Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER SIX STARTING YOUR OWN BUSINESS: THE ENTREPRENEURSHIP ALTERNATIVE Text by Profs. Gene Boone & David Kurtz Multimedia Presentation by Prof. Milton Pressley The University of New Orleans

Copyright © 2003 by South-Western. All Rights Reserved. Define the term entrepreneur, and distinguish among an entrepreneur, a small-business owner, and a manager Define the term entrepreneur, and distinguish among an entrepreneur, a small-business owner, and a manager Identify three different types of entrepreneurs Identify three different types of entrepreneurs Explain why people choose to become entrepreneurs Explain why people choose to become entrepreneurs Discuss conditions that encourage opportunities for entrepreneurs Discuss conditions that encourage opportunities for entrepreneurs LEARNING GOALS

Copyright © 2003 by South-Western. All Rights Reserved. Describe the role of entrepreneurs in the economy Describe the role of entrepreneurs in the economy Identify personality traits that typically characterize entrepreneurs Identify personality traits that typically characterize entrepreneurs Summarize the process of starting a new venture Summarize the process of starting a new venture Explain how organizations promote intrapreneurship Explain how organizations promote intrapreneurship LEARNING GOALS

Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER OVERVIEW People are increasingly choosing the path of entrepreneurship People are increasingly choosing the path of entrepreneurship To become an entrepreneur, learn as much as possible by: To become an entrepreneur, learn as much as possible by: Completing academic programs Completing academic programs Gaining practical experience working Gaining practical experience working Reading newspaper and magazine articles and biographies of successful entrepreneurs Reading newspaper and magazine articles and biographies of successful entrepreneurs © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved.

WHAT IS AN ENTREPRENEUR? Entrepreneur: person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business Entrepreneur: person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.1 Categories of Entrepreneurs CATEGORIES OF ENTREPRENEURS

Copyright © 2003 by South-Western. All Rights Reserved. CATEGORIES OF ENTREPRENEURS Classic entrepreneurs: person who identifies a business opportunity and allocates available resources to tap that market Classic entrepreneurs: person who identifies a business opportunity and allocates available resources to tap that market © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. CATEGORIES OF ENTREPRENEURS Intrapreneurs: entrepreneurially oriented person who develops innovations within the context of a large corporation Intrapreneurs: entrepreneurially oriented person who develops innovations within the context of a large corporation Change agents (turnaround entrepreneurs): manager who tries to revitalize an established firm to keep it competitive Change agents (turnaround entrepreneurs): manager who tries to revitalize an established firm to keep it competitive © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH If you want to start your own firm someday, you have plenty of company If you want to start your own firm someday, you have plenty of company

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.2 U.S. Adults Currently Engaged in Starting a Business

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.3 Why People Become Entrepreneurs

Copyright © 2003 by South-Western. All Rights Reserved. REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss Being One’s Own Boss Self-management is the motivation of many entrepreneurs Self-management is the motivation of many entrepreneurs © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.4 Guru.com: Portraying an Entrepreneurial Icon

Copyright © 2003 by South-Western. All Rights Reserved. REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss Financial Success Financial Success Entrepreneurs: Entrepreneurs: Are wealth creators Are wealth creators Believe they won’t get rich working for others Believe they won’t get rich working for others Path to riches can be long and uncertain Path to riches can be long and uncertain © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss Financial Success Job Security Job Security Many workers lack job security Many workers lack job security Growing percentage of Americans create their own by starting their own firms Growing percentage of Americans create their own by starting their own firms © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Gives the founder some choice over when, where, and how to work Gives the founder some choice over when, where, and how to work Many work extraordinarily long hours... often at the whim of their customers Many work extraordinarily long hours... often at the whim of their customers Being One’s Own Boss Financial Success Job Security Quality of Life Quality of Life

Copyright © 2003 by South-Western. All Rights Reserved. THE ENVIRONMENT FOR ENTREPRENEURS Factors that support and expand opportunities for entrepreneurs are shown on the next slide... Factors that support and expand opportunities for entrepreneurs are shown on the next slide... © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.5 Factors Supporting and Expanding Opportunities for Entrepreneurship

