Transcript Chapter 1:The Foundations of Entrepreneurship

Entrepreneurs: The
Driving Force Behind
Small Business
Chapter 1 Entrepreneurs
Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall
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The World of the
Entrepreneur
In the U.S., entrepreneurs start more
than 6 million businesses a year!
 Global Entrepreneurship Monitor (GEM)

 Approximately
10% of U.S. population is
actively involved in trying to start a new
business
 Approximately 9.5% of people in 42 GEM
countries studied are involved in starting a
new business
Chapter 1 Entrepreneurs
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Source: 2006 Global Entrepreneurship Monitor.
Belgium
Japan
Italy
Sweden
UAE
Germany
France
Slovenia
Russia
Singapore
Finland
Denmark
Mexico
South
Netherlands
United
Hungary
Turkey
Latvia
Canada
Spain
Ireland
Czech
Greece
Croatia
Norway
Chile
United
Argentina
India
Malaysia
Iceland
Brazil
Australia
Uruguay
Thailand
China
Indonesia
Jamaica
Phillpines
Colombia
Total Entrepreneurial
Activity (TEA) Index
Entrepreneurial Activity Across the Globe
Persons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity
25.0
20.0
TEA Index
15.0
10.0
Global TEA
Average
5.0
0.0
Country
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
Defining
Entrepreneurship?

Nexus of …
Opportunity.
 Individual.

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What Is an Entrepreneur?
Who - Someone who creates a new
business despite the risk and
uncertainty for the purpose of
achieving profit and growth.
How - identifies opportunity and
assembles the necessary resources
to realize goals.
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What Is an Entrepreneur?
An entrepreneur is someone who
is willing to work 16 hours a day
to keep from working 8 hours a
day for someone else!
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
Banana Slug String Band
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Urban Krag
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Chapter 1 Entrepreneurs
http://www.youtube.com/watch?v=StCRr6iqH
xs
http://www.urbankrag.com
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Characteristics of
Entrepreneurs
Survey: 72% of adults in the U.S. have
considered starting their own businesses
 Willingness to take initiative
 Preference for moderate risk
 Confidence in their ability to succeed
 Self-reliance
 Perseverance
 Desire for immediate feedback
Chapter 1 Entrepreneurs
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Characteristics of
Entrepreneurs
High level of energy
 Competitiveness
 Future orientation

 Serial
entrepreneurs
Skilled at organizing
 Value achievement over money

Chapter 1 Entrepreneurs
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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 Entrepreneurs
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How to Spot Entrepreneurial
Opportunities

Creativity vs. Innovation

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Creativity – the ability to develop
new ideas and to discover new
ways of looking at problems and
opportunities
Innovation – the ability to apply
creative solutions to problems and
opportunities to enhance or to
enrich people’s lives
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Opportunity discovery…

Find a need…
 Creative

Solution.
Fill it…
 Implementation
Chapter 1 Entrepreneurs
of Solution.
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How to Spot Entrepreneurial
Opportunities

Monitor trends and exploit them early on


Take a different approach to an existing
market


Starwich - http://www.starwich.com/
Goodwin Heart Pine http://www.heartpine.com/history.shtml
Put a new twist on an old idea

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PODS - http://www.pods.com/about-pods.aspx
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How to Spot Entrepreneurial
Opportunities

Creative re-use of existing resources


Others have the same problem that you do


Alaska Glacial Mud Company http://skinbotanica.com/
Stroller Strides - http://www.strollerstrides.com/
Notice what is missing

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Dogs on Wheels http://www.dogsonwheels.net/pictures.html
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Benefits of Small Business
Ownership
The opportunity to:
 Control your own destiny
 Make a difference

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


Social entrepreneurs
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 Entrepreneurs
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Drawbacks of Small
Business Ownership

