The Foundations of Entrepreneurship

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

The World of the Entrepreneur

In the U.S., entrepreneurs start between 3 million and 4.5 million businesses a year! Study of influential Americans the defining issue of the 21st Century: Entrepreneurship. Approximately 10.5% of Americans are actively involved in trying to start a new business.

Chapter 1: Entrepreneurship Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Total Entrepreneurial Activity (TEA) Index

20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

Entrepreneurial Activity Across the Globe

Persons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity

Country

Japan Russia Belgium France Hong Kong Croatia Sweden Taiwan Poland Spain Netherlands Finland Slovenia Germany United Italy Singapore South Denmark Hungary Switzerland Israel Australia Norway Canada Ireland United Iceland China Mexico Brazil New Argentina Korea Chile India Thailand

TEA Index

Global TEA Average

What is an Entrepreneur?
One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Entrepreneurship
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).

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Benefits of Small Business Ownership

The opportunity to: Create your own destiny Make a difference Reach your full potential Reap impressive profits Contribute to society and to be recognized for your efforts Do what you enjoy and to have fun at it

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Drawbacks of Small Business Ownership

Uncertainty of income Risk of losing your entire investment Long hours and hard work

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Small Business Owners' Work Week

Number of Hours Worked per Week More than 60 hours 17% Less than 30 hours 11% 30 to 40 hours 24%

51 to 60 hours 20% 41 to 50 hours 28%

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 gets established

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Owner Age at Business Formation

18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

16 . 8 %

16 . 7 % 15 . 9 % 15 . 2 %

9.8%

9.3%

8.5%

3.9% 2.2% 1. 7 %

Under 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 25 Age

65+

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 gets established High levels of stress Complete responsibility Discouragement

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Feeding 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 Wide Web

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Worldwide E-Commerce Revenues

$1,140 $1,200 $1,000 $800

Billions of $

1999
$600 $400 $200 $Business-to Business Business-to-Consumer $80 $31

2003
$178

Feeding 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 Wide Web International opportunities
Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Chapter 1: Entrepreneurship

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The Cultural Diversity of Entrepreneurship

Young entrepreneurs Women entrepreneurs Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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The Cultural Diversity of Entrepreneurship

Home-based businesses Family businesses Copreneurs Corporate castoffs Corporate dropouts

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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A Profile of Small Business by Industry

Construction 12% Retail 20% Wholesale 8% Manufacturing 6% Finance 8%

Other 6%

Service 40%

Small Businesses...
Make up 99% of all the businesses in the U.S. Employ 51% of the nation's private sector workforce. Create more jobs than big businesses. Are leaders in offering training and advancement opportunities to workers.

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Small Businesses...
(continued)

Produce 51% of the nation's private GDP. Account for 47% of business sales. Create 4X more innovations per R & D dollar spent than medium-sized firms and 24X as many as large companies.

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Small Business Survival Rate

100% 100% 81% 65% 54% 46% 40% 36% 32% 29% 27%

% of Small Firms Surviving

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New

25%

10

# of Years in Business

Ten Deadly Mistakes of Entrepreneurship

1.
2. 3. 4. 5.

Management mistakes Lack of experience Poor financial control Weak marketing efforts Failure to develop a strategic plan

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Ten Deadly Mistakes of Entrepreneurship

(continued)

6.
7. 8. 9. 10.

Uncontrolled growth Poor location Improper inventory control Incorrect pricing Inability to make the entrepreneurial transition

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Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Putting Failure Into Perspective

Entrepreneurs are not paralyzed by the prospect of failure. Failure a natural part of the creative process. Successful entrepreneurs learn to fail intelligently.

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Avoiding the Pitfalls of Small 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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Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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