1. Starting Your Own Business: The Entrepreneurship Alternative6
Chapter
Starting Your Own Business: The Entrepreneurship Alternative

2. Learning Objectives
LO 6.1 Define the term entrepreneur and distinguish among entrepreneurs, small- business owners, and managers.
LO 6.2 Identify the different types of entrepreneurs.
LO 6.3 Explain why people choose to become entrepreneurs.
LO 6.4 Discuss factors that support and expand opportunities for entrepreneurs.
LO 6.5 Identify personality traits that typically characterize successful entrepreneurs.
LO 6.6 Summarize the process of starting a new venture.
LO 6.7 Explain how organizations promote intrapreneurship.

3. What is Entrepreneurship?
Entrepreneur: A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business
Differ from many small-business owners in their strong desire to make their business grow
Differ from managers through their overriding responsibility to use the resources of the organization to accomplish their goals
Willing to take risks
Entrepreneurs differ from managers as they are willing to assume risk (financial, social, career, etc.). They have common personality traits and behaviours that distinguish them from those who succeed as managers.
Entrepreneur.com is an excellent resource (click on link); it offers tips on marketing, technology, and how-to/start-up guides for new businesses.
Class Activity: Ask students to share examples of friends or family members who operate their own businesses.

4. Categories of Entrepreneurs
Classic entrepreneurs
Serial entrepreneurs
Social entrepreneurs
A classic entrepreneur pursues business opportunities and allocates resources. A serial entrepreneur starts one business, runs it, and then runs additional businesses in succession. Social entrepreneurs focus on solving society’s challenges through their businesses.
Lecture Enhancer: Think of an example for each type of entrepreneur. If you can’t think of a real example, make one up.

5. Test Your Knowledge
What kind of entrepreneur starts many businesses in succession?
a. Classic entrepreneur
b. Social entrepreneur
c. Serial entrepreneur
d. Intrapreneur 

6. Test Your Knowledge
What kind of entrepreneur starts many businesses in succession?
a. Classic entrepreneur
b. Social entrepreneur
c. Serial entrepreneur
d. Intrapreneur
Answer: C

7. Reasons to Choose Entrepreneurship as a Career Path
In an average month, Canadians start approximately 23,000 new businesses.
Recent decades have shown a heightened interest in entrepreneurial careers.
People choose entrepreneurship for many reasons
Dissatisfaction with traditional work
Their ideas fulfill customer needs
Freedom to make own decisions
The number of Canadians choosing entrepreneurship as a career is growing. See how many students want to become entrepreneurs, and discuss the types of businesses they want to start and their reasons for wanting to do so.

8. Why People Become Entrepreneurs
Many entrepreneurs want to be their own bosses, and self-management is their motivation. Entrepreneurs are wealth creators. Many entrepreneurs start ventures with the specific goal of creating a profitable business to reap financial rewards. As large companies continue to lay off employees, entrepreneurs find job security in their own ventures. Finally, quality of life (lifestyle entrepreneur: a person who starts a business to reduce work hours and create a more relaxed lifestyle.) provides an attractive option for people to gain independence, freedom, and control.
Lecture Enhancer: Discuss the unique stresses and challenges of being your own boss.

9. Reasons to Choose Entrepreneurship as a Career Path
Being Your Own Boss
Self-management is the motivation that drives many entrepreneurs.
Financial Success
Entrepreneurs are wealth creators and idea generators.
Job Security
Over the past ten years, large companies have eliminated more jobs than they have created.
Quality of Life
Starting a business gives the founder some choice over when, where, and how to work.
People have always wanted to be their own bosses and be rewarded for their efforts by keeping profits. As companies continue to restructure and downsize, many people consider entrepreneurship rather than seeking employment with a company. Lifestyle entrepreneurs are trying to achieve a balance between work and their other interests.
Lecture Enhancer: Why do many people choose entrepreneurship when considering job security?

