chapter 1 entrepreneurship copyright 2006 prentice hall publishing company 1 entrepreneurs: the...

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 11Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship

Entrepreneurs: The Driving Force Behind Small Business


The World of the The World of the EntrepreneurEntrepreneur In the U.S., entrepreneurs start In the U.S., entrepreneurs start

nearly 6 million businesses a year!nearly 6 million businesses a year! Global Entrepreneurship Monitor Global Entrepreneurship Monitor

(GEM)(GEM) Approximately 10.5% of U.S. Approximately 10.5% of U.S.

population is actively involved in population is actively involved in trying to start a new business. trying to start a new business.

Approximately 12% of people in 37 Approximately 12% of people in 37 GEM countries studied are involved in GEM countries studied are involved in starting a new business.starting a new business.

Entrepreneurial Activity Across the GlobePersons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity

0.02.04.06.08.0

10.012.014.016.018.020.0

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and

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Mex

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Arg

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Country

To

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TE

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Ind

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TEA Index

Global TEAAverage

Source: 2002 Global Entrepreneurship Monitor.Source: 2002 Global Entrepreneurship Monitor.


What is an What is an Entrepreneur?Entrepreneur?

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

What Is an What Is an Entrepreneur?Entrepreneur?

An entrepreneur is someone An entrepreneur is someone who is willing to work 16 who is willing to work 16 hours a day to keep from hours a day to keep from working 8 hours a day for working 8 hours a day for someone else!someone else!

5%

25%

27%

36%

41%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Percentage

Have been downsized or laid off

Wanted to fulfill lifelong goal

Tired of working for someone else

Wanted more control over future

Joined fanily business

Why Entrepreneurs Went into Business

Source: Dun & Bradstreet 19Source: Dun & Bradstreet 19thth Annual Small Business Survey, 2000. Annual Small Business Survey, 2000.


Characteristics of Characteristics of EntrepreneursEntrepreneurs

Desire to take initiativeDesire to take initiative Preference for moderate riskPreference for moderate risk Confidence in their ability to Confidence in their ability to

succeedsucceed Self-relianceSelf-reliance PerseverancePerseverance Desire for immediate feedbackDesire for immediate feedback


Characteristics of Characteristics of EntrepreneursEntrepreneurs

High level of energyHigh level of energy CompetitivenessCompetitiveness Future orientationFuture orientation

Serial entrepreneursSerial entrepreneurs Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money


EntrepreneurshipEntrepreneurship

One characteristic of One characteristic of entrepreneurs stands out:entrepreneurs stands out:

Diversity!Diversity! AnyoneAnyone – regardless of age, race, – regardless of age, race,

gender, color, national origin, or gender, color, national origin, or any other characteristic – can any other characteristic – can become an entrepreneur become an entrepreneur (although not everyone should). (although not everyone should).


Benefits of Small Benefits of Small Business OwnershipBusiness Ownership

The opportunity to:The opportunity to: Create your own destinyCreate your own destiny Make a differenceMake a difference Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to be recognized Contribute to society and to be recognized

for your effortsfor your efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work

Small Business Owners' Work WeekNumber of Hours Worked per Week

Less than 30 hours11%

30 to 40 hours24%

41 to 50 hours28%

51 to 60 hours20%

More than 60 hours17%

Source: Dun & Bradstreet 21st Annual Small Business Survey, 2002.Source: Dun & Bradstreet 21st Annual Small Business Survey, 2002.


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the Lower quality of life until the

business gets establishedbusiness gets established

9.8%

16.8% 16.7%15.9%

15.2%

9.3%8.5%

3.9%

2.2% 1.7%

0.0%

2.0%

4.0%6.0%

8.0%

10.0%

12.0%14.0%

16.0%

18.0%

Under25

25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Age

Owner Age at Business Formation

Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002. Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002.


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the business gets establishedLower quality of life until the business gets established

High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement


Feeding the Feeding the Entrepreneurial Entrepreneurial FireFire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic Demographic and economic

factorsfactors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide

WebWeb


Feeding the Feeding the Entrepreneurial Entrepreneurial FireFire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic Demographic and economic

factorsfactors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide

WebWeb International opportunitiesInternational opportunities


The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship

Young entrepreneursYoung entrepreneurs

89%86%

79%

69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Asian/Pacific Islander African-American Hispanic-American White

Aspiring Teenage EntrepreneursPercent Interested in Starting a Business

Source: Milken Institute, 2003. Source: Milken Institute, 2003.



Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1978 1981 1984 1987 1990 1993 1996 1999 2002

Women Owned Businesses in the United States

Source: National Federation of Women Business Owners, 2003.Source: National Federation of Women Business Owners, 2003.



Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs Minority-owned enterprisesMinority-owned enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs



Home-based business ownersHome-based business owners Family business ownersFamily business owners CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts

A Profile of Small Business by Industry

Service40%

Retail20%

Construction12%

Wholesale8% Manufacturing

6%Finance

8%

Other6%

Source: Small Business Administration, 2002. Source: Small Business Administration, 2002.


Small Small Businesses...Businesses...

Make up 98.5% of all the businesses Make up 98.5% of all the businesses in the U.S.in the U.S.

Employ 52% of the nation’s private Employ 52% of the nation’s private sector workforce.sector workforce.

Pay 45 % of total private payroll.Pay 45 % of total private payroll. Create more jobs than big Create more jobs than big

businesses.businesses. Are leaders in offering training and Are leaders in offering training and

advancement opportunities to advancement opportunities to workers.workers.


Produce 51% of the nation’s private Produce 51% of the nation’s private GDP.GDP.

Account for 47% of business sales.Account for 47% of business sales. Create 4X more innovations per R & D Create 4X more innovations per R & D

dollar spent than medium-sized firms dollar spent than medium-sized firms and 24X as many as large companies.and 24X as many as large companies. Create two-thirds of all new Create two-thirds of all new

inventions.inventions. Produce 13X to 14X more patents Produce 13X to 14X more patents

per employees than large per employees than large companies.companies.

Small Small Businesses...Businesses...

100%

81%

65%

54%46%

40%36%

32% 29% 27% 25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% o

f S

mal

l F

irm

s S

urv

ivin

g

New 1 2 3 4 5 6 7 8 9 10

# of Years in Business

Small Business Survival Rate

Source: National Federation of Independent Businesses Source: National Federation of Independent Businesses Business Policy GuideBusiness Policy Guide, 2003. , 2003.


Eleven Deadly Eleven Deadly Mistakes of Mistakes of EntrepreneurshipEntrepreneurship1.1. Management incompetenceManagement incompetence

2.2. Lack of experienceLack of experience

3.3. Forcing a flawed ideaForcing a flawed idea

4.4. UndercapitalizationUndercapitalization

5.5. Poor cash managementPoor cash management

6.6. Failure to develop a strategic Failure to develop a strategic planplan


Eleven Deadly Eleven Deadly Mistakes of Mistakes of EntrepreneurshipEntrepreneurship7.7. Weak marketing effortWeak marketing effort

8.8. Uncontrolled growthUncontrolled growth

9.9. Poor locationPoor location

10.10. Lack of inventory controlLack of inventory control

11.11. Inability to make the Inability to make the “entrepreneurial transition”“entrepreneurial transition”


Putting Failure Into Putting Failure Into PerspectivePerspective Entrepreneurs are Entrepreneurs are notnot paralyzed paralyzed

by the prospect of failure.by the prospect of failure. Failure – a natural part of the Failure – a natural part of the

creative process. creative process. Successful entrepreneurs learn to Successful entrepreneurs learn to

fail fail intelligentlyintelligently..


Avoiding the Pitfalls Avoiding the Pitfalls of of Small Business Small Business FailureFailure

Know your business in Know your business in depthdepth

Prepare a solid business Prepare a solid business planplan

Manage financial resourcesManage financial resources Understand financial Understand financial

statementsstatements


Avoiding the Pitfalls Avoiding the Pitfalls of of Small Business Small Business FailureFailure

Learn to manage people Learn to manage people effectivelyeffectively

Set your business apart Set your business apart from the competitionfrom the competition

Keep in tune with yourselfKeep in tune with yourself

chapter 1 entrepreneurship copyright 2006 prentice hall publishing company 1 entrepreneurs: the...

Documents

entrepreneurship copyright

small business slide

money slide

immediate feedback slide

new business

initiative desire

immediate feedback desire

moderate risk preference