Copyright © 2003 by South-Western. All Rights Reserved. © PhotoDisc Creates many opportunities for entrepreneurs Allows products to be sold overseas Provides international talent pool 40% of the fastest- growing small U.S. firms have international sales Globalization THE ENVIRONMENT FOR ENTREPRENEURS © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. © PhotoDisc Tremendous growth in educational opportunity for would-be entrepreneurs via: College Classes Business schools helping students start businesses Other organizations like the Center for Entrepreneurial Leadership Globalization THE ENVIRONMENT FOR ENTREPRENEURS Education © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. © PhotoDisc Information Technology Provided a big boost for entrepreneurs Helps entrepreneurs work quickly and efficiently, provide attentive customer service, increase sales,and project a professional image Has created demand for new products Education Globalization THE ENVIRONMENT FOR ENTREPRENEURS © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. © PhotoDisc Information Technology Internet is also a challenge for entrepreneurs Customers can go online, quickly get needed information, and buy from anywhere in the world Entrepreneurs need a distinctive advantage over big competitors Education Globalization THE ENVIRONMENT FOR ENTREPRENEURS © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. © PhotoDisc Demographic & Economic Trends Demographic trends create opportunities for new goods and services Last decade’s strong economy created markets for products that consumers might do without in harder times Education Information Technology Globalization THE ENVIRONMENT FOR ENTREPRENEURS © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Entrepreneurship Around the World Growth of entrepreneurship is a worldwide phenomenon Growth of entrepreneurship is a worldwide phenomenon Level of entrepreneurship varies considerably even among industrialized nations Level of entrepreneurship varies considerably even among industrialized nations © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.6 Levels of Entrepreneurial Activities in Ten Countries

Copyright © 2003 by South-Western. All Rights Reserved. THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY American entrepreneurs have given the world goods and services that have changed the way people live, work, and play American entrepreneurs have given the world goods and services that have changed the way people live, work, and play Products include: Products include: Ball-point pens Ball-point pens Netscape Navigator software Netscape Navigator software Fiberglass skis Fiberglass skis Velcro fasteners Velcro fasteners FedEx delivery service FedEx delivery service MacDonald's MacDonald's © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.7 Influence of Entrepreneurs on the Economy

Copyright © 2003 by South-Western. All Rights Reserved. THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY Entrepreneurs: Entrepreneurs: Create new products Create new products Build new industries Build new industries Bring new life to old industries Bring new life to old industries Since WWII, behind: Since WWII, behind: 2/3 rds of Inventions 2/3 rds of Inventions 95% of major innovations 95% of major innovations Innovation © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY Vital source of new jobs Vital source of new jobs Typically hire small numbers of employees per firm... spread over many companies Typically hire small numbers of employees per firm... spread over many companies See potential employees where established firms overlook them See potential employees where established firms overlook them Innovation Job Generation © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY Entrepreneurship offers excellent economic opportunities for women and minorities Entrepreneurship offers excellent economic opportunities for women and minorities Innovation Job Generation Diversity © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.8 Diversity of 21 st Century Entrepreneurs

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.9 Characteristics of Entrepreneurs CHARACTERISTICS OF ENTREPRENEURS

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Vision Vision Have an overall idea for how to make a business inspiration a success Have an overall idea for how to make a business inspiration a success

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS High Energy Level High Energy Level Willingly work hard to realize their visions Willingly work hard to realize their visions

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Need to Achieve Need to Achieve Need to work hard because they want to excel Need to work hard because they want to excel

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Self-Confidence and Optimism Self-Confidence and Optimism Believe in ability to succeed, and they instill their optimism in others Believe in ability to succeed, and they instill their optimism in others

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Tolerance for Failure Tolerance for Failure Entrepreneurs view setbacks and failures as learning experiences Entrepreneurs view setbacks and failures as learning experiences Not easily discouraged or disappointed when things don’t go as planned Not easily discouraged or disappointed when things don’t go as planned

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Creativity Creativity Entrepreneurs typically conceive new ideas for goods and services Entrepreneurs typically conceive new ideas for goods and services Devise innovative ways to overcome difficult problems and situations Devise innovative ways to overcome difficult problems and situations

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Tolerance for Ambiguity Tolerance for Ambiguity Take the uncertainties associated with launching a venture in stride Take the uncertainties associated with launching a venture in stride

Copyright © 2003 by South-Western. All Rights Reserved. CHARACTERISTICS OF ENTREPRENEURS Internal Locus of Control Internal Locus of Control Believe that they control their own fates Believe that they control their own fates Take personal responsibility for the success or failure of their actions rather than believing in luck or fate Take personal responsibility for the success or failure of their actions rather than believing in luck or fate

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.10 An Entrepreneur With an Internal Locus of Control

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.11 Think You Might Be a Good Entrepreneur?