10. Test Your Knowledge
What is the overriding responsibility of an entrepreneur?
To manage people
To make as much money as possible
c. To use the company resources to accomplish goals
d. To be ethical and socially responsible 

11. Test Your Knowledge
What is the overriding responsibility of an entrepreneur?
To manage people
To make as much money as possible
c. To use the company resources to accomplish goals
d. To be ethical and socially responsible
Answer: C

12. The Environment for Entrepreneurship
Globalization, education, information technology, and demographic and economic trends create many opportunities for entrepreneurs. Growth in entrepreneurship is a worldwide phenomenon.

13. Globalization
The rapid globalization of business has created many opportunities for entrepreneurs.
Most of the fastest-growing small Canadian companies have international sales (most to the United States).
Entrepreneurship is growing worldwide; levels vary by country.
Entrepreneurs are the key to economic growth for many lesser-developed nations.
Lecture Enhancer: What factors may have contributed to the increased globalization of entrepreneurship?

14. Information Technology
Education/
Information Technology
Education
Students at many colleges and universities can take a major in entrepreneurship. Dozens of other colleges and universities offer an emphasis in entrepreneurship and hundreds more offer one or two courses in how to start a business.
Many schools offer internships with start-ups.
Information Technology
Technology has given entrepreneurs tools that help them compete.
Entrepreneurs have used information technology to revolutionize industries.
Educational opportunities have grown for entrepreneurs, and information technology has provided a big boost for entrepreneurs (including lower costs, enhanced customer service opportunities, and the ability to present a professional image). Social networking is a key business key tool for entrepreneurs.
Lecture Enhancer: What role does education play in encouraging graduates to start new businesses?
Class Activity: Survey the class to see how many students have taken at least one specialized course focusing on entrepreneurship.

15. Demographic and Economic Trends
Demographics on Entrepreneurships and Small Business
Two groups are most likely to start their own businesses
Immigrants to North America
People between the ages of 55 and 64 (have access to retirement savings/home equity; want to keep working after retirement)
Flexible, adaptable entrepreneurs will have most success
Trends like the aging population, the growth of ethnic groups, and the growth of two-income families create abundant opportunities for entrepreneurs (e.g., services designed for older consumers, foods that cater to ethnic preferences, and convenience products for busy parents). The link to census data shows the current demographic and economic data.

16. Characteristics of Entrepreneurs
There are key characteristics that make up the entrepreneurial personality. Many entrepreneurs had parent role models and/or always wanted to be entrepreneurs. These traits may increase a person’s chances of being a successful entrepreneur.
Class Activity: Ask students why optimism is an important trait for potential entrepreneurs.

17. Characteristics of Entrepreneurs
Vision: an overall idea for how to make business ideas successful
High energy level: a willingness to work hard
Need to achieve: want to excel and achieve difficult goals
Self-confidence: fearlessness in the face of difficult odds
Tolerance for failure: not easily discouraged
Creativity: devise innovative ways to overcome difficult problems and situations; have new ideas for good and services
Tolerance for ambiguity: take business uncertainties in stride
Internal locus of control: belief in control of own fates
The combination of these characteristics is important to an entrepreneur who is willing to take risks. These eight traits are especially important for people who want to succeed as entrepreneurs.
Lecture Enhancer: What are some personal-life issues that might hinder an entrepreneur’s success?

18. Guidelines for Selecting a Business Idea
Are you ready to be an entrepreneur? These guidelines will help students to solidify and refine their business ideas. This is an excellent class assignment and discussion topic.
Class Activity: Ask students to pause a moment and reflect on a basic service or product that is needed in the immediate community. Have students discuss their ideas.

19. Starting a New Venture Selecting a Business Idea
Find something you love to do and are good at doing
Find an idea that can satisfy a need in the marketplace
Entrepreneurs must be sure that the idea they choose has interest in the marketplace.
Business Plan
There are a lot of ways to think about who you are and how that might translate into a business. You will also want to think about buying an existing business or operating a franchise.
Lecture Enhancer: Share an example of a successful business that was started by a student.
Lecture Enhancer: Why is it important that both of these criteria be considered before starting a business?

20. Buying an Existing Business
Advantages:
Established customers
Deal with familiar suppliers
Good/service known in marketplace
Necessary permits and licenses are already secured
Financing may be easier
Seller financing
There are many advantages to purchasing an existing business. Financing may be easier as the businesses has a “track record” and financial data. Buyers may wish to buy a successful, established business or a struggling business to turn around. To find businesses for sale, consult information provided by government agencies and websites listing companies for sale.
Lecture Enhancer: What are some possible downsides of buying an existing business?

