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The Foundations of

Entrepreneurship
The Foundations of
Entrepreneurship
Chapter 1: Entrepreneurship 1
Copyright 2002 Prentice Hall Publishing Company
The World of the Entrepreneur The World of the Entrepreneur
A new business is born every 11 seconds A new business is born every 11 seconds
in the United States in the United States
Study of influential Americans Study of influential Americans the the
defining issue of the 21 defining issue of the 21
st st
Century: Century:
Entrepreneurship! Entrepreneurship!
One of 12 Americans is actively involved One of 12 Americans is actively involved
in trying to start a new business. in trying to start a new business.
Chapter 1: Entrepreneurship 2
Copyright 2002 Prentice Hall Publishing Company
A new business is born every 11 seconds A new business is born every 11 seconds
in the United States in the United States
Study of influential Americans Study of influential Americans the the
defining issue of the 21 defining issue of the 21
st st
Century: Century:
Entrepreneurship! Entrepreneurship!
One of 12 Americans is actively involved One of 12 Americans is actively involved
in trying to start a new business. in trying to start a new business.
Entrepreneurial Activity Across the Globe 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
It aly
Israel
Canada
Unit ed St at es
C
o
u
n
t
r
y
Percentage of Adult Population Working to Start a New Business
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
It aly
Israel
Canada
Unit ed St at es
C
o
u
n
t
r
y
Percentage of Adult Population Working to Start a New Business
Who is an Entrepreneur? Who is an Entrepreneur?
One who creates a new business in the One who creates a new business in the
face of risk and uncertainty for the face of risk and uncertainty for the
purpose of achieving profit and growth purpose of achieving profit and growth
by identifying opportunities and by identifying opportunities and
assembling the necessary resources to assembling the necessary resources to
capitalize on them. capitalize on them.
Chapter 1: Entrepreneurship 4
Copyright 2002 Prentice Hall Publishing Company
One who creates a new business in the One who creates a new business in the
face of risk and uncertainty for the face of risk and uncertainty for the
purpose of achieving profit and growth purpose of achieving profit and growth
by identifying opportunities and by identifying opportunities and
assembling the necessary resources to assembling the necessary resources to
capitalize on them. capitalize on them.
Characteristics of Entrepreneurs Characteristics of Entrepreneurs
Desire for responsibility Desire for responsibility
Preference for moderate risk Preference for moderate risk
Confidence in their ability to succeed Confidence in their ability to succeed
Desire for immediate feedback Desire for immediate feedback
High level of energy High level of energy
Future orientation Future orientation
Skilled at organizing Skilled at organizing
Value achievement over money Value achievement over money
Chapter 1: Entrepreneurship 5
Copyright 2002 Prentice Hall Publishing Company
Desire for responsibility Desire for responsibility
Preference for moderate risk Preference for moderate risk
Confidence in their ability to succeed Confidence in their ability to succeed
Desire for immediate feedback Desire for immediate feedback
High level of energy High level of energy
Future orientation Future orientation
Skilled at organizing Skilled at organizing
Value achievement over money Value achievement over money
The Type E Personality The Type E Personality
Common Traits of Entrepreneurs: Common Traits of Entrepreneurs:
Aggressively pursues goals; pushes self and others Aggressively pursues goals; pushes self and others
Seeks autonomy, independence and freedom from boundaries Seeks autonomy, independence and freedom from boundaries
Sends consistent messages; very focused Sends consistent messages; very focused
Acts quickly, often without deliberating Acts quickly, often without deliberating
