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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter Appendix - 1
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 Copyright 2012 Pearson Education, Inc.
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The Context of Entrepreneurship
Entrepreneurship - the process of starting
new businesses, generally in response to
opportunities.
Entrepreneurial ventures - organizations that
pursue opportunities, are characterized by
innovative practices, and have growth and
profitability as their main goals.

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The Context of Entrepreneurship (cont.)

Small business - an organization that is

independently owned, operated, and
financed; has fewer than 100 employees;
doesnt necessarily engage in any new or
innovative practices; and has relatively little
impact on its industry.

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Why Is Entrepreneurship Important?

Innovation
Engage in the creative destruction process
Act as agents of change
Number of New Startups
Increasing numbers of new firms
Job Creation
New ventures create 60-80% of net new jobs

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Exhibit A-1: Evaluating Potential Ideas

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Start-Up and Planning Issues
Feasibility study - an analysis of the various
aspects of a proposed entrepreneurial venture
designed to determine its feasibility.
Venture capitalists - External equity financing
provided by professionally managed pools of
investor money.

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 Appendix A-2: Feasibility Study

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Appendix A-2: Feasibility Study (cont.)

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Appendix A-2: Feasibility Study (cont.)

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Venture FeasibilityFinancing
Venture capitalists - external equity financing
provided by professionally managed pools of
investor money.
Angel investors - a private investor (or group
of private investors) who offers financial
backing to an entrepreneurial venture in
return for equity in the venture.
Initial Public Offering (IPO) - the first public
registration and sale of a companys stock.
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Appendix A-3: Possible Financing Options

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Developing a Business Plan
Business plan - a written document that
summarizes a business opportunity and
defines and articulates how the identified
opportunity is to be seized and exploited.

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Elements of a Business Plan
Executive summary
Analysis of opportunity
Analysis of context
Description of the business
Financial data and projections
Supporting documentation

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Legal Forms of Organization
Sole proprietorship - a form of legal
organization in which the owner maintains
sole and complete control over the business
and is personally liable for business debts.
General partnership - a form of legal
organization in which two or more business
owners share the management and risk of the
business.

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Legal Forms of Organization (cont.)
Limited Liability Partnership (LLP) - a form of
legal organization consisting of general
partner(s) and limited liability partner(s).
Corporation - a legal business entity that is
separate from its owners and managers.
Closely held corporation - a corporation
owned by a limited number of people who do
not trade the stock publicly.

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Legal Forms of Organization (cont.)
S corporation - a specialized type of
corporation that has the regular
characteristics of a C corporation but is unique
in that the owners are taxed as a partnership
as long as certain criteria are met.
Limited Liability Company (LLC) - A form of
legal organization thats a hybrid between a
partnership and a corporation.

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Legal Forms of Organization (cont.)
Operating agreement - the document that
outlines the provisions governing the way an
LLC will conduct business.

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 Exhibit A-4: Legal Forms of
Business Organization

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 Exhibit A-4: Legal Forms of
Business Organization (cont.)

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 Exhibit A-4: Legal Forms of
Business Organization (cont.)

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 Exhibit A-5: Achieving a Supportive,
Growth Oriented Culture

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 Human Resource Management
Issues in Entrepreneurial Ventures
Employee Recruitment Concerns
Locating high potential employees who:
can perform multiple roles
are willing to buy-in (commitment)
Filling critical skill gaps
Employee Retention Issues
Potential for damage to client/customer relationships due
to loss of employees
Need to offer desirable benefits
Compensation: base pay and incentives

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Leading Issues
Personality Characteristics of Entrepreneurs
High level of motivation, abundance of self-confidence,
ability to be involved for the long term, high energy level,
persistent problem solver, high degree of initiative, ability
to set goals, and moderate risk-taker
Proactive personality a personality trait that
describes individuals who are more prone to take
actions to influence their environments.

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Leading Issues (cont.)
Motivating Employees Through Empowerment
Empowerment
Giving employees the power to make decisions and take actions on
their own to solve problems
Benefits of Empowerment
Improved flexibility and speed
Stronger work motivation
Higher morale
Better work quality
Higher job satisfaction
Lower turnover
Higher productivity
Improved quality

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Leading Issues (cont.)
Empowering Employees
Participative decision making
Delegation
Redesigning jobs

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The Entrepreneur as Leader
Leading Employee Work Teams
Empowered teams
Have the authority to plan and implement process
improvements
Self-directed teams
Are nearly autonomous and responsible for many
managerial activities
Cross-functional teams
Are composed of individuals from various specialties
who work together on various tasks

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Controlling Issues (cont.)
Managing Growth Managing Downturns
Planning for growth Recognizing crisis situations
Organizing for growth avoiding the boiled frog
phenomenon
Financing growth
Dealing with downturns,
Finding people
declines, and crises
Creating a growth-oriented
culture
Controlling for growth

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Recognizing Crisis Situations
Boiled frog phenomenon - a perspective on
recognizing performance declines that
suggests watching out for subtly declining
situations.

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Exiting the Venture
Why Leave?
Desiring to harvest the value of the venture
Facing serious organizational performance
problems
Desiring to pursue other interests/opportunities
Business Valuation Methods
Asset valuations
Earnings valuations
Cash flow valuations
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Exiting the Venture (cont.)
Harvesting - exiting a venture when an
entrepreneur hopes to capitalize financially on
the investment in the venture.

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Terms to Know
Entrepreneurship Limited liability partnership
Entrepreneurial ventures (LLP)
Small business Corporation
Closely held corporation
Feasibility study
S corporation
Venture capitalists
Limited liability company (LLC)
Angel investors
Operating agreement
Initial public offering (IPO)
Proactive personality
Business plan
boiled frog phenomenon
Sole proprietorship
Harvesting
General partnership

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