1. Chapter 1Copyright © 2010 by Nelson Education Ltd. EntrepreneursEntrepreneurs 1 PowerPoint Presentation by Ian Anderson, Algonquin College

2. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-2 Looking Ahead After studying this chapter, you should be able to: 1. Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs. 2.Explain the nature of entrepreneurship and how it is related to small business. 3.Define and identify the importance of small business. 4.Identify rewards and drawbacks of entrepreneurial careers. 5.Describe the various types of entrepreneurs and entrepreneurial ventures. 6.Discuss several factors related to readiness for entrepreneurship and getting started in an entrepreneurial career. 7.Describe some characteristics of successful entrepreneurs.

3. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-3 Entrepreneurial Opportunity An economically attractive and timely opportunity that creates value. A true opportunity exists only for the entrepreneur who has the interest, resources, and capabilities required to succeed.

4. Chapter 1Copyright © 2010 by Nelson Education Ltd. Entrepreneurial Opportunity In the Trenches: Gumdrops Vancouver’s first wet weather boutique proved that customers saw value in the concept and that a business idea was present, not just an opportunity. 1-4

5. Chapter 1Copyright © 2010 by Nelson Education Ltd. Entrepreneurship and Small Business Despite similarities, entrepreneur and small business manager are not synonymous –Entrepreneurs might be the founders of business firms, or they might be owner- managers of existing firms –Small business managers receive specified compensation and do not assume ownership risks 1-5

6. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-6 What Is a Small Business? Criteria for Defining Smallness in Business –Financing supplied by one person or small group –Localized business operations (except marketing) –Business’ size small relative to larger competitors –Fewer than 100 employees

7. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-7 Why is Small Business Important? In 2007, 1,030,000 small businesses were registered in Canada –97% of these businesses have fewer than 50 employees –80% of all business entities have less than 5 employees There are 2.5 million self-employed Canadians 56% of Canadians work for small and medium-sized businesses New jobs created by small businesses are growing at rate of 2.3 percent per year, with almost 80 percent of the growth being generated by the newly self-employed.

8. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-8 Exhibit 1-1 Entrepreneurial Incentives

9. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-9 Drawbacks of Entrepreneurship Hard work –Finding new customers and markets –Frustrations with financing, government, tax, technology, and employment issues Long hours –20% work more than 60 hours per week Emotional loneliness Strong possibility of failure Disruptions to personal life

10. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-10 Causes of Business Failures Lack of managerial and financial abilities Fail to adapt to competitive environment A broad based study found the following: –32% inadequate research and development –23% lacked competitive advantage –14% uncontrolled costs –13% poorly developed marketing strategies –10% poor market timing –8% succumbed to competitor activities

11. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-11 Varieties of Entrepreneurship Founder (“Pure” Entrepreneur)  An entrepreneur who brings a new firm into existence. General Manager (“Second Stage” Entrepreneur)  An entrepreneur who directs the continuing operations of established firms. Franchisee  An entrepreneur whose power is limited by the contractual relationship with a franchising organization.

12. Chapter 1Copyright © 2010 by Nelson Education Ltd. High-Potential Ventures versus Small Firms and MicroBusinesses High-Potential Venture (Gazelle)  A small firm that has great prospects for growth. Attractive Small Firm  A small firm that provides substantial profits to its owner. MicroBusiness (Lifestyle)  A small firm that provides minimal profits to its owner. 1-12

13. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-13 A person with primarily technical skills and little business knowledge. –Paternalistic approach –Reluctance to delegate –Narrow view of strategy –Personal sales effort –Short planning horizon –Simple record keeping Characteristics of Artisan Entrepreneurs

14. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-14 A person with both business skills and technical knowledge. –Scientific approach to problems –Willing to delegate –Broad view of strategy –Diversified marketing approach –Longer planning horizon –Sophisticated accounting and financial control Characteristics of Opportunistic Entrepreneurs

15. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-15 Entrepreneurial Teams Two or more people who work together as entrepreneurs. Helpful to:  Secure a broad range of managerial talents  Enhance profits Useful in:  High technology businesses  Attractive small firms  High potential ventures

16. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-16 Four Routes to Entrepreneurship Entering a family business Opening a franchised business Starting a new business Buying an existing business

17. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-17 Exhibit 1-2 Age Concerns in Starting a Business

18. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-18 Refugee – a person who becomes an entrepreneur to escape an undesirable situation Foreign refugee –Becomes an entrepreneur in a new country Corporate refugee –Leaves big business to go into business for themselves Entrepreneurial Refugee

19. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-19 Precipitating Event  An event, such as losing a job, that moves an individual to become an entrepreneur.  Job termination  Job dissatisfaction  Unexpected opportunity Taking The Plunge

20. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-20 Successful Entrepreneurs Strong commitment / passion Willingness to take risks  Moderate risk-takers Self-Confidence internal locus of control  have an internal locus of control

21. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-21 Internal vs. External Locus of Control Internal Locus of Control:  Entrepreneurs tend to hold themselves accountable for their own successes or failures. External Locus of Control:  Non-entrepreneurs tend to believe that external circumstances, luck or fate impact upon their worlds.

22. Chapter 1Copyright © 2010 by Nelson Education Ltd. 1-22 Entrepreneurial Characteristics Commitment and determination Leadership Opportunity obsession Tolerance of risk, ambiguity and uncertainty Creativity, self-reliance and adaptability Motivation to excel