Chapter 1 Entrepreneurs Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 1...

Copyright Copyright ©©2009 Pearson Education, Inc. Publishing as Prentice Hall2009 Pearson Education, Inc. Publishing as Prentice Hall 11Chapter 1 EntrepreneursChapter 1 Entrepreneurs

Entrepreneurs: The Driving Force Behind Small Business


The World of the The World of the EntrepreneurEntrepreneur In the U.S., entrepreneurs start more In the U.S., entrepreneurs start more

than 6 million businesses a year!than 6 million businesses a year! Global Entrepreneurship Monitor Global Entrepreneurship Monitor

(GEM)(GEM) Approximately 10% of U.S. population is Approximately 10% of U.S. population is

actively involved in trying to start a new actively involved in trying to start a new businessbusiness

Approximately 9.5% of people in 42 Approximately 9.5% of people in 42 GEM countries studied are involved in GEM countries studied are involved in starting a new businessstarting a new business

Source: 2006 Global Entrepreneurship Source: 2006 Global Entrepreneurship Monitor.Monitor.

Entrepreneurial Activity Across the GlobePersons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity

0.0

5.0

10.0

15.0

20.0

25.0

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Global TEAAverage

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall


What Is an What Is an Entrepreneur?Entrepreneur?

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

What Is an What Is an Entrepreneur?Entrepreneur?

An entrepreneur is someone An entrepreneur is someone who is willing to work 16 who is willing to work 16 hours a day to keep from hours a day to keep from working 8 hours a day for working 8 hours a day for someone else!someone else!

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall


Characteristics of Characteristics of EntrepreneursEntrepreneurs

SurveySurvey: 72% of adults in the U.S. have : 72% of adults in the U.S. have considered starting their own considered starting their own businesses businesses

Willingness to take initiativeWillingness to take initiative Preference for Preference for moderatemoderate risk risk Confidence in their ability to succeedConfidence in their ability to succeed Self-relianceSelf-reliance PerseverancePerseverance Desire for immediate feedbackDesire for immediate feedback


High level of energyHigh level of energy CompetitivenessCompetitiveness Future orientationFuture orientation

Serial entrepreneursSerial entrepreneurs Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money

Characteristics of Characteristics of EntrepreneursEntrepreneurs


EntrepreneurshipEntrepreneurship

One characteristic of One characteristic of entrepreneurs stands out:entrepreneurs stands out:

Diversity!Diversity! AnyoneAnyone – regardless of age, race, – regardless of age, race,

gender, color, national origin, or gender, color, national origin, or any other characteristic – can any other characteristic – can become an entrepreneur become an entrepreneur (although not everyone should)(although not everyone should)


How to Spot How to Spot Entrepreneurial Entrepreneurial OpportunitiesOpportunities

Creativity vs. Innovation Creativity vs. Innovation CreativityCreativity – the ability to – the ability to

develop new ideas and to develop new ideas and to discover new ways of looking at discover new ways of looking at problems and opportunitiesproblems and opportunities

InnovationInnovation – the ability to apply – the ability to apply creativecreative solutions to problems solutions to problems and opportunities to enhance and opportunities to enhance or to enrich people’s lives or to enrich people’s lives



Monitor trends and exploit them early Monitor trends and exploit them early onon StarwichStarwich

Take a different approach to an Take a different approach to an existing marketexisting market Goodwin Heart PineGoodwin Heart Pine

Put a new twist on an old ideaPut a new twist on an old idea PODSPODS



Look for creative ways to use existing Look for creative ways to use existing resourcesresources Alaska Glacial Mud Company Alaska Glacial Mud Company

Realize that others have the same Realize that others have the same problem that you doproblem that you do Stroller StridesStroller Strides

Notice what is missingNotice what is missing Dogs on WheelsDogs on Wheels


Benefits of Small Benefits of Small Business OwnershipBusiness Ownership

The opportunity to:The opportunity to: Control your own destinyControl your own destiny Make a differenceMake a difference

Social entrepreneursSocial entrepreneurs Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to be recognized for Contribute to society and to be recognized for

your effortsyour efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work

Source: MasterCard Global Small Business Survey, 2007. Source: MasterCard Global Small Business Survey, 2007.

Small Business Owners' Work WeekNumber of Hours Worked per Week

1 to 39 hours10%

40 to 49 hours29%

50 to 59 hours22%

60 to 69 hours19%

More than 70 hours20%

Average workweek = 54 hours


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the Lower quality of life until the

business gets establishedbusiness gets established

Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002. Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002.