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
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Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business
gets established
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Small Business Owners' Work Week
Number of Hours Worked per Week
1 to 39 hours
10%
More than 70 hours
20%
40 to 49 hours
29%
60 to 69 hours
19%
50 to 59 hours
22%
Average workweek = 54 hours
Source: MasterCard Global Small Business Survey, 2007.
Owner Age at Business Formation
33.5%
35.0%
3 1. 1%
30.0%
25.0%
17 . 8 %
20.0%
15.0%
9.8%
10.0%
6 . 1%
5.0%
1. 7 %
0.0%
Under 25
25-34
35-44
45-54
Age
Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002.
55-64
65+
Drawbacks of Small
Business Ownership
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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
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Feeding the
Entrepreneurial Fire



Entrepreneurs as heroes
Entrepreneurial education
Demographic and economic factors


Dynamic Business Environment



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Independent lifestyles
Shift to a service economy
Technological change/advancement
E-Commerce / Internet
Globalization - International Biz.
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Entrepreneur Motivation
Why Entrepreneurs Went into Business
41%
Joined fanily business
36%
Wanted more control over future
27%
Tired of working for someone else
25%
Wanted to fulfill lifelong goal
Have been downsized or laid off
0%
5%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Percentage
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Source: Dun & Bradstreet 19th Annual Small Business Survey, 2000.
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The Cultural Diversity
of Entrepreneurship
Young entrepreneurs
 Women entrepreneurs
 Minority-owned enterprises
 Immigrant entrepreneurs
 Part-time entrepreneurs

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Aspiring Teenage Entrepreneurs
Percent Interested in Starting a Business
89%
90%
86%
79%
80%
69%
70%
60%
50%
40%
30%
20%
10%
0%
Asian/Pacific Islander
Source: Milken Institute, 2003.
African-American
Hispanic-American
White
Source: National Federation of Women Business Owners, 2003.
Entrepreneurial Activity by Age Group
0.34%
0.35%
Percentage of Age Group Starting a Company
0.30%
0.29%
0.30%
0.26%
0.25%
0.21%
0.20%
0.15%
0.10%
0.05%
0.00%
20-34
35-44
45-54
Age Group
Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 2006.
55-64
65 and older
Small Business Focus
Start-up
 Management – Various aspects.


SBA definition – varies
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SBA Definitions
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Small Businesses...

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Make up 99.7% of all the 29.3 million
businesses in the U.S.
Employ 52% of the nation’s private sector
workforce
Pay 45% of total private payroll
Create more jobs than big businesses
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1996 to 2006: Between 60% and 80% of all
net new jobs in the U.S.
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Small Businesses by Industry
Other, 5.53%
Construction, 12.81%
Manufacturing, 4.74%
Wholesale, 5.63%
Services, 49.77%
Retail, 12.47%
Finance & Real Estate, 9.05%
Source: Small Business Administration, 2006.
Small
Businesses...

Are leaders in offering training and
advancement opportunities to workers




Provide 67% of workers with their first jobs
Produce 51% of the nation’s private GDP
Account for 47% of business sales
Key role in innovation:
 Produce 13X to 14X more patents per
employees than large companies
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Small Business Survival Rate
% of Small Firms Surviving
100%
100%
90%
81%
80%
70%
65%
60%
54%
50%
46%
40%
40%
36%
30%
32%
29%
27%
25%
20%
10%
0%
New
1
2
3
4
5
6
# of Years in Business
Source: National Federation of Independent Businesses Business Policy Guide, 2003.
7
8
9
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Putting Failure into
Perspective
Median age of U.S. companies = 12
years
 Entrepreneurs are not paralyzed by
the prospect of failure
 Failure – a natural part of the creative
process
 Successful entrepreneurs learn to fail

intelligently
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Avoiding the Pitfalls of
Small Business Failure
Know your business in depth
(Drucker’s – Theory of the
Business)
 Prepare a business plan
 Manage financial resources
 Understand financial
statements

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Avoiding the Pitfalls of
Small Business Failure
Learn effective people
management
 Set your business apart from
the competition
 Maintain a positive attitude
(focus on solutions not
problems)

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