Copyright © 2003 by South-Western. All Rights Reserved. STARTING A NEW VENTURE Selecting a Business Idea Creating a Business Plan Finding Financing © PhotoDisc Steps involved in beginning a new business Steps involved in beginning a new business

Copyright © 2003 by South-Western. All Rights Reserved. STARTING A NEW VENTURE Selecting a Business Idea © PhotoDisc Important considerations: Important considerations: Finding something you love to do and are good at doing Finding something you love to do and are good at doing Determining whether your idea can satisfy a need in the market Determining whether your idea can satisfy a need in the market Success also depends on your offering being appealing to the marketplace Success also depends on your offering being appealing to the marketplace

Copyright © 2003 by South-Western. All Rights Reserved. STARTING A NEW VENTURE Selecting a Business Idea © PhotoDisc Buying an Existing Business Buying an Existing Business Some prefer not to assume the risks of starting a new firm Some prefer not to assume the risks of starting a new firm Buying a Franchise Buying a Franchise Another less risky way to begin a business Another less risky way to begin a business

Copyright © 2003 by South-Western. All Rights Reserved. STARTING A NEW VENTURE Selecting a Business Idea Creating a Business Plan © PhotoDisc Entrepreneurs have traditionally seized opportunities as they arise and changed course as necessary Entrepreneurs have traditionally seized opportunities as they arise and changed course as necessary A formal business plan, however, is an integral part of managing a business A formal business plan, however, is an integral part of managing a business

Copyright © 2003 by South-Western. All Rights Reserved.

STARTING A NEW VENTURE Selecting a Business Idea Creating a Business Plan Finding Financing © PhotoDisc Finding Financing Finding Financing Seed Capital: initial funding needed to launch a new venture Seed Capital: initial funding needed to launch a new venture

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.12 Preparing to Convince Others to Invest in Business

Copyright © 2003 by South-Western. All Rights Reserved. STARTING A NEW VENTURE Selecting a Business Idea Creating a Business Plan Finding Financing © PhotoDisc Debt Financing: borrowed funds that entrepreneurs must repay Debt Financing: borrowed funds that entrepreneurs must repay Equity Financing: funds invested in new ventures in exchange for part ownership Equity Financing: funds invested in new ventures in exchange for part ownership Venture Capitalists: business firm or group of individuals who invest in new and growing firms Venture Capitalists: business firm or group of individuals who invest in new and growing firms

Copyright © 2003 by South-Western. All Rights Reserved. Figure 6.13 Where Venture Capital Dollars Go

Copyright © 2003 by South-Western. All Rights Reserved. STARTING A NEW VENTURE Selecting a Business Idea Creating a Business Plan Finding Financing Angel Investors: wealthy individuals who invest directly in new ventures in exchange for an equity stake Angel Investors: wealthy individuals who invest directly in new ventures in exchange for an equity stake © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. INTRAPRENEURSHIPINTRAPRENEURSHIP Intrapreneurship: process of promoting innovation within the structure of an existing organization Intrapreneurship: process of promoting innovation within the structure of an existing organization Helps retain employees who might otherwise leave to start their own businesses Helps retain employees who might otherwise leave to start their own businesses Intrapreneurship practiced in: Intrapreneurship practiced in: 3M 3M Thermo Electron Thermo Electron Xerox Xerox Intuit Intuit © PhotoDisc

Copyright © 2003 by South-Western. All Rights Reserved. WHAT’S AHEAD Next Chapter: Next Chapter: Describes technology behind electronic commerce Describes technology behind electronic commerce Introduces challenges and opportunities available to those who want to use the Internet Introduces challenges and opportunities available to those who want to use the Internet © PhotoDisc