Keeps distance and maintains objectivity Keeps distance and maintains objectivity
Pursues simple, practical solutions Pursues simple, practical solutions
Willing to take risks; comfortable with uncertainty Willing to take risks; comfortable with uncertainty
Exhibits clear opinions and values; has high expectations Exhibits clear opinions and values; has high expectations
Impatient; just do it mentality Impatient; just do it mentality
Positive, upbeat, optimistic; communicates confidence Positive, upbeat, optimistic; communicates confidence
Chapter 1: Entrepreneurship 6
Copyright 2002 Prentice Hall Publishing Company
Common Traits of Entrepreneurs: Common Traits of Entrepreneurs:
Aggressively pursues goals; pushes self and others Aggressively pursues goals; pushes self and others
Seeks autonomy, independence and freedom from boundaries Seeks autonomy, independence and freedom from boundaries
Sends consistent messages; very focused Sends consistent messages; very focused
Acts quickly, often without deliberating Acts quickly, often without deliberating
Keeps distance and maintains objectivity Keeps distance and maintains objectivity
Pursues simple, practical solutions Pursues simple, practical solutions
Willing to take risks; comfortable with uncertainty Willing to take risks; comfortable with uncertainty
Exhibits clear opinions and values; has high expectations Exhibits clear opinions and values; has high expectations
Impatient; just do it mentality Impatient; just do it mentality
Positive, upbeat, optimistic; communicates confidence Positive, upbeat, optimistic; communicates confidence
Common Themes in Definitions Common Themes in Definitions
of Entrepreneurship of Entrepreneurship
Defining
Entrepreneurship
The
Entrepreneur
Uniqueness
Process
Chapter 1: Entrepreneurship 7
Copyright 2002 Prentice Hall Publishing Company
Defining
Entrepreneurship
Innovation
Organization
Creation
Creating
Value
Profit or
Nonprofit
Growth
The Development of The Development of
Entrepreneurship Theory Entrepreneurship Theory
18th Century
Chapter 1: Entrepreneurship 8
Copyright 2002 Prentice Hall Publishing Company
Richard Cantillon:
Coins term
entrepreneur
Entrepreneur bears
risks and plans,
supervises,
organizes, and
owns factors of
production
The Development of The Development of
Entrepreneurship Theory Entrepreneurship Theory
19th Century
Chapter 1: Entrepreneurship 9
Copyright 2002 Prentice Hall Publishing Company
Jean Baptiste Say:
Proposed that profits
from entrepreneurship
were separate from
profits of capital
ownership
Distinction made
between those who
supplied funds and
earned interest and
those who profited from
managerial abilities
The Development of The Development of
Entrepreneurship Theory Entrepreneurship Theory
20th Century
Chapter 1: Entrepreneurship 10
Copyright 2002 Prentice Hall Publishing Company
Joseph Schumpeter:
Described the
entrepreneur as
someone who is an
innovator and someone
who creatively
destructs
Peter Drucker:
Described the
entrepreneur as
someone who
maximizes opportunity
Myths About Myths About
Entrepreneurship Entrepreneurship
1. Successful entrepreneurship takes only a great idea. 1. Successful entrepreneurship takes only a great idea.
2. Entrepreneurship is easy. 2. Entrepreneurship is easy.
3. Entrepreneurship is a risky gamble. 3. Entrepreneurship is a risky gamble.
4. Entrepreneurship is found only in small businesses. 4. Entrepreneurship is found only in small businesses.
5. 5. Entrepreneurial ventures and small businesses are identical. Entrepreneurial ventures and small businesses are identical.
Chapter 1: Entrepreneurship 11
Copyright 2002 Prentice Hall Publishing Company
1. Successful entrepreneurship takes only a great idea. 1. Successful entrepreneurship takes only a great idea.
2. Entrepreneurship is easy. 2. Entrepreneurship is easy.
3. Entrepreneurship is a risky gamble. 3. Entrepreneurship is a risky gamble.
4. Entrepreneurship is found only in small businesses. 4. Entrepreneurship is found only in small businesses.
5. 5. Entrepreneurial ventures and small businesses are identical. Entrepreneurial ventures and small businesses are identical.
