entrepreneurs: the powerful economic force chapter 1 bentr2101 fundamental of entreprenuership

Entrepreneurs: The Powerful Economic Force

CHAPTER 1

BENTR2101 • FUNDAMENTAL OF ENTREPRENUERSHIP

BENTR2101 Fundamental of Entrepreneurship 2

Objectives

• At the end of the lecture students should be able to:-– Define the role of the entrepreneur in

the U.S. economy. – Describe the entrepreneurial profile. – Describe the benefits of owning a

small business. – Describe the potential drawbacks of

owning a small business. – Explain the forces that are driving the

growth in entrepreneurship.


– Discuss the role of diversity in small business and entrepreneurship.

– Describe the contributions small businesses make to the U. S. economy.

– Explain the reasons small businesses fail. – Put business failure into the proper

perspective. – Explain how small business owners can

avoid the major pitfalls of running a business.


Topics covered

• Introduction To Entrepreneurship• Characteristic Of Successful

Entrepreneur• The Cultural Diversity Of

Entrepreneurship• Eleven Deadly Mistakes of

Entrepreneurship


The World of the Entrepreneur

• In the U.S., entrepreneurs start nearly 6 million businesses a year!

• Global Entrepreneurship Monitor (GEM)– Approximately 10.5% of U.S.

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

– Approximately 12% of people in 37 GEM countries studied are involved in 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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TEA Index

Global TEAAverage

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


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.


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


Characteristics of Entrepreneurs

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

succeed• Self-reliance• Perseverance• Desire for immediate feedback


Characteristics of Entrepreneurs

• High level of energy• Competitiveness• Future orientation

– Serial entrepreneurs

• Skilled at organizing• Value achievement over money


Entrepreneurship

• One characteristic of entrepreneurs stands out:

Diversity!• Anyone – regardless of age, race,

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


Benefits of Small Business Ownership

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

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


Drawbacks of Small Business Ownership

• Uncertainty of income• Risk of losing your entire investment• Long 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%



• Uncertainty of income• Risk of losing your entire investment• Long 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



• 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 stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement


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


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 opportunitiesInternational opportunities


The Cultural Diversity of Entrepreneurship

• Young 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



• Young entrepreneurs• Women 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



• Young entrepreneurs• Women entrepreneurs• Minority-owned enterprises• Immigrant entrepreneurs• Part-time entrepreneurs



• Home-based business owners• Family business owners• Copreneurs• Corporate castoffs• Corporate dropouts


A Profile of Small Business by Industry

Service40%

Retail20%

Construction12%

Wholesale8% Manufacturing

6%Finance

8%

Other6%


Small Businesses...

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

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

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

businesses.• Are leaders in offering training and

advancement opportunities to workers.


• 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-sized firms and 24X as many as large companies.– Create two-thirds of all new

inventions.– Produce 13X to 14X more patents

per employees than large companies.

Small Businesses...


100%

81%

65%

54%46%

40%36%

32% 29% 27% 25%

0%

10%

20%

30%

40%

50%

60%

70%

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90%

100%

% o

f S

mal

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irm

s S

urv

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New 1 2 3 4 5 6 7 8 9 10

# of Years in Business

Small Business Survival Rate


Eleven Deadly Mistakes of Entrepreneurship

1. Management incompetence2. Lack of experience3. Forcing a flawed idea4. Undercapitalization5. Poor cash management6. Failure to develop a strategic plan


Eleven Deadly Mistakes of Entrepreneurship

7. Weak marketing effort8. Uncontrolled growth9. Poor location10.Lack of inventory control11.Inability to make the

“entrepreneurial transition”


Putting Failure Into Perspective

• Entrepreneurs are not paralyzed by the prospect of failure.

• Failure – a natural part of the creative process.

• Successful entrepreneurs learn to fail intelligently.


Avoiding the Pitfalls of Small Business Failure• Know your business in depth• Prepare a solid business plan• Manage financial resources• Understand financial

statements


Avoiding the Pitfalls of Small Business Failure

• Learn to manage people effectively

• Set your business apart from the competition

• Keep in tune with yourself

entrepreneurs: the powerful economic force chapter 1 bentr2101 fundamental of entreprenuership

Documents

new business

small business owners

business failure

global entrepreneurship

entrepreneurial profile

contributions small

reasons small businesses

years old