9.8%

33.5%31.1%

17.8%

6.1%

1.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Under 25 25-34 35-44 45-54 55-64 65+

Age

Owner Age at Business Formation


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the business gets establishedLower quality of life until the business gets established

High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement


Feeding the Feeding the Entrepreneurial Entrepreneurial FireFire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic Demographic and economic

factorsfactors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide

WebWeb International opportunitiesInternational opportunities


The Cultural The Cultural Diversity of Diversity of EntrepreneurshipEntrepreneurship

Young entrepreneursYoung entrepreneurs

89%86%

79%

69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Asian/Pacific Islander African-American Hispanic-American White

Aspiring Teenage EntrepreneursPercent Interested in Starting a Business

Source: Milken Institute, 2003. Source: Milken Institute, 2003.



Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs

Source: National Federation of Women Business Owners, 2003.Source: National Federation of Women Business Owners, 2003.

42. 3%

23. 3%

0. 4%

12. 3%

4. 4%

15. 6%

0. 0%

5. 0%

10. 0%

15. 0%

20. 0%

25. 0%

30. 0%

35. 0%

40. 0%

45. 0%

Number of fi r ms Number of empl oyees Sal es

Category

Growth of Women-Owned Companies1997 to 2006

Women-owned firms

All firms



Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs Minority-owned enterprisesMinority-owned enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs


The Cultural Diversity The Cultural Diversity of Entrepreneurshipof Entrepreneurship

Home-based business ownersHome-based business owners Family business ownersFamily business owners CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts Retired baby BoomersRetired baby Boomers

Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 2006. Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 2006.

0.26%

0.30%0.29%

0.34%

0.21%

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

Per

cen

tag

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f A

ge

Gro

up

Sta

rtin

g a

Co

mp

any

20-34 35-44 45-54 55-64 65 and older

Age Group

Entrepreneurial Activity by Age Group

Source: Small Business Administration, 2006. Source: Small Business Administration, 2006.

Small Businesses by Industry

Construction, 12.81%

Manufacturing, 4.74%

Wholesale, 5.63%

Retail, 12.47%

Finance & Real Estate, 9.05%

Services, 49.77%

Other, 5.53%


Small Small Businesses...Businesses...

Make up 99.7% of all the 29.3 million Make up 99.7% of all the 29.3 million businesses in the U.S.businesses in the U.S.

Employ 52% of the nation’s private Employ 52% of the nation’s private sector workforcesector workforce

Pay 45% of total private payrollPay 45% of total private payroll Create more jobs than big businessesCreate more jobs than big businesses

1996 to 2006: Between 60% and 80% of 1996 to 2006: Between 60% and 80% of all net new jobs in the U.S. all net new jobs in the U.S.


Are leaders in offering training and Are leaders in offering training and advancement opportunities to workersadvancement opportunities to workers Provide 67% of workers with their first jobs Provide 67% of workers with their first jobs

Produce 51% of the nation’s private GDPProduce 51% of the nation’s private GDP Account for 47% of business salesAccount for 47% of business sales Key role in innovation:Key role in innovation:

Produce 13X to 14X more patents per Produce 13X to 14X more patents per employees than large companiesemployees than large companies

Small Small Businesses...Businesses...

100%

81%

65%

54%46%

40%36%

32% 29% 27% 25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% o

f S

mal

l F

irm

s S

urv

ivin

g

New 1 2 3 4 5 6 7 8 9 10

# of Years in Business

Small Business Survival Rate

Source: National Federation of Independent Businesses Source: National Federation of Independent Businesses Business Policy GuideBusiness Policy Guide, 2003. , 2003.


Putting Failure into Putting Failure into PerspectivePerspective Median age of U.S. companies = Median age of U.S. companies =

12 years 12 years Entrepreneurs are Entrepreneurs are notnot paralyzed paralyzed

by the prospect of failureby the prospect of failure Failure – a natural part of the Failure – a natural part of the

creative process creative process Successful entrepreneurs learn to Successful entrepreneurs learn to

fail fail intelligentlyintelligently


Avoiding the Pitfalls Avoiding the Pitfalls of of Small Business Small Business FailureFailure

Know your business in Know your business in depthdepth

Prepare a business planPrepare a business plan Manage financial resourcesManage financial resources Understand financial Understand financial

statementsstatements


Avoiding the Pitfalls Avoiding the Pitfalls of of Small Business Small Business FailureFailure

Learn to manage people Learn to manage people effectivelyeffectively

Set your business apart Set your business apart from the competitionfrom the competition

Maintain a positive Maintain a positive attitudeattitude


All rights reserved. No part of this publication may All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, electronic, mechanical, photocopying, recording, or otherwise, without the prior written or otherwise, without the prior written permission of the publisher. Printed in the United permission of the publisher. Printed in the United States of America.States of America.

Copyright ©2009 Pearson Education, Copyright ©2009 Pearson Education, Inc. Publishing as Prentice HallInc. Publishing as Prentice Hall

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