The Entrepreneurial The Entrepreneurial
Process Process
Exploring the
Entrepreneurial
Context
Identifying
Opportunities/Possible
Competitive Advantage
Starting the Venture: Starting the Venture:
Researching Feasibility Researching Feasibility
Planning the Venture Planning the Venture
Organizing the Venture Organizing the Venture
Launching the Venture Launching the Venture
Managing the Venture: Managing the Venture:
Managing Processes Managing Processes
Managing People Managing People
Managing Growth Managing Growth
Special Issues Special Issues
Chapter 1: Entrepreneurship 12
Copyright 2002 Prentice Hall Publishing Company
Starting the Venture: Starting the Venture:
Researching Feasibility Researching Feasibility
Planning the Venture Planning the Venture
Organizing the Venture Organizing the Venture
Launching the Venture Launching the Venture
Managing the Venture: Managing the Venture:
Managing Processes Managing Processes
Managing People Managing People
Managing Growth Managing Growth
Special Issues Special Issues
Rewards of Being an Rewards of Being an
Entrepreneur Entrepreneur
High degree of independencefreedom
from constraints
Get to use a variety of skills and talents
Freedom to make decisions
Accountable to only yourself
Opportunity to tackle challenges
Feeling of achievement and pride
Potential for greater financial rewards
Chapter 1: Entrepreneurship 13
Copyright 2002 Prentice Hall Publishing Company
High degree of independencefreedom
from constraints
Get to use a variety of skills and talents
Freedom to make decisions
Accountable to only yourself
Opportunity to tackle challenges
Feeling of achievement and pride
Potential for greater financial rewards
Feeding / Foster / Boost up Feeding / Foster / Boost up
the Entrepreneurial Fire the Entrepreneurial Fire
Entrepreneurs as heroes Entrepreneurs as heroes
Entrepreneurial education Entrepreneurial education
Demographic and economic factors Demographic and economic factors
Shift to a service economy Shift to a service economy
Technological advancements Technological advancements
Independent lifestyles Independent lifestyles
EE--Commerce and the World Wide Commerce and the World Wide
Web Web
International opportunities International opportunities
Chapter 1: Entrepreneurship 14
Copyright 2002 Prentice Hall Publishing Company
Entrepreneurs as heroes Entrepreneurs as heroes
Entrepreneurial education Entrepreneurial education
Demographic and economic factors Demographic and economic factors
Shift to a service economy Shift to a service economy
Technological advancements Technological advancements
Independent lifestyles Independent lifestyles
EE--Commerce and the World Wide Commerce and the World Wide
Web Web
International opportunities International opportunities
Challenges of Challenges of
Being an Entrepreneur Being an Entrepreneur
Must be comfortable with change and uncertainty
Must make a bewildering number of decisions
May face tough economic choices
Must be comfortable with taking risks
Need many different skills and talents
Must be comfortable with the potential for failure
Chapter 1: Entrepreneurship 15
Copyright 2002 Prentice Hall Publishing Company
Must be comfortable with change and uncertainty
Must make a bewildering number of decisions
May face tough economic choices
Must be comfortable with taking risks
Need many different skills and talents
Must be comfortable with the potential for failure
The Cultural Diversity of The Cultural Diversity of
Entrepreneurship Entrepreneurship
Young entrepreneurs Young entrepreneurs
Women Women
Minority Minority--owned enterprises owned enterprises
Immigrant entrepreneurs Immigrant entrepreneurs
Part Part--time entrepreneurs time entrepreneurs
Home Home--based businesses based businesses
Family businesses Family businesses
Copreneurs Copreneurs
Corporate castoffs: unwanted, second hand goods Corporate castoffs: unwanted, second hand goods
Corporate dropouts Corporate dropouts
Chapter 1: Entrepreneurship 16
Copyright 2002 Prentice Hall Publishing Company
Young entrepreneurs Young entrepreneurs
Women Women
Minority Minority--owned enterprises owned enterprises
Immigrant entrepreneurs Immigrant entrepreneurs
Part Part--time entrepreneurs time entrepreneurs
Home Home--based businesses based businesses
Family businesses Family businesses
Copreneurs Copreneurs
Corporate castoffs: unwanted, second hand goods Corporate castoffs: unwanted, second hand goods
Corporate dropouts Corporate dropouts
Nine Deadly Mistakes of Nine Deadly Mistakes of
Entrepreneurship Entrepreneurship
1. 1. Management incompetence Management incompetence
2. 2. Lack of experience Lack of experience
3. 3. Poor financial control Poor financial control
4. 4. Failure to develop a strategic plan Failure to develop a strategic plan
5. 5. Uncontrolled growth Uncontrolled growth
Chapter 1: Entrepreneurship 17
