The Foundations of Entrepreneurship

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

The World of the Entrepreneur

A new business is born every 11 seconds in the United States Study of influential Americans the defining issue of the 21st Century: Entrepreneurship! One of 12 Americans is actively involved in trying to start a new business.

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Entrepreneurial Activity Across the Globe

Percentage of Adult Population Working to Start a New Business
Unit ed St at es Canada Israel 5.4% 3.4% 3.3% 2.2% 2.0% 1.8% 1.6% 1.4% 6.8% 8.5%

Country

It aly Great Brit ain Germany Denmark France Japan Finland

0.0%

2.0%

4.0% Percent

6.0%

8.0%

10.0%

What is an Entrepreneur?
One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

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Characteristics of Entrepreneurs

Desire for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation Skilled at organizing Value achievement over money

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The Type E Personality

Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages; very focused Acts quickly, often without deliberating

Chapter 1: Entrepreneurship

Keeps distance and maintains objectivity

Pursues simple, practical solutions Willing to take risks; comfortable with uncertainty Exhibits clear opinions and values; has high expectations Impatient; just do it mentality Positive, upbeat, optimistic; communicates confidence
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Common Themes in Definitions of Entrepreneurship

Process Uniqueness

The Entrepreneur

Growth

Defining Entrepreneurship

Innovation

Profit or Nonprofit

Creating Value

Organization Creation

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The Development of Entrepreneurship Theory

18th Century

Richard Cantillon: Coins term entrepreneur (go-between or between taker)

Entrepreneur bears risks and plans, supervises, organizes, and owns factors of production
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Chapter 1: Entrepreneurship

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The Development of Entrepreneurship Theory

19th Century

Jean Baptiste Say: Proposed that profits from entrepreneurship were separate from profits of capital ownership

Distinction made between those who supplied funds and earned interest and those who profited from managerial abilities

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The Development of Entrepreneurship Theory

20th Century

Joseph Schumpeter: Described the entrepreneur as someone who is an innovator and someone who creatively destructs

Peter Drucker: Described the entrepreneur as someone who maximizes opportunity

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Myths About Entrepreneurship

1. Successful entrepreneurship takes only a great idea.
2. Entrepreneurship is easy.

3. Entrepreneurship is a risky gamble.

4. Entrepreneurship is found only in small businesses. 5. Entrepreneurial ventures and small businesses are identical.

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The Entrepreneurial Process

Starting the Venture:

Exploring the Entrepreneurial Context

Identifying Opportunities/Possible Competitive Advantage

Researching Feasibility
Planning the Venture Organizing the Venture Launching the Venture

Managing the Venture:

Managing Processes Managing People Managing Growth Special Issues

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Rewards of Being an Entrepreneur

High degree of independence freedom from constraints Get to use a variety of skills and talents Freedom to make decisions Accountable to only yourself Opportunity to tackle challenges Feeling of achievement and pride Potential for greater financial rewards
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Feeding the Entrepreneurial Fire

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web International opportunities
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Chapter 1: Entrepreneurship

Challenges of Being an Entrepreneur

Must be comfortable with change and uncertainty Must make a bewildering number of decisions

May face tough economic choices

Must be comfortable with taking risks Need many different skills and talents Must be comfortable with the potential for failure
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The Cultural Diversity of Entrepreneurship

Young entrepreneurs Women Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs Home-based businesses Family businesses Copreneurs Corporate castoffs Corporate dropouts
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Chapter 1: Entrepreneurship

Nine Deadly Mistakes of Entrepreneurship

1.
2. 3. 4. 5.

Management incompetence Lack of experience Poor financial control Failure to develop a strategic plan Uncontrolled growth

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Nine Deadly Mistakes of Entrepreneurship

(continued)

6.
7. 8. 9.

Poor location Improper inventory control Incorrect pricing Inability to make the entrepreneurial transition

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Differences Between Small Businesses and Entrepreneurial Ventures

Independently owned, operated, and financed Less than 100 employees Doesnt emphasize new or innovative practices

Innovative practices Goals are profitability and growth Seeks out new opportunities Willingness to take risks

Little impact on industry

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Benefits of Small Business Ownership

The opportunity to: create your own destiny make a difference reach your full potential reap unlimited profits contribute to society and be recognized for your efforts do what you enjoy and have fun at it

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Drawbacks of Small Business Ownership

Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement

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Small Businesses
Make up 99% of all businesses in the United States. Employ 53% of the nation's private sector workforce. Create more jobs than big businesses. Are leaders in offering training and advancement opportunities to workers.

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Small Businesses
(continued)

Produce 51% of the nation's private GDP. Account for 47% of business sales. Create 4X more innovations per R & D dollar spent than medium-size firms and 24X as many as large companies.

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Small Business by Industry

Financial 8.0% Construction 11.8% Manufacturing 5.8% Wholesale 7.4%

Other 7.3% Services 39.2%

Retail 20.5%

The Small Business Failure Record

24% of new businesses fail after two years. 51% fail within four years. 63% fail within six years.

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Small Business Survival Rate

% of Small Firms Surviving

100% 80% 60% 40% 20% 0% New 2 4 6 8 10

# of Years in Business

Avoiding the Pitfalls of Small Business Failure

Know your business in depth Develop a solid business plan Manage financial resources Understand financial statements Learn to manage people effectively Keep in tune with yourself

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10 Tips of Utahs Fastest Growing Companies

1.

2.

3. 4. 5.

Stop paying lip service to customer service Be willing to share the pie with your employees Make your own luck Be prepared to make sacrifices Spread yourself out, not thin
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Chapter 1: Entrepreneurship

10 Tips of Utahs Fastest Growing Companies (continued)

6.
7. 8. 9. 10.

Break down the walls Stay one step ahead Invest in yourself Be different Look where youre going

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Motto for Entrepreneurs

Conceive it Believe it Achieve it!

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