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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-11
Entrepreneurs: The Driving Force Behind Small Business
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-22
The World of the The World of the EntrepreneurEntrepreneur In the U.S., entrepreneurs start more In the U.S., entrepreneurs start more
than 6 million businesses a year!than 6 million businesses a year! Global Entrepreneurship Monitor (GEM)Global Entrepreneurship Monitor (GEM)
Approximately 8% of the U.S. population is Approximately 8% of the U.S. population is actively involved in entrepreneurial activityactively involved in entrepreneurial activity
Nearly 11% of people in 49 GEM countries Nearly 11% of people in 49 GEM countries studied are involved in starting a new studied are involved in starting a new businessbusiness
Copyright ©2012 Pearson Education, Inc. publishing as Prentice HallChapter 1 Entrepreneurs 1-3
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-44
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!
Copyright ©2012 Pearson Education, Inc. publishing as Prentice HallChapter 1 Entrepreneurs 1-5
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-66
Characteristics of Characteristics of EntrepreneursEntrepreneurs
SurveySurvey: 61% of adults in the U.S. : 61% of adults in the U.S. would like to start their own would like to start their own business business
Willingness to take initiativeWillingness to take initiative Preference for Preference for moderatemoderate risk risk Confidence in their ability to succeedConfidence in their ability to succeed Self-relianceSelf-reliance PerseverancePerseverance Desire for immediate feedbackDesire for immediate feedback
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-77
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
Characteristics of Characteristics of EntrepreneursEntrepreneurs
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-88
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)
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-99
How to Spot How to Spot Entrepreneurial Entrepreneurial OpportunitiesOpportunities
Creativity vs. Innovation Creativity vs. Innovation CreativityCreativity – the ability to – the ability to
develop new ideas and to develop new ideas and to discover new ways of looking at discover new ways of looking at problems and opportunitiesproblems and opportunities
InnovationInnovation – the ability to apply – the ability to apply creativecreative solutions to problems solutions to problems and opportunities to enhance and opportunities to enhance or to enrich people’s lives or to enrich people’s lives
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1010
How to Spot How to Spot Entrepreneurial Entrepreneurial OpportunitiesOpportunities
Monitor trends and exploit them early Monitor trends and exploit them early onon Sonic MuleSonic Mule
Take a different approach to an existing Take a different approach to an existing marketmarket Poo Poo Paper CompanyPoo Poo Paper Company
Put a new twist on an old ideaPut a new twist on an old idea Green Grass at LastGreen Grass at Last
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1111
How to Spot How to Spot Entrepreneurial Entrepreneurial OpportunitiesOpportunities
Look for creative ways to use existing Look for creative ways to use existing resourcesresources Greenfields Coal Greenfields Coal
Realize that others have the same Realize that others have the same problem that you doproblem that you do SkirtSportsSkirtSports
Notice what is missingNotice what is missing Dogs on WheelsDogs on Wheels
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1212
Benefits of Small Benefits of Small Business OwnershipBusiness Ownership
The opportunity to:The opportunity to: Control your own destinyControl your own destiny Make a differenceMake a difference
Social entrepreneursSocial entrepreneurs Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to be recognized for Contribute to society and to be recognized for
your effortsyour efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1313
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
Source: MasterCard Global Small Business Survey, Source: MasterCard Global Small Business Survey, 2007. 2007.
Small Business Owners' Work WeekNumber of Hours Worked per Week
1 to 39 hours10%
40 to 49 hours29%
50 to 59 hours22%
60 to 69 hours19%
More than 70 hours20%
Average workweek = 54 hours
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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1515
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
Source: National Federation of Independent Businesses and Wells Fargo Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002. Bank, 2002.
9.8%
33.5%31.1%
17.8%
6.1%
1.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Under 25 25-34 35-44 45-54 55-64 65+
Age
Owner Age at Business Formation
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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1717
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
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1818
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 OutsourcingOutsourcing Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide
WebWeb International opportunitiesInternational opportunities
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-1919
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Young entrepreneursYoung entrepreneurs
Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 1996-2009. 1996-2009.
Entrepreneurial Activity by Age Group
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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-2121
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs
Source: 2008 Kauffman Index of Entrepreneurial Activity. Source: 2008 Kauffman Index of Entrepreneurial Activity.
Entrepreneurial Activity by Entrepreneurial Activity by GenderGender
Copyright ©2012 Pearson Education, Inc. publishing as Prentice HallChapter 1 Entrepreneurs
1-22
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-2323
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs Minority-owned enterprisesMinority-owned enterprises
Source: based on Minorities in Business: A Demographic Source: based on Minorities in Business: A Demographic Review of Small Business Ownership, Small Business Review of Small Business Ownership, Small Business Administration, Office of Advocacy, April 2007. Administration, Office of Advocacy, April 2007.
Minority Business Ownership Minority Business Ownership in the United Statesin the United States
0102030405060708090
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
EastWestNorth
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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-2525
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs Minority-owned enterprisesMinority-owned enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-2626
The Cultural Diversity The Cultural Diversity of Entrepreneurshipof Entrepreneurship Home-based business ownersHome-based business owners Family business ownersFamily business owners CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts Retired Baby BoomersRetired Baby Boomers
Source: Small Business Administration, Source: Small Business Administration, 2009. 2009.
Small Business by Industry
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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-2828
Small Small Businesses...Businesses...
Make up 99.7% of all the 29.3 million Make up 99.7% of all the 29.3 million businesses in the U.S.businesses in the U.S.
Employ 50.2% of the nation’s private Employ 50.2% of the nation’s private sector workforcesector workforce
Pay 45% of total private payrollPay 45% of total private payroll Create more jobs than big businessesCreate more jobs than big businesses
SBA estimates they create 79% of all net SBA estimates they create 79% of all net new jobs in the U.S. new jobs in the U.S.
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-2929
Are leaders in offering training and Are leaders in offering training and advancement opportunities to workersadvancement opportunities to workers Provide 67% of workers with their first jobs Provide 67% of workers with their first jobs
Produce 51% of the nation’s private Produce 51% of the nation’s private GDPGDP
Account for 47% of business salesAccount for 47% of business sales Key role in innovation:Key role in innovation:
Produce 13 times more patents per Produce 13 times more patents per employees than large companiesemployees than large 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 Sm
all F
irms
Surv
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 Business Policy GuideGuide, 2003. , 2003.
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Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-3131
Putting Failure into Putting Failure into PerspectivePerspective About 54% of new companies fail About 54% of new companies fail
within 4 years within 4 years Entrepreneurs are Entrepreneurs are notnot paralyzed paralyzed
by the prospect of failureby 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
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-3232
Avoiding the Pitfalls Avoiding the Pitfalls of of Small Business Small Business FailureFailure
Know your business in Know your business in depthdepth
Prepare a business planPrepare a business plan Manage financial resourcesManage financial resources Understand financial Understand financial
statementsstatements
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-3333
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
Maintain a positive Maintain a positive attitudeattitude
Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1-3434
All rights reserved. No part of this publication may All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, electronic, mechanical, photocopying, recording, or otherwise, without the prior written or otherwise, without the prior written permission of the publisher. Printed in the United permission of the publisher. Printed in the United States of America.States of America.
Copyright ©2012 Pearson Education, Copyright ©2012 Pearson Education, Inc. Publishing as Prentice HallInc. Publishing as Prentice Hall
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