Copyright 2002 Prentice Hall Publishing Company
1. 1. Management incompetence Management incompetence
2. 2. Lack of experience Lack of experience
3. 3. Poor financial control Poor financial control
4. 4. Failure to develop a strategic plan Failure to develop a strategic plan
5. 5. Uncontrolled growth Uncontrolled growth
Nine Deadly Mistakes of Nine Deadly Mistakes of
Entrepreneurship Entrepreneurship
(continued) (continued)
6. 6. Poor location Poor location
7. 7. Improper inventory control Improper inventory control
8. 8. Incorrect pricing Incorrect pricing
9. 9. Inability to make the entrepreneurial Inability to make the entrepreneurial
transition transition
Chapter 1: Entrepreneurship 18
Copyright 2002 Prentice Hall Publishing Company
6. 6. Poor location Poor location
7. 7. Improper inventory control Improper inventory control
8. 8. Incorrect pricing Incorrect pricing
9. 9. Inability to make the entrepreneurial Inability to make the entrepreneurial
transition transition
Differences Between Small Businesses Differences Between Small Businesses
and Entrepreneurial Ventures and 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
Chapter 1: Entrepreneurship 19
Copyright 2002 Prentice Hall Publishing Company
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
Benefits of Small Business Benefits of Small Business
Ownership Ownership
The opportunity to: The opportunity to:
create your own destiny create your own destiny
make a difference make a difference
reach your full potential reach your full potential
reap unlimited profits reap unlimited profits
contribute to society and be recognized for contribute to society and be recognized for
your efforts your efforts
do what you enjoy and have fun at it do what you enjoy and have fun at it
Chapter 1: Entrepreneurship 20
Copyright 2002 Prentice Hall Publishing Company
The opportunity to: The opportunity to:
create your own destiny create your own destiny
make a difference make a difference
reach your full potential reach your full potential
reap unlimited profits reap unlimited profits
contribute to society and be recognized for contribute to society and be recognized for
your efforts your efforts
do what you enjoy and have fun at it do what you enjoy and have fun at it
Drawbacks of Small Business Drawbacks of Small Business
Ownership Ownership
Uncertainty of income Uncertainty of income
Risk of losing your entire investment Risk of losing your entire investment
Long hours and hard work Long hours and hard work
Lower quality of life until the business gets Lower quality of life until the business gets
established established
High levels of stress High levels of stress
Complete responsibility Complete responsibility
Discouragement Discouragement
Chapter 1: Entrepreneurship 21
Copyright 2002 Prentice Hall Publishing Company
Uncertainty of income Uncertainty of income
Risk of losing your entire investment Risk of losing your entire investment
Long hours and hard work Long hours and hard work
Lower quality of life until the business gets Lower quality of life until the business gets
established established
High levels of stress High levels of stress
Complete responsibility Complete responsibility
Discouragement Discouragement
Small Businesses Small Businesses
Make up 99% of all businesses in the Make up 99% of all businesses in the
United States. United States.
Employ 53% of the nation's private Employ 53% of the nation's private
sector workforce. sector workforce.
Create more jobs than big businesses. Create more jobs than big businesses.
Are leaders in offering training and Are leaders in offering training and
advancement opportunities to advancement opportunities to
workers. workers.
Chapter 1: Entrepreneurship 22
Copyright 2002 Prentice Hall Publishing Company
Make up 99% of all businesses in the Make up 99% of all businesses in the
United States. United States.
Employ 53% of the nation's private Employ 53% of the nation's private
sector workforce. sector workforce.
Create more jobs than big businesses. Create more jobs than big businesses.
Are leaders in offering training and Are leaders in offering training and
advancement opportunities to advancement opportunities to
workers. workers.
Produce 51% of the nation's private Produce 51% of the nation's private
GDP. GDP.
Account for 47% of business sales. Account for 47% of business sales.
Create 4X more innovations per R & D Create 4X more innovations per R & D
dollar spent than medium dollar spent than medium--size firms size firms
and 24X as many as large companies. and 24X as many as large companies.
Small Businesses Small Businesses
(continued) (continued)
Chapter 1: Entrepreneurship 23
Copyright 2002 Prentice Hall Publishing Company
Produce 51% of the nation's private Produce 51% of the nation's private
GDP. GDP.
Account for 47% of business sales. Account for 47% of business sales.
