Slides of chap1

Chapter 1 EntrepreneursChapter 1 Entrepreneurs CopyrightCopyright ©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

The World of theThe World of the
EntrepreneurEntrepreneur
 In the U.S., entrepreneurs start moreIn 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 isApproximately 8% of the U.S. population is
actively involved in entrepreneurial activityactively involved in entrepreneurial activity
 Nearly 11% of people in 49 GEM countriesNearly 11% of people in 49 GEM countries
studied are involved in starting a newstudied are involved in starting a new
businessbusiness

Chapter 1 EntrepreneursChapter 1 Entrepreneurs CopyrightCopyright ©2012 Pearson Education, Inc. publishing as Prentice Hall©2012 Pearson Education, Inc. publishing as Prentice Hall
1-1-44
What is anWhat is an
Entrepreneur?Entrepreneur?
One who creates a new business inOne who creates a new business in
the face of risk and uncertainty for thethe face of risk and uncertainty for the
purpose of achieving profit and growthpurpose of achieving profit and growth
by identifying opportunities andby identifying opportunities and
assembling the necessary resourcesassembling the necessary resources
to capitalize on themto capitalize on them

What is an Entrepreneur?What is an Entrepreneur?
An entrepreneur is someone whoAn entrepreneur is someone who
is willing to work 16 hours a day tois willing to work 16 hours a day to
keep from working 8 hours a daykeep from working 8 hours a day
for someone else!for someone else!

Characteristics ofCharacteristics of
EntrepreneursEntrepreneurs
SurveySurvey: 61% of adults in the U.S. would: 61% of adults in the U.S. would
like to start their own businesslike to start their own business
 Willingness to take initiativeWillingness to take initiative
 Preference forPreference for moderatemoderate riskrisk
 Confidence in their ability to succeedConfidence in their ability to succeed
 Self-relianceSelf-reliance
 PerseverancePerseverance
 Desire for immediate feedbackDesire for immediate feedback

 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 ofCharacteristics of
EntrepreneursEntrepreneurs

EntrepreneurshipEntrepreneurship
 One characteristic of entrepreneursOne characteristic of entrepreneurs
stands out:stands out:
Diversity!Diversity!
 AnyoneAnyone – regardless of age, race,– regardless of age, race,
gender, color, national origin, or anygender, color, national origin, or any
other characteristic – can become another characteristic – can become an
entrepreneur (although not everyoneentrepreneur (although not everyone
should)should)

How to Spot EntrepreneurialHow to Spot Entrepreneurial
OpportunitiesOpportunities
 Creativity vs. InnovationCreativity vs. Innovation
 CreativityCreativity – the ability to develop– the ability to develop
new ideas and to discover newnew ideas and to discover new
ways of looking at problems andways of looking at problems and
opportunitiesopportunities
 InnovationInnovation – the ability to apply– the ability to apply
creativecreative solutions to problems andsolutions to problems and
opportunities to enhance or toopportunities to enhance or to
enrich people’s livesenrich people’s lives

 Monitor trends and exploit them early onMonitor trends and exploit them early on
 Sonic MuleSonic Mule
 Take a different approach to an existingTake 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

 Look for creative ways to use existingLook for creative ways to use existing
resourcesresources
 Greenfields CoalGreenfields Coal
 Realize that others have the same problemRealize that others have the same problem
that you dothat you do
 SkirtSportsSkirtSports
 Notice what is missingNotice what is missing
 Dogs on WheelsDogs on Wheels

Benefits of Small BusinessBenefits of Small Business
OwnershipOwnership
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 recognizedContribute to society and to be recognized
for your effortsfor your efforts
 Do what you enjoy and to have fun at itDo what you enjoy and to have fun at it

Drawbacks of SmallDrawbacks 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, 2007.Source: MasterCard Global Small Business Survey, 2007.
Small Business Owners' Work Week
Number of Hours Worked per Week
1 to 39 hours
10%
40 to 49 hours
29%
50 to 59 hours
22%
60 to 69 hours
19%
More than 70 hours
20%
Average workweek = 54 hours

 Lower quality of life until the business getsLower quality of life until the business gets
establishedestablished

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

 Lower quality of life until the business getsLower quality of life until the business gets
establishedestablished
 High levels of stressHigh levels of stress
 Complete responsibilityComplete responsibility
 DiscouragementDiscouragement

