the foundations of entrepreneurship

The Foundations of

Entrepreneurship

The Foundations of

Entrepreneurship

2Chapter 1: Entrepreneurship Copyright 2008 Prentice Hall Publishing

The World of the The World of the EntrepreneurEntrepreneur

Every year in the U.S., Every year in the U.S., entrepreneurs launch 850,000 entrepreneurs launch 850,000 new businesses.new businesses.

Entrepreneurial spirit - the most Entrepreneurial spirit - the most significant economic development significant economic development in recent history.in recent history.

GEM study: 11.3 percent of adult GEM study: 11.3 percent of adult population in the U.S. is actively population in the U.S. is actively involved in trying to start a new involved in trying to start a new business. business.

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

0.05.0

10.015.020.025.030.035.040.045.0

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Country

To

tal

En

trep

ren

euri

al

Act

ivit

y (T

EA

) In

dex

TEA Index

Global TEAAverage

Source: 2004 Global Entrepreneurship Monitor.


The World of the The World of the EntrepreneurEntrepreneur

GEM studyGEM study Globally 9.4 percent of adults are Globally 9.4 percent of adults are

actively engaged in trying to start a actively engaged in trying to start a business.business.

Men are twice as likely as women to Men are twice as likely as women to start a business (exactly the start a business (exactly the oppositeopposite trend in the U.S., however).trend in the U.S., however).

Nearly one-third of global Nearly one-third of global entrepreneurs are between the ages entrepreneurs are between the ages of 25 and 44. of 25 and 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 in the face of risk and uncertainty for the purpose of uncertainty for the purpose of achieving profit and growth by achieving profit and growth by identifying opportunities and identifying opportunities and assembling the necessary assembling the necessary resources to capitalize on them. resources to capitalize on them.


Characteristics of Characteristics of EntrepreneursEntrepreneurs

Desire for responsibilityDesire for responsibility Preference for moderate risk – risk Preference for moderate risk – risk

eliminatorseliminators Confidence in their ability to Confidence in their ability to

succeedsucceed Desire for immediate feedbackDesire for immediate feedback High level of energyHigh level of energy Future orientation – serial Future orientation – serial

entrepreneursentrepreneurs 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 Benefits of EntrepreneurshipEntrepreneurship

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 Contribute to society and to be

recognized for your effortsrecognized for your efforts Do what you enjoy and to have Do what you enjoy and to have

fun at it fun at it


Drawbacks of Drawbacks of EntrepreneurshipEntrepreneurship

Uncertainty of incomeUncertainty of income Risk of losing your entire Risk of losing your entire

investmentinvestment 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: Adapted from Dun & Bradstreet 21st Annual Small Business Survey Summary Report, 2002, p. 35.



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

Entrepreneurs' Age at Business Formation

18 - 2412.0%

25 - 3432.3%

35 - 4430.6%

45 - 5417.4%

55 - 646.7%

Over 651.0%

Source: 2004 Global Entrepreneurship Monitor.



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

High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

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 lifestyleIndependent lifestyle E-commerce and the World E-commerce and the World

Wide WebWide Web

$94.0

$117.7

$142.5

$169.5

$199.3

$232.1

$-

$50.0

$100.0

$150.0

$200.0

$250.0

Re

ve

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es

(in

Bill

ion

s)

2003 2004 2005 2006 2007 2008

Year

U.S. Retail E-Commerce Revenues

Source: eMarketer, 2005.


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

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 E-commerce and the World

Wide WebWide Web International International

opportunitiesopportunities


The Cultural The Cultural Diversity of Diversity of

EntrepreneurshipEntrepreneurship Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs

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 companies23%

Other reasons7%

Source: Center for Women’s Business Research, 2004.



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



EntrepreneurshipEntrepreneurship Home-based businessesHome-based businesses Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts

Small Business by Industry

Service39.2%

Retail20.5%

Construction11.8%

Wholesale7.4%

Manufacturing5.8%

Finance8.0%

Other7.3%

Source: U.S. Small Business Administration, 2005.


Small Small Businesses...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 Employ 51 percent of the nation’s private sector nation’s private sector workforce.workforce.

Create more jobs than big Create more jobs than big businesses.businesses.

Are leaders in offering training Are leaders in offering training and advancement opportunities and advancement opportunities to workers.to workers.


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

Account for 47 percent of Account for 47 percent of business sales.business sales.

Create 13X more innovations Create 13X more innovations per employee than large per employee than large companies.companies. Zipper, FM radio, laser, air Zipper, FM radio, laser, air

conditioning, escalator, light conditioning, escalator, light bulb, personal computer, bulb, personal computer, automatic transmission, and automatic transmission, and many more!many more!

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: NFIB Business Policy Guide, 2003, p. 16.


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 Failure to develop a strategic planplan


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


Putting Failure into Putting Failure into PerspectivePerspective

Entrepreneurs are Entrepreneurs are notnot paralyzed by the prospect of paralyzed by the prospect of failure.failure.

Failure – a natural part of the Failure – a natural part of the creative process. creative process.

Successful entrepreneurs learn Successful entrepreneurs learn to fail to fail intelligentlyintelligently..


Avoiding the Avoiding the Pitfalls of Pitfalls of

Small Business Small Business FailureFailure

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 Understand financial

statementsstatements Learn to manage people Learn to manage people

effectivelyeffectively Keep in tune with yourselfKeep in tune with yourself

the foundations of entrepreneurship

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