Create 4X more innovations per R & D Create 4X more innovations per R & D
dollar spent than medium dollar spent than medium--size firms size firms
and 24X as many as large companies. and 24X as many as large companies.
Small Business by Industry
Services
39.2%
Retail
20.5%
Wholesale
7.4%
Manufacturing
5.8%
Construction
11.8%
Financial
8.0%
Other
7.3%
Small Business by Industry
Services
39.2%
Retail
20.5%
Wholesale
7.4%
Manufacturing
5.8%
Construction
11.8%
Financial
8.0%
Other
7.3%
The Small Business The Small Business
Failure Record Failure Record
24% of new businesses fail after two 24% of new businesses fail after two
years. years.
51% fail within four years. 51% fail within four years.
63% fail within six years. 63% fail within six years.
Chapter 1: Entrepreneurship 25
Copyright 2002 Prentice Hall Publishing Company
24% of new businesses fail after two 24% of new businesses fail after two
years. years.
51% fail within four years. 51% fail within four years.
63% fail within six years. 63% fail within six years.
0%
20%
40%
60%
80%
100%
%

o
f

S
m
a
l
l

F
i
r
m
s
S
u
r
v
i
v
i
n
g
New 2 4 6 8 10
# of Years in Business
Small Business Survival Rate
0%
20%
40%
60%
80%
100%
%

o
f

S
m
a
l
l

F
i
r
m
s
S
u
r
v
i
v
i
n
g
New 2 4 6 8 10
# of Years in Business
Small Business Survival Rate
Avoiding the pitfalls of Avoiding the pitfalls of
Small Business Failure Small Business Failure
Know your business in depth Know your business in depth
Develop a solid business plan Develop a solid business plan
Manage financial resources Manage financial resources
Understand financial statements Understand financial statements
Learn to manage people effectively Learn to manage people effectively
Keep in tune with yourself Keep in tune with yourself
Chapter 1: Entrepreneurship 27
Copyright 2002 Prentice Hall Publishing Company
Know your business in depth Know your business in depth
Develop a solid business plan Develop a solid business plan
Manage financial resources Manage financial resources
Understand financial statements Understand financial statements
Learn to manage people effectively Learn to manage people effectively
Keep in tune with yourself Keep in tune with yourself
10 Tips of Utahs Fastest Growing 10 Tips of Utahs Fastest Growing
Companies Companies
1. 1. Stop paying lip service to customer Stop paying lip service to customer
service service
2. 2. Be willing to share the pie with your Be willing to share the pie with your
employees employees
3. 3. Make your own luck Make your own luck
4. 4. Be prepared to make sacrifices Be prepared to make sacrifices
5. 5. Spread yourself out, not thin Spread yourself out, not thin
Chapter 1: Entrepreneurship 28
Copyright 2002 Prentice Hall Publishing Company
1. 1. Stop paying lip service to customer Stop paying lip service to customer
service service
2. 2. Be willing to share the pie with your Be willing to share the pie with your
employees employees
3. 3. Make your own luck Make your own luck
4. 4. Be prepared to make sacrifices Be prepared to make sacrifices
5. 5. Spread yourself out, not thin Spread yourself out, not thin
10 Tips of Utahs Fastest Growing 10 Tips of Utahs Fastest Growing
Companies (continued) Companies (continued)
6. 6. Break down the walls Break down the walls
7. 7. Stay one step ahead Stay one step ahead
8. 8. Invest in yourself Invest in yourself
9. 9. Be different Be different
10. 10. Look where youre going Look where youre going
Chapter 1: Entrepreneurship 29
Copyright 2002 Prentice Hall Publishing Company
6. 6. Break down the walls Break down the walls
7. 7. Stay one step ahead Stay one step ahead
8. 8. Invest in yourself Invest in yourself
9. 9. Be different Be different
10. 10. Look where youre going Look where youre going
Motto for Entrepreneurs Motto for Entrepreneurs
Conceive it Conceive it
Believe it Believe it
Achieve it! Achieve it!
Chapter 1: Entrepreneurship 30
Copyright 2002 Prentice Hall Publishing Company
Conceive it Conceive it
Believe it Believe it
Achieve it! Achieve it!