Feeding theFeeding the
Entrepreneurial FireEntrepreneurial Fire
 Entrepreneurs as heroesEntrepreneurs as heroes
 Entrepreneurial educationEntrepreneurial education
 Demographic and economicDemographic and economic
factorsfactors
 Shift to a service economyShift to a service economy
 Technological advancementsTechnological advancements
 OutsourcingOutsourcing
 Independent lifestylesIndependent lifestyles
 E-Commerce and the World WideE-Commerce and the World Wide
WebWeb
 International opportunitiesInternational opportunities

The Cultural DiversityThe Cultural Diversity
of Entrepreneurshipof Entrepreneurship
 Young entrepreneursYoung entrepreneurs

Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 1996-2009.Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 1996-2009.
Entrepreneurial Activity by Age
Group

 Women entrepreneursWomen entrepreneurs

Source: 2008 Kauffman Index of Entrepreneurial Activity.Source: 2008 Kauffman Index of Entrepreneurial Activity.
Entrepreneurial Activity by GenderEntrepreneurial Activity by Gender

 Minority-owned enterprisesMinority-owned enterprises

Source: based on Minorities in Business: A Demographic Review ofSource: based on Minorities in Business: A Demographic Review of
Small Business Ownership, Small Business Administration, Office ofSmall Business Ownership, Small Business Administration, Office of
Advocacy, April 2007.Advocacy, April 2007.
Minority Business Ownership inMinority Business Ownership in
the United Statesthe United States
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
East
West
North
Copyright ©2012 Pearson Education, Inc. publishing as Prentice HallChapter 1 Entrepreneurs
1-24

 Minority-owned enterprisesMinority-owned enterprises
 Immigrant entrepreneursImmigrant entrepreneurs
 Part-time entrepreneursPart-time entrepreneurs

The Cultural Diversity ofThe Cultural Diversity of
EntrepreneurshipEntrepreneurship
 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, 2009.Source: Small Business Administration, 2009.
Small Business by
Industry

Small Businesses...Small Businesses...
 Make up 99.7% of all the 29.3 millionMake 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 privateEmploy 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 newSBA estimates they create 79% of all net new
jobs in the U.S.jobs in the U.S.

 Are leaders in offering training andAre leaders in offering training and
advancement opportunities to workersadvancement opportunities to workers
 Provide 67% of workers with their first jobsProvide 67% of workers with their first jobs
 Produce 51% of the nation’s private GDPProduce 51% of the nation’s private GDP
 Account for 47% of business salesAccount for 47% of business sales
 Key role in innovation:Key role in innovation:
 Produce 13 times more patents perProduce 13 times more patents per
employees than large companiesemployees than large companies
SmallSmall
Businesses...Businesses...

100%
81%
65%
54%
46%
40%
36%
32% 29% 27% 25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%ofSmallFirmsSurviving
New 1 2 3 4 5 6 7 8 9 10
# of Years in Business
Small Business Survival Rate
Source: National Federation of Independent BusinessesSource: National Federation of Independent Businesses Business Policy GuideBusiness Policy Guide,,
2003.2003.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 1-30Chapter 1 Entrepreneurs

Putting Failure intoPutting Failure into
PerspectivePerspective
 About 54% of new companies failAbout 54% of new companies fail
within 4 yearswithin 4 years
 Entrepreneurs areEntrepreneurs are notnot paralyzed byparalyzed by
the prospect of failurethe prospect of failure
 Failure – a natural part of the creativeFailure – a natural part of the creative
processprocess
 Successful entrepreneurs learn to failSuccessful entrepreneurs learn to fail
intelligentlyintelligently

Avoiding the PitfallsAvoiding the Pitfalls
ofof
Small BusinessSmall Business
FailureFailure
 Know your business in depthKnow your business in depth
 Prepare a business planPrepare a business plan
 Manage financial resourcesManage financial resources
 Understand financialUnderstand financial
statementsstatements

Avoiding the PitfallsAvoiding the Pitfalls
ofof
Small BusinessSmall Business
FailureFailure Learn to manage peopleLearn to manage people
effectivelyeffectively
 Set your business apart fromSet your business apart from
the competitionthe competition
 Maintain a positive attitudeMaintain a positive attitude

All rights reserved. No part of this publication may beAll rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted,reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical,in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the priorphotocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the Unitedwritten permission of the publisher. Printed in the United
States of America.States of America.
Copyright ©2012 Pearson Education, Inc.Copyright ©2012 Pearson Education, Inc.
Publishing as Prentice Hall Publishing as Prentice Hall

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