid Failure Have a plan Get the knowledge on your industry Don’t undercapitalize your business Be able to use your financial statements Know your limits and work around them