Introduction to Entrepreneurship Chapter 01

Business Education

1. The Foundations of
Entrepreneurship

2. Copyright 2008 Prentice Hall Publishing
2Chapter 1: Entrepreneurship
The World of the EntrepreneurThe World of the Entrepreneur

Every year in the U.S., entrepreneurs launch Every year in the U.S., entrepreneurs launch
850,000 new businesses.850,000 new businesses.

Entrepreneurial spirit - the most significant Entrepreneurial spirit - the most significant
economic development in recent history.economic development in recent history.

GEM study: 11.3 percent of adult population GEM study: 11.3 percent of adult population
in the U.S. is actively involved in trying to in the U.S. is actively involved in trying to
start a new business. start a new business.

3. Entrepreneurial Activity Across the Globe
Persons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
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TEA Index
Global TEA
Average
Source: 2004 Global Entrepreneurship Monitor.

4. Copyright 2008 Prentice Hall Publishing
4Chapter 1: Entrepreneurship
The World of the EntrepreneurThe World of the Entrepreneur

GEM studyGEM study

Globally 9.4 percent of adults are actively Globally 9.4 percent of adults are actively
engaged in trying to start a business.engaged in trying to start a business.

Men are twice as likely as women to start a Men are twice as likely as women to start a
business (exactly the business (exactly the oppositeopposite trend in the U.S., trend in the U.S.,
however).however).

Nearly one-third of global entrepreneurs are Nearly one-third of global entrepreneurs are
between the ages of 25 and 44. between the ages of 25 and 44.

5. Copyright 2008 Prentice Hall Publishing
5Chapter 1: Entrepreneurship
What Is an Entrepreneur?What Is an Entrepreneur?
One who creates a new business in the face One who creates a new business in the face
of risk and uncertainty for the purpose of of risk and uncertainty for the purpose of
achieving profit and growth by identifying achieving profit and growth by identifying
opportunities and assembling the necessary opportunities and assembling the necessary
resources to capitalize on them. resources to capitalize on them.

6. Copyright 2008 Prentice Hall Publishing
6Chapter 1: Entrepreneurship
Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Desire for responsibilityDesire for responsibility

Preference for moderate risk – risk Preference for moderate risk – risk
eliminatorseliminators

Confidence in their ability to succeedConfidence in their ability to succeed

Desire for immediate feedbackDesire for immediate feedback

High level of energyHigh level of energy

Future orientation – serial entrepreneursFuture orientation – serial entrepreneurs

Skilled at organizingSkilled at organizing

Value achievement over moneyValue achievement over money

7. Copyright 2008 Prentice Hall Publishing
7Chapter 1: Entrepreneurship
EntrepreneurshipEntrepreneurship

One characteristic of entrepreneurs stands One characteristic of entrepreneurs stands
out:out:
Diversity!Diversity!

AnyoneAnyone – regardless of age, race, gender, – regardless of age, race, gender,
color, national origin, or any other color, national origin, or any other
characteristic – can become an entrepreneur characteristic – can become an entrepreneur
(although not everyone should). (although not everyone should).

8. Copyright 2008 Prentice Hall Publishing
8Chapter 1: Entrepreneurship
Benefits of EntrepreneurshipBenefits of Entrepreneurship
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

9. Copyright 2008 Prentice Hall Publishing
9Chapter 1: Entrepreneurship
Drawbacks of EntrepreneurshipDrawbacks of Entrepreneurship

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

10. Small Business Owners' Work Week
Number of Hours Worked per Week
Less than 30 hours
11%
30 to 40 hours
24%
41 to 50 hours
28%
51 to 60 hours
20%
More than 60 hours
17%
Source: Adapted from Dun & Bradstreet 21
st
Annual Small Business Survey Summary Report, 2002, p. 35.

11. Copyright 2008 Prentice Hall Publishing
11Chapter 1: Entrepreneurship
Drawbacks of EntrepreneurshipDrawbacks of Entrepreneurship

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 Lower quality of life until the business gets
establishedestablished

12. Entrepreneurs' Age at Business Formation
18 - 24
12.0%
25 - 34
32.3%
35 - 44
30.6%
45 - 54
17.4%
55 - 64
6.7%
Over 65
1.0%
Source: 2004 Global Entrepreneurship Monitor.

13. Copyright 2008 Prentice Hall Publishing
13Chapter 1: Entrepreneurship
Drawbacks of EntrepreneurshipDrawbacks of Entrepreneurship

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

14. Copyright 2008 Prentice Hall Publishing
14Chapter 1: Entrepreneurship
Feeding the Feeding the
Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes

Entrepreneurial educationEntrepreneurial education

Demographic and economic factorsDemographic and economic factors

Shift to a service economyShift to a service economy

Technological advancementsTechnological advancements

Independent lifestyleIndependent lifestyle

E-commerce and the World Wide E-commerce and the World Wide
WebWeb

15. $94.0
$117.7
$142.5
$169.5
$199.3
$232.1
$-
$50.0
$100.0
$150.0
$200.0
$250.0
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2003 2004 2005 2006 2007 2008
Year
U.S. Retail E-Commerce Revenues
Source: eMarketer, 2005.