21. Creating a Business Plan
In the past, many entrepreneurs launched businesses without a formal business plan.
Business plans help contemporary entrepreneurs prepare enough resources and stay focused on key objectives.
Entrepreneurs often go after opportunities as they arise and then they change course when they need to. Flexibility seems to be the key to business start-ups, especially in rapidly changing markets. Starting a business has many risks; doing at least some planning is not just advisable but necessary, especially when an entrepreneur needs to look for funds from outside sources.
See Appendix F in the text for detailed information about business plans.
Class Activity: Discuss the benefits of developing a business plan, even if funds are already available.

22. Finding Financing
Seed capital: The initial funding needed to launch a new vendor
Debt Financing
Credit cards
Family and friends
Bank loans
Finance companies
Equity Financing
Venture Capitalists
Angel Investors
You need to assess your start-up and initial operating costs and identify how you will obtain funding. Debt financing is a “debt” (contractual obligation) in which you incur a liability to pay someone back. Equity financing is the sale of ownership in which you have sold investors a piece of your firm. They are invested in your success and expect to be rewarded accordingly. Angel investors (wealthy individuals who invest directly in a new venture in exchange for an equity stake) focus more on start-up businesses than venture capitalists (business organizations or groups of private individuals that invest in early stage, high-potential, growth companies; usually in high-technology industries). Each group invests directly in a business for an equity stake.
Lecture Enhancer: What are the downsides to depending upon debt financing to start a business?
Class Activity: Lead a discussion of possible pitfalls of having friends or family invest in your business.

23. Government Support for New Ventures
Business incubators are a key way government supports new ventures
Enterprise zones
Encourage entrepreneurship in specific geographic areas set aside for economic renewal
Urban reserves
Economic zone within a municipality set aside as First Nation reserve land for Aboriginal commercial ventures
All levels of government support new ventures in many ways (see Chapter 5). Various local agencies and business incubators offer information, resources, and sometimes even access to financing for entrepreneurs. Business incubators help build new ventures. Enterprise zones help build entrepreneurship in specific localities (offer tax advantages, incentives). Urban reserves are economic zones that enjoy tax exemptions offered to traditional reserves.
Lecture Enhancer: What are some advantages to starting a business in an enterprise zone?

24. Test Your Knowledge
Which of the following is the least likely source of financing for new ventures?
a. Venture capitalists
b. Debt capital
c. Equity capital
d. Angel investors

25. Test Your Knowledge
Which of the following is the least likely source of financing for new ventures?
a. Venture capitalists
b. Debt capital
c. Equity capital
d. Angel investors
Answer: A

26. Intrapreneurship
The process of promoting innovation within the structure of an existing organization
An idea to promote creativity
Companies promote in a variety of ways
Skunkworks
Pacing Programs
Many companies want to retain entrepreneurial spirit within their organizations. Many organizations encourage intrapreneurship and can benefit from the practice. 3M and the Post-it note is a great example of encouraging creativity in its employees. Skunkworks (project initiated by an employee who has an idea and then recruits resources from within 3M to turn it into a commercial product) and pacing programs (company-initiated projects focusing on a few products and technologies that have potential for success) are two other intrapreneurial approaches by 3M.
Lecture Enhancer: What is another reason for companies to encourage rather than discourage intrapreneurship?

27. Test Your Knowledge
Bootlegging is a 3M effort to promote intrapreneurship by allowing:
a. employees to borrow time from other projects to develop new products.
b. employees to take a sabbatical to work on new products.
c. employees to take frequent vacations to inspire new product ideas.
d. employees to copy competitors’ product ideas and claim credit.  

28. Test Your Knowledge
Bootlegging is a 3M Corp. effort to promote intrapreneurship by allowing:
a. employees to borrow time from other projects to develop new products.
b. employees to take a sabbatical to work on new products.
c. employees to take frequent vacations to inspire new product ideas.
d. employees to copy competitors’ product ideas and claim credit.  
Answer: A