Chapter 1Entrepreneur and Entrepreneurship

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Businessbuying and selling of products and services.Productexists in nature or is made by human beings and is tangible.Servicework that provides time, skills, or expertise and is intangible.Combining Resources:1.1. What Is Business?

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.1.1. What Is a Small Business?0 to 500 full-time employeesApproximately 99.9% of the 26.8 million U.S. businesses are small.Small businesses employ about 50% of the U.S. private workforce.Annual sales < $5 millionSmall Businesses OwnersManage their businesses by expecting stable sales, profits, and growth

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Employeesearn their living working for someone elses business.Entrepreneursearn their living starting, owning, and working for their own business.EntrepreneursRecognize opportunities where others see chaos or confusionChallenge the unknown and continuously create the futureEntrepreneursFocus their efforts on innovation, profitability and sustainable growth1.2. What Is an Entrepreneur?

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

A scarce (limited) resource is something of value that can be used to make something else or fill a need.

Entrepreneurs add value to scarce resources by shifting them from areas of lower to higher productivity.1.2.1. Entrepreneurs Add Value to Scarce Resources

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.2.2. The World of the EntrepreneurEvery year U.S. entrepreneurs launch 550,000 new businesses.Entrepreneurial spirit - the most significant economic development in recent history.Global Entrepreneurship Monitor (GEM) study reports:18.7% of adult population in the U.S. is actively involved in trying to start a new business.Men are twice as likely to start a business as women.Most entrepreneurs turn to family members and friends for capital.Entrepreneurs are most likely to launch businesses when they are between the ages of 25 and 44.

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Control over timeFulfillmentCreation/OwnershipControl over compensationControl over working conditions1.2.3. Why Be an Entrepreneur?

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.3. Characteristics of EntrepreneursDesire for responsibilityPreference for moderate levels of risk risk eliminatorsConfidence in their ability to succeedDesire for immediate feedbackHigh level of energyFuture orientation serial entrepreneursSkilled at organizingValue achievement over money

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

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). 1.3. Characteristics of Entrepreneurs

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.3.1. Benefits of EntrepreneurshipThe opportunity to:Create your own destinyMake a differenceReach your full potentialReap impressive profitsContribute to society and to be recognized for your effortsDo what you enjoy and to have fun at it

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.3.2. Drawbacks of EntrepreneurshipUncertainty of incomeRisk of losing your entire investmentLong hours and hard workLower quality of life until the business gets establishedHigh levels of stressComplete responsibilityDiscouragement

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Cost/Benefit Analysislisting costs and benefits in order to make decisions that are not emotional

Costsmoney and time invested

Benefitsmoney earned and knowledge and experience gained

Opportunity Costcost of the next-best investment

For cost/benefit analysis to be accurate, opportunity cost must be included.1.3.3. Cost/Benefit Analysis

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.4. Ten Deadly Mistakes of EntrepreneurshipManagement mistakesLack of experiencePoor financial controlWeak marketing effortsFailure to develop a strategic planUncontrolled growthPoor locationImproper inventory controlIncorrect pricingInability to make the entrepreneurial transition

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.5. Shumpeters Sources of OpportunityUse a new technology to produce a new product.Use an existing technology to produce a new product.Use an existing technology to produce an old product in a new way.Find a new source of resources to produce more efficiently.Develop a new market for an existing product.

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Not All Ideas Are OpportunitiesAn opportunity is an idea that is based on what customers need or want and are willing to buy sufficiently often at a high enough price to sustain the business.

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.6. Timmons Business Opportunity=Idea + 4 CharacteristicsAttractive to customersWill work in the business environmentCan be executed in an existing window of opportunityResources and skills to create the business available to the entrepreneur

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Use SWOT to Evaluate Business IdeasStrengthsandWeaknessesOpportunitiesandThreats

Roots of OpportunityProblemsChangesInventions (creation)CompetitionTechnological advances

Where others see problems, entrepreneurs recognize opportunities.

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.7. Pathways to EntrepreneurshipStart from the beginningBuy an existing businessSecure franchise rightsLicense technology(Do not steal someone elses creativity)

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

Profitamount of money earned after costs are paid

Profit signals that an entrepreneur is adding value to scarce resources.

Entrepreneurs try to make choices (trade-offs) that will increase profit.

1.8. Profit Is the Signal

Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE 2010 Pearson Education, Upper Saddle River, NJ 07458.All Rights Reserved.*

1.9. Rules for Building a Successful BusinessRecognize an opportunityEvaluate it with critical thinking (SWOT)Build a teamCreate a business planGather resourcesEstablish ownershipCreate wealth

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