16. Copyright 2008 Prentice Hall Publishing
16Chapter 1: Entrepreneurship
Feeding the Feeding the
Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes

Entrepreneurial educationEntrepreneurial education

Demographic and economic factorsDemographic and economic factors

Shift to a service economyShift to a service economy

Technological advancementsTechnological advancements

Independent lifestylesIndependent lifestyles

E-commerce and the World Wide WebE-commerce and the World Wide Web

International opportunitiesInternational opportunities

17. Copyright 2008 Prentice Hall Publishing
17Chapter 1: Entrepreneurship
The Cultural Diversity of The Cultural Diversity of
EntrepreneurshipEntrepreneurship

Young entrepreneursYoung entrepreneurs

Women entrepreneursWomen entrepreneurs

18. Why Women Start Businesses
Gain control over
my schedule
46%
Saw a market
opportunity and
decided to pursue
it
24%
Frustrated with
"glass ceiling" at
big companies
23%
Other reasons
7%
Source: Center for Women’s Business Research, 2004.

19. Copyright 2008 Prentice Hall Publishing
19Chapter 1: Entrepreneurship
The Cultural Diversity of The Cultural Diversity of
EntrepreneurshipEntrepreneurship

Young entrepreneursYoung entrepreneurs

Women entrepreneursWomen entrepreneurs

Minority-owned enterprisesMinority-owned enterprises

Immigrant entrepreneursImmigrant entrepreneurs

Part-time entrepreneursPart-time entrepreneurs

20. Copyright 2008 Prentice Hall Publishing
20Chapter 1: Entrepreneurship
The Cultural Diversity of The Cultural Diversity of
EntrepreneurshipEntrepreneurship

Home-based businessesHome-based businesses

Family businessesFamily businesses

CopreneursCopreneurs

Corporate castoffsCorporate castoffs

Corporate dropoutsCorporate dropouts

21. Small Business by Industry
Service
39.2%
Retail
20.5%
Construction
11.8%
Wholesale
7.4%
Manufacturing
5.8%
Finance
8.0%
Other
7.3%
Source: U.S. Small Business Administration, 2005.

22. Copyright 2008 Prentice Hall Publishing
22Chapter 1: Entrepreneurship
Small Businesses...Small Businesses...

Make up 99.7 percent of all Make up 99.7 percent of all
businesses in the U.S.businesses in the U.S.

Employ 51 percent of the nation’s Employ 51 percent of the nation’s
private sector workforce.private sector workforce.

Create more jobs than big businesses.Create more jobs than big businesses.

Are leaders in offering training and Are leaders in offering training and
advancement opportunities to advancement opportunities to
workers.workers.

23. Copyright 2008 Prentice Hall Publishing
23Chapter 1: Entrepreneurship

Produce 51 percent of the nation’s Produce 51 percent of the nation’s
private GDP.private GDP.

Account for 47 percent of business Account for 47 percent of business
sales.sales.

Create 13X more innovations per Create 13X more innovations per
employee than large companies.employee than large companies.

Zipper, FM radio, laser, air Zipper, FM radio, laser, air
conditioning, escalator, light bulb, conditioning, escalator, light bulb,
personal computer, automatic personal computer, automatic
transmission, and many more!transmission, and many more!
Small Businesses...Small Businesses...

24. 100%
81%
65%
54%
46%
40%
36%
32%
29%
27%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%

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g
New 1 2 3 4 5 6 7 8 9 10
# of Years in Business
Small Business Survival Rate
Source: NFIB Business Policy Guide, 2003, p. 16.

25. Copyright 2008 Prentice Hall Publishing
25Chapter 1: Entrepreneurship
Ten Deadly Mistakes of Ten Deadly Mistakes of
EntrepreneurshipEntrepreneurship
1.1.Management mistakesManagement mistakes
2.2.Lack of experienceLack of experience
3.3.Poor financial controlPoor financial control
4.4.Weak marketing effortsWeak marketing efforts
5.5.Failure to develop a strategic planFailure to develop a strategic plan

26. Copyright 2008 Prentice Hall Publishing
26Chapter 1: Entrepreneurship
Ten Deadly Mistakes of Ten Deadly Mistakes of
EntrepreneurshipEntrepreneurship
6.6.Uncontrolled growthUncontrolled growth
7.7.Poor locationPoor location
8.8.Improper inventory controlImproper inventory control
9.9.Incorrect pricingIncorrect pricing
10.10.Inability to make the “entrepreneurial Inability to make the “entrepreneurial
transition”transition”

27. Copyright 2008 Prentice Hall Publishing
27Chapter 1: Entrepreneurship
Putting Failure into PerspectivePutting Failure into Perspective

Entrepreneurs are Entrepreneurs are notnot paralyzed by the paralyzed by the
prospect of failure.prospect of failure.

Failure – a natural part of the creative Failure – a natural part of the creative
process. process.

Successful entrepreneurs learn to fail Successful entrepreneurs learn to fail
intelligentlyintelligently..

28. Copyright 2008 Prentice Hall Publishing
28Chapter 1: Entrepreneurship
Avoiding the Pitfalls of Avoiding the Pitfalls of
Small Business FailureSmall Business Failure

Know your business in depthKnow your business in depth

Develop a solid business planDevelop a solid business plan

Manage financial resourcesManage financial resources

Understand financial statementsUnderstand financial statements

Learn to manage people effectivelyLearn to manage people effectively

Keep in tune with yourselfKeep in tune with yourself