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Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 11Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Entrepreneurs: The Driving Force Behind Small Business
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 22Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
The World of the The World of the EntrepreneurEntrepreneur In the U.S., entrepreneurs start In the U.S., entrepreneurs start
nearly 6 million businesses a year!nearly 6 million businesses a year! Global Entrepreneurship Monitor Global Entrepreneurship Monitor
(GEM)(GEM) Approximately 10.5% of U.S. Approximately 10.5% of U.S.
population is actively involved in population is actively involved in trying to start a new business. trying to start a new business.
Approximately 12% of people in 37 Approximately 12% of people in 37 GEM countries studied are involved in GEM countries studied are involved in starting a new business.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
Jap
anR
uss
iaB
elg
ium
Fra
nce
Ho
ng
Ko
ng
Cro
atia
Sw
eden
Tai
wan
Po
lan
dS
pai
nN
eth
erla
nd
sF
inla
nd
Slo
ven
iaG
erm
any
Un
ited
Ital
yS
ing
apo
reS
ou
thD
enm
ark
Hu
ng
ary
Sw
itze
rlan
dIs
rael
Au
stra
lia
No
rway
Can
ada
Irel
and
Un
ited
Icel
and
Ch
ina
Mex
ico
Bra
zil
New
Arg
enti
na
Ko
rea
Ch
ile
Ind
iaT
hai
lan
d
Country
To
tal E
ntr
ep
ren
eu
ria
l A
cti
vit
y (
TE
A)
Ind
ex
TEA Index
Global TEAAverage
Source: 2002 Global Entrepreneurship Monitor.Source: 2002 Global Entrepreneurship Monitor.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 44Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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!
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
Source: Dun & Bradstreet 19Source: Dun & Bradstreet 19thth Annual Small Business Survey, 2000. Annual Small Business Survey, 2000.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 77Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Characteristics of Characteristics of EntrepreneursEntrepreneurs
Desire to take initiativeDesire to take initiative Preference for moderate riskPreference for moderate risk Confidence in their ability to Confidence in their ability to
succeedsucceed Self-relianceSelf-reliance PerseverancePerseverance Desire for immediate feedbackDesire for immediate feedback
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 88Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Characteristics of Characteristics of EntrepreneursEntrepreneurs
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
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 99Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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).
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1010Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Benefits of Small Benefits of Small Business OwnershipBusiness Ownership
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 recognized Contribute to society and to be recognized
for your effortsfor your efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1111Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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
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: Dun & Bradstreet 21st Annual Small Business Survey, 2002.Source: Dun & Bradstreet 21st Annual Small Business Survey, 2002.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1313Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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
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
Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002. Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1515Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1616Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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 Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide
WebWeb
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1717Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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 Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide
WebWeb International opportunitiesInternational opportunities
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1818Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Young entrepreneursYoung 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
Source: Milken Institute, 2003. Source: Milken Institute, 2003.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2020Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Young entrepreneursYoung entrepreneurs Women entrepreneursWomen 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
Source: National Federation of Women Business Owners, 2003.Source: National Federation of Women Business Owners, 2003.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2222Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2323Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship
Home-based business ownersHome-based business owners Family business ownersFamily business owners CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts
A Profile of Small Business by Industry
Service40%
Retail20%
Construction12%
Wholesale8% Manufacturing
6%Finance
8%
Other6%
Source: Small Business Administration, 2002. Source: Small Business Administration, 2002.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2525Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Small Small Businesses...Businesses...
Make up 98.5% of all the businesses Make up 98.5% of all the businesses in the U.S.in the U.S.
Employ 52% of the nation’s private Employ 52% of the nation’s private sector workforce.sector workforce.
Pay 45 % of total private payroll.Pay 45 % of total private payroll. Create more jobs than big Create more jobs than big
businesses.businesses. Are leaders in offering training and Are leaders in offering training and
advancement opportunities to advancement opportunities to workers.workers.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2626Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Produce 51% of the nation’s private Produce 51% of the nation’s private GDP.GDP.
Account for 47% of business sales.Account for 47% of business sales. Create 4X more innovations per R & D Create 4X more innovations per R & D
dollar spent than medium-sized firms dollar spent than medium-sized firms and 24X as many as large companies.and 24X as many as large companies. Create two-thirds of all new Create two-thirds of all new
inventions.inventions. Produce 13X to 14X more patents Produce 13X to 14X more patents
per employees than large per employees than large companies.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 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: National Federation of Independent Businesses Source: National Federation of Independent Businesses Business Policy GuideBusiness Policy Guide, 2003. , 2003.
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2828Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Eleven Deadly Eleven Deadly Mistakes of Mistakes of EntrepreneurshipEntrepreneurship1.1. Management incompetenceManagement incompetence
2.2. Lack of experienceLack of experience
3.3. Forcing a flawed ideaForcing a flawed idea
4.4. UndercapitalizationUndercapitalization
5.5. Poor cash managementPoor cash management
6.6. Failure to develop a strategic Failure to develop a strategic planplan
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2929Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Eleven Deadly Eleven Deadly Mistakes of Mistakes of EntrepreneurshipEntrepreneurship7.7. Weak marketing effortWeak marketing effort
8.8. Uncontrolled growthUncontrolled growth
9.9. Poor locationPoor location
10.10. Lack of inventory controlLack of inventory control
11.11. Inability to make the Inability to make the “entrepreneurial transition”“entrepreneurial transition”
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 3030Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Putting Failure Into Putting Failure Into PerspectivePerspective Entrepreneurs are Entrepreneurs are notnot paralyzed paralyzed
by the prospect of failure.by 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..
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 3131Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
Avoiding the Pitfalls Avoiding the Pitfalls of of Small Business Small Business FailureFailure
Know your business in Know your business in depthdepth
Prepare a solid business Prepare a solid business planplan
Manage financial resourcesManage financial resources Understand financial Understand financial
statementsstatements
Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 3232Chapter 1 EntrepreneurshipChapter 1 Entrepreneurship
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
Keep in tune with yourselfKeep in tune with yourself