Entrepreneurship Chapter-1 Finance

7/30/2019 Entrepreneurship Chapter-1 Finance

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Chapter 1: Entrepreneurship 1Copyright 2002 Prentice Hall Publishing Company

The Foundations of

Entrepreneurship


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The World of the Entrepreneur

A new business is born every 11 seconds

in the United States

Study of influential Americansthedefining issue of the 21st Century:

Entrepreneurship!

One of 12 Americans is actively involvedin trying to start a new business.


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Entrepreneurial Activity Across the Globe

1 . 4 %

1 . 6 %

1 . 8 %

2 . 0 %

2 . 2 %

3 . 3 %

3 . 4 %

5 . 4 %

6 . 8 %

8 .5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Percent

Finland

Japan

France

Denmark

Germany

Great Brit ain

Italy

Israel

Canada

Unit ed States

Count

ry

Percentage of Adult Population Working to Start a New Business


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Who is an Entrepreneur?

One who creates a new business in the

face of risk and uncertainty for the

purpose of achieving profit and growthby identifying opportunities and

assembling the necessary resources to

capitalize on them.


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Characteristics of Entrepreneurs

Desire for responsibility

Preference for moderate risk

Confidence in their ability to succeed

Desire for immediate feedback High level of energy

Future orientation

Skilled at organizing

Value achievement over money


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The Type E Personality

Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and others

Seeks autonomy, independence and freedom from boundaries

Sends consistent messages; very focused

Acts quickly, often without deliberating

Keeps distance and maintains objectivity

Pursues simple, practical solutions

Willing to take risks; comfortable with uncertainty

Exhibits clear opinions and values; has high expectations

Impatient; just do it mentality

Positive, upbeat, optimistic; communicates confidence


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Common Themes in Definitionsof Entrepreneurship

DefiningEntrepreneurship

TheEntrepreneur

Innovation

Organization

CreationCreating

Value

Profit or

Nonprofit

Growth

Uniqueness

Process



The Development ofEntrepreneurship Theory

18th Century

Richard Cantillon:

Coins term

entrepreneur

Entrepreneur bears

risks and plans,

supervises,organizes, and

owns factors of

production




19th Century

Jean Baptiste Say:

Proposed that profits

from entrepreneurshipwere separate from

profits of capital

ownership

Distinction made

between those who

supplied funds and

earned interest andthose who profited from

managerial abilities


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20th Century

Joseph Schumpeter:

Described theentrepreneur as

someone who is aninnovator and someone

who creativelydestructs

Peter Drucker:

Described the

entrepreneur assomeone who

maximizes opportunity


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Myths AboutEntrepreneurship

1. Successful entrepreneurship takes only a great idea.

2. Entrepreneurship is easy.

3. Entrepreneurship is a risky gamble.

4. Entrepreneurship is found only in small businesses.

5. Entrepreneurial ventures and small businesses are identical.


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The EntrepreneurialProcess

Exploring the

Entrepreneurial

Context

Identifying

Opportunities/Possible

Competitive Advantage

Starting the Venture:

Researching Feasibility

Planning the Venture

Organizing the Venture Launching the Venture

Managing the Venture:

Managing Processes

Managing People

Managing Growth

Special Issues


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Feeding / Foster / Boost up

the Entrepreneurial Fire

Entrepreneurs as heroes

Entrepreneurial education

Demographic and economic factors

Shift to a service economy

Technological advancements

Independent lifestyles

E-Commerce and the World WideWeb

International opportunities


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Challenges of

Being an EntrepreneurMust be comfortable with change and uncertainty

Must make a bewildering number of decisionsMay face tough economic choices

Must be comfortable with taking risks

Need many different skills and talents

Must be comfortable with the potential for failure


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The Cultural Diversity of

Entrepreneurship

Young entrepreneurs

Women

Minority-owned enterprises

Immigrant entrepreneurs Part-time entrepreneurs

Home-based businesses

Family businesses

Intrapreneurs

Corporate castoffs: unwanted, second hand goods

Corporate dropouts


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Nine Deadly Mistakes of

Entrepreneurship

1. Management incompetence

2. Lack of experience

3. Poor financial control

4. Failure to develop a strategic plan

5. Uncontrolled growth


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Nine Deadly Mistakes of

Entrepreneurship(continued)

6. Poor location

7. Improper inventory control

8. Incorrect pricing

9. Inability to make the entrepreneurial

transition


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Differences Between Small Businessesand Entrepreneurial Ventures

Independently owned,

operated, and financed

Less than 100 employees

Doesnt emphasize new

or innovative practices

Little impact on industry

Innovative practices

Goals are profitability and growth

Seeks out new opportunities

Willingness to take risks


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Benefits of Small Business

Ownership

The opportunity to:

create your own destiny

make a difference

reach your full potential

reap unlimited profits

contribute to society and be recognized for

your efforts do what you enjoy and have fun at it


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Drawbacks of Small Business

Ownership

Uncertainty of income

Risk of losing your entire investment

Long hours and hard work

Lower quality of life until the business getsestablished

High levels of stress

Complete responsibility Discouragement


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Small Businesses

Make up 99% of all businesses in theUnited States.

Employ 53% of the nation's private

sector workforce. Create more jobs than big businesses.

Are leaders in offering training andadvancement opportunities toworkers.


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Produce 51% of the nation's privateGDP.

Account for 47% of business sales.

Create 4X more innovations per R & Ddollar spent than medium-size firms

and 24X as many as large companies.

Small Businesses(continued)


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Small Business by Industry

Services

39.2%

Retail

20.5%Wholesale

7.4%

Manufacturing

5.8%

Construction11.8%

Financial

8.0%Other

7.3%


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The Small Business

Failure Record 24% of new businesses fail after two

years.

51% fail within four years.

63% fail within six years.


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0%

20%

40%

60%

80%

100%

%o

fSmallF

irms

Survivin

g

New 2 4 6 8 10

# of Years in Business

Small Business Survival Rate


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Avoiding the pitfalls ofSmall Business Failure

Know your business in depth

Develop a solid business plan

Manage financial resources Understand financial statements

Learn to manage people effectively

Keep in tune with yourself


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Ch t 1 E t hi 28

Motto (Slogan) for Entrepreneurs

Conceive it- Imagine, envision, envisage

Believe it- Accept, consider, think

Achieve it!- Attain, reach, realize, do it.

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Entrepreneurship Chapter-1 Finance