1. PowerPoint Presentation to Accompany Management Third Canadian Edition John R. Schermerhorn, Jr. Barry Wright
Prepared by: Jim LoPresti
University of Colorado, Boulder
Revised by: Dr. Shavin Malhotra
Ryerson University, Toronto, Ontario

2. Chapter 5: Entrepreneurship and Small Business Management
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3. Chapter 5 Learning Objectives
5.1 Define entrepreneurship and list the characteristics of entrepreneurs.
5.2 Describe various types of small businesses and explain why many small businesses fail.
5.3 Outline how to create a new venture.
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4. The Nature of Entrepreneurship
Strategic thinking and risk-taking behaviour that results in the creation of new opportunities for individuals and/or organizations.
Entrepreneurs
Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats.
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5. Entrepreneurs are … The Nature of Entrepreneurship
Founders of businesses that become large-scale enterprises.
People who:
Buy a local franchise outlet
Open a small retail shop
Operate a self-employed service business
People who introduce a new product or operational change in an existing organization.
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6. The Nature of Entrepreneurship
Typical characteristics of entrepreneurs:
Internal locus of control
High energy level
High need for achievement
Tolerance for ambiguity
Self-confidence
Passion and action-orientation
Self-reliance and desire for independence
Flexibility
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7. Figure 5.2 Personal traits and characteristics of entrepreneurs.
The Nature of Entrepreneurship
Figure 5.2 Personal traits and characteristics of entrepreneurs.
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8. The Nature of Entrepreneurship
Typical entrepreneurial backgrounds and experiences:
Parents were entrepreneurs or self-employed.
Families encouraged responsibility, initiative, and independence.
Have tried more than one business venture.
Have relevant personal or career experience.
Become entrepreneurs between 22 and 45 years of age.
Have strong interests in creative production and enterprise control.
Seek independence and sense of mastery.
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9. The Nature of Entrepreneurship
Reasons for women and member of visible minorities becoming entrepreneurs:
Out of necessity (necessity-based entrepreneurship)
Gain economic independence.
Provide a pathway to career success that may be blocked otherwise.
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10. Common myths about entrepreneurs:
The Nature of Entrepreneurship
Common myths about entrepreneurs:
Entrepreneurs are born, not made.
Entrepreneurs are gamblers.
Money is the key to entrepreneurial success.
You have to be young to be an entrepreneur.
You must have a degree in business to be an entrepreneur.
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11. Social Entrepreneurship:
The Nature of Entrepreneurship
Social Entrepreneurship:
A unique form of ethical entrepreneurship that seeks novel ways to solve pressing social problems.
Social enterprises have a social mission to help make lives better for underserved populations.
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12. Entrepreneurship and Small Business
Small businesses …
Ones with 100 or fewer employees.
Independently owned and operated.
48 percent of the private labour force works in small businesses.
Accounts for 23% of Canada’s GDP.
Are established by:
Starting a new business.
Buying an existing business.
Buying and running a franchise.
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13. Entrepreneurship and Small Business
Internet or Web-based Entrepreneurship
Internet entrepreneurship is the use of the internet to pursue an entrepreneurial venture.
The Internet offers numerous entrepreneurial opportunities.
Nearly 85% of small businesses are conducting business over the internet.
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14. Web-based business models include:
Entrepreneurship and Small Business
Web-based business models include:
Advertising model
Brokerage model
Community model
Freemium model
Infomediary model
Merchant model
Referral model
Subscription model
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15. Family businesses … Entrepreneurship and Small Business
Owned and financially controlled by family members.
Largest percentage of businesses worldwide.
Can provide an ideal business situation.
Problems unique to family businesses:
Family business feud
Succession problem
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16. Reasons for small business failures:
Entrepreneurship and Small Business
Reasons for small business failures:
Lack of experience
Lack of expertise
Lack of strategy and strategic leadership
Poor financial control
Growing too fast
Insufficient commitment
Ethical failure
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17. Figure 5.3 Eight reasons why many small businesses fail.
Entrepreneurship and Small Business
Figure 5.3 Eight reasons why many small businesses fail.
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18. Management Fundamentals - Chapter 5
New Venture Creation
Important issues in new venture creation:
Does the entrepreneur have good ideas and the courage to give them a chance?
Is the entrepreneur prepared to meet and master the test of strategy and competitive advantage?
Can the entrepreneur identify a market niche that is being missed by other established firms?
Can the entrepreneur identify a new market that has not yet been discovered by existing firms?
Can the entrepreneur generate first-mover advantage by exploiting a niche or entering a market before competitors?
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19. Management Fundamentals - Chapter 5
New Venture Creation
Life cycle of entrepreneurial firms
Birth stage
Breakthrough stage
Maturity stage
Each stage poses different managerial challenges and requires different managerial competencies.
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20. Figure 5.4 Stages in the life cycle of an entrepreneurial firm.
New Venture Creation
Figure 5.4 Stages in the life cycle of an entrepreneurial firm.
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21. Management Fundamentals - Chapter 5
New Venture Creation
Basic items that should be included in a business plan:
Executive summary
Industry analysis
Company description
Product and services description
Market description
Marketing strategy
Operations description
Staffing description
Financial projection
Capital needs
Milestones
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22. Management Fundamentals - Chapter 5
New Venture Creation
Forms of legal ownership
Sole proprietorship
Partnership
General partnership
Limited partnership
Limited liability partnership
Corporation
Limited liability corporation (LLC)
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23. Management Fundamentals - Chapter 5
New Venture Creation
Financing the new venture
Sources of outside financing
Debt financing
Equity financing
Equity financing alternatives
Venture capitalists
Initial public offerings
Angel investors
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24. COPYRIGHT
Copyright © 2014 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.