Chapter 1

What is an Entrepreneur

Objectives

• Understand what differentiates an entrepreneur

• Classify different types of entrepreneurs• Understand your strength and limitations

Introduction

• The number of employees in small and entrepreneurial ventures is growing faster than in any other sector of the labor force.

• Entrepreneurship is the process of planning, organizing, operating, and assuming the risk of a business venture.

• It requires a special blend of courage, self confidence, and skills, all of which determine the success or failure of an enterprise.

Commonly Shared Entrepreneurial Characteristics

• 1. They have the ability to deal with ambiguity: they can spot opportunities not obvious to competitors.

• 2. They are self starters, optimists, perseverant, energetic, and action oriented: Threats are turned into great new ideas.

• 3. They are persuasive leaders, people oriented, natural networkers, and communicators: They create and sustain networks of relationships.

• 4. They are often creative and highly imaginative.• 5. They passionately seek new opportunities: profit from change and

disruption.• 6. They tolerate risk: temper risk with reality.• 7. They work with urgency: focus on long term too.• 8. They focus on execution: instead on analyzing ideas.• 9. They are open to change: do not hang on to plans that do not work.

Types of Entrepreneurs

• 1. Aspiring entrepreneurs: dream of starting a business. Have not yet made the leap from current employment.

• 2. Lifestyle entrepreneurs: their intention is to earn an income for themselves and their families. Goal maybe to retain control of the company.

• 3. Growth entrepreneurs: desire to grow as fast as possible. Most dynamic job generators in the economy. Willing to trade control for growth.

The need to control• The first decision an entrepreneur has to make is whether personal

lifestyle and control are more important than growth and eventual wealth creation.

• Partners: Studying successful companies shows there is a lower chance of failure when there is more than one founding partner.

• Hired managers: most venture capitalists refuse to invest in companies where the founder is not open to the idea of stepping aside at the appropriate time. Bringing in new managers with more experience can often be a painful but necessary step.

• Financing options: If control is important financing will have to be through bank loans.

• Opportunity selection: If control is important you are better off starting with a smaller opportunity.

Why become an entrepreneur?

• Some people are attracted to the perceived independence and freedom – being able to do your own thing.

• Some may hit a plateau – blocked from further promotions.

• For many, entrepreneurship offers a vehicle to create huge financial rewards.

Develop management skills• The failure rate of new companies is 24% within

the first 2 years and 80 – 90 % within the first 10 years.

• Most companies fail because the founders are confronting complex management decisions without experience or knowledge.

• Starting a company can be stressful with tremendous demands on your time and energy.

• You need to maintain appropriate balance between your personal lifestyle and your new company.

Summary• Entrepreneurship is the process of planning, organizing, operating, and assuming the risk of a

business venture.• It requires a special blend of courage, self confidence, and skills, all of which determine the success

or failure of an enterprise.• 1. Aspiring entrepreneurs: dream of starting a business. Have not yet made the leap from current

employment.• 2. Lifestyle entrepreneurs: their intention is to earn an income for themselves and their families.

Goal maybe to retain control of the company.• 3. Growth entrepreneurs: desire to grow as fast as possible. Most dynamic job generators in the

economy. Willing to trade control for growth. • Some people are attracted to the perceived independence and freedom – being able to do your

own thing.• Some may hit a plateau – blocked from further promotions. • For many, entrepreneurship offers a vehicle to create huge financial rewards.• The failure rate of new companies is 24% within the first 2 years and 80 – 90 % within the first 10

years.• Most companies fail because the founders are confronting complex management decisions

without experience or knowledge.• Starting a company can be stressful with tremendous demands on your time and energy.• You need to maintain appropriate balance between your personal lifestyle and your new company.

Home Work

• 1. What is entrepreneurship?• 2. What are the requirements of an

entrepreneur?• 3. Why do people become entrepreneurs?• 4. What is the failure rate of new companies?