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Management 11e John Schermerhorn
Chapter 6Chapter 6
Entrepreneurship and Entrepreneurship and
New VenturesNew Ventures
Planning Ahead – Chapter 6 Study Questions
1. What is entrepreneurship?
2. What is special about small business entrepreneurship?
3. How do entrepreneurs start and finance new ventures?
Study Question 1: What is entrepreneurship?
Entrepreneurship • Risk-taking behavior that results in new
opportunities Serial entrepreneur
• Starts and runs business and nonprofits over and over again
First-mover advantage• First to exploit a niche or enter a market
Entrepreneurs Display entrepreneurial behavior as employees of
larger firms
Study Question 1: What is entrepreneurship?
Characteristics of entrepreneurs
Study Question 1: What is entrepreneurship?
Diversity and Entrepreneurship Women and minority entrepreneurs are growing in numbers Necessity-based entrepreneurship
People start a business because no other employment opportunities exist
Social entrepreneurship Unique form of ethical entrepreneurship that seeks new ways to
solve pressing social problems Social entrepreneurs
Take risks to find new ways to solve pressing social problems such as poverty, literacy, illness,homelessness
Study Question 2: What is special about small business entrepreneurship?
Small business have fewer than 500 employees
Study Question 2: What is special about small business entrepreneurship?
Starting a small business Startup
New and temporary venture that is trying to establish a profitable business model
Franchise One business owner sells to another the right to
operate the same business in another location
Lean startups Use free software and web services while staying
small and keeping operations simple
Study Question 2: What is special about small business entrepreneurship?
Options for starting a small business
Study Question 2: What is special about small business entrepreneurship?
Types of internet business models
Study Question 2: What is special about small business entrepreneurship?
Family owned businesses Largest percentage of businesses worldwide Feuds result when family members disagree
over how the business is run Possible succession problems
Who will run the business when the current head leaves?
Succession plan outlines leadership transition and financial matters
Why small businesses fail SBA reports
as many as 60 – 80% fail
Study Question 2: What is special about small business entrepreneurship?
Study Question 2: What is special about small business entrepreneurship?
Small business development Business incubator
Offers space, shared services and advice to get small businesses started
Small Business Development Centers Founded with U.S. Small Business Administration
to provide advice to new and existing small businesses
Study Question 3: How do entrepreneurs start and finance new ventures?
Life cycles of entrepreneurial firms
Study Question 3: How do entrepreneurs start and finance new ventures?
Business plan Describes goals, operating plans and
financing for a new business Banks want to see a well-developed
business plan before loaning money
Forms of ownership Sole Proprietorship
An individual or married couple pursuing business for a profit
Study Question 3: How do entrepreneurs start and finance new ventures?
Forms of ownership Partnership
Two or more people agree to contribute resources to start and operate a business together
Study Question 3: How do entrepreneurs start and finance new ventures?
Forms of ownership Corporation
A legal entity that exists separately from its owners
Limited Liability Company (LLC) A combination of sole proprietorship, partnership,
and corporation Protects owners against personal loss other than what
is invested in the company Treated as a proprietorship or partnership for tax
purposes
Study Question 3: How do entrepreneurs start and finance new ventures?
Financing Debt Financing
involves borrowing money from another person, a bank, or a financial institution
Equity Financing involves exchanging ownership shares for outside investment monies
Venture Capitalists Involves making large investments in new ventures in return for an equity
stake in the business Financing
Angel Investor A wealthy individual willing to invest in return for equity in a new venture
Initial Public Offering (IPO) An initial selling of shares of stock to the public at large
Chapter 6 Case
Sprinkles: Leading a sweet trend