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The

The Foundations
Foundations of
of
Entrepreneurship
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

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

Total Entrepreneurial
Activity (TEA) Index

Entrepreneurial Activity Across the Globe

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

20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
TEA Index

Global TEA
Average

Country

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).
Is this true for our society ?

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

10

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%

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


25
Age

1.7%

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

12

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

13

Worldwide E-Commerce Revenues


$1,140
$1,200

Billions of $

$1,000
$800

1999
$600

2003

$400
$200

$178
$80

$31

$Business-to Business

Business-to-Consumer

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
Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

15

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

16

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

17

A Profile of Small Business by Industry


Construction
12%

Wholesale
8%

Retail
20%

Manufacturing
6%
Finance
8%

Other
6%
Service
40%

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

19

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

20

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

# of Years in Business

10

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

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

23

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

24

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

Chapter 1: Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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