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hapter 1: Entrepreneurship 1 Copyright 2003 Prentice Hall Publishing Company Entrepreneurs: The Driving Force Behind Small Businesses
Chapter 1: Entrepreneurship 1Copyright 2003 Prentice Hall Publishing Company
Entrepreneurs: The Driving Force
Behind Small Businesses
Entrepreneurs: The Driving Force
Behind Small Businesses
Chapter 1: Entrepreneurship 2Copyright 2003 Prentice Hall Publishing Company
The Age of the EntrepreneurThe Age of the Entrepreneur
A new business is born in the U.S. every A new business is born in the U.S. every 11 seconds. 11 seconds.
Study of influential Americans: Study of influential Americans: THETHE defining trend of the 21defining trend of the 21stst century: century:
Entrepreneurship! Entrepreneurship! One of every 25 adults is actively engaged One of every 25 adults is actively engaged
in trying to start a new business.in trying to start a new business.
Country
Percentage of Adult Population Working to Start a New Business
Finland 1.4%
Japan 1.6%
France 1.8%
Denmark 2.0%
Germany 2.2%
Great Britain 3.3%
Italy 3.4%
Israel 5.4%
Canada 6.8%
United States 8.5%
Source: 1999 Global Entrepreneurship MonitorSource: 1999 Global Entrepreneurship Monitor
Chapter 1: Entrepreneurship 4Copyright 2003 Prentice Hall Publishing Company
The Age of the EntrepreneurThe Age of the Entrepreneur
Entrepreneurs launch 3.5 to 4.5 million Entrepreneurs launch 3.5 to 4.5 million businesses a year in the U.S. businesses a year in the U.S.
Survey of college seniors: 49% of men Survey of college seniors: 49% of men and 31% of women said they were and 31% of women said they were interested in pursuing entrepreneurship interested in pursuing entrepreneurship after graduation. after graduation.
Chapter 1: Entrepreneurship 5Copyright 2003 Prentice Hall Publishing Company
What Is an Entrepreneur?What Is an Entrepreneur?
A person who creates a new business A person 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 on necessary resources to capitalize on those opportunities. those opportunities.
5%
25%
27%
36%
41%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Percentage
Have been downsized or laid off
Wanted to fulfill lifelong goal
Tired of working for someone else
Wanted more control over future
Joined fanily business
Why Entrepreneurs Went into Business
Chapter 1: Entrepreneurship 7Copyright 2003 Prentice Hall Publishing Company
Characteristics of EntrepreneursCharacteristics of Entrepreneurs
Desire for responsibilityDesire for responsibility Preference for moderate riskPreference for moderate risk Confidence in their ability to succeedConfidence in their ability to succeed Desire for immediate feedbackDesire for immediate feedback High level of energyHigh level of energy Future orientationFuture orientation Skilled in organizationSkilled in organization Value achievement over moneyValue achievement over money
The Entrepreneurial Personality
Idealists24%
Optimizers21%Hard Workers
20%
Jugglers20%
Sustainers15%
Source: Yanjelovich Partners and Pitney Bowes.
Chapter 1: Entrepreneurship 9Copyright 2003 Prentice Hall Publishing Company
Benefits of Small Business Benefits of Small Business OwnershipOwnership
The opportunity to:The opportunity to: gain control over your own destinygain control over your own destiny make a differencemake a difference reach your full potentialreach your full potential reap unlimited profitsreap unlimited profits contribute to society and to be recognized for contribute to society and to be recognized for
your effortsyour efforts do what you enjoydo what you enjoy
Chapter 1: Entrepreneurship 10Copyright 2003 Prentice Hall Publishing Company
Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership
Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital
Chapter 1: Entrepreneurship 11Copyright 2003 Prentice Hall Publishing Company
Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership
Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital Long hours and hard workLong hours and hard work
Chapter 1: Entrepreneurship 12Copyright 2003 Prentice Hall Publishing Company
Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership
Lower quality of life until the business gets Lower quality of life until the business gets establishedestablished
Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital Long hours and hard workLong hours and hard work
11%
33% 32%
16%
6%2%
0%
5%
10%
15%
20%
25%
30%
35%
Under 25 25-34 35-44 45-54 55-64 65 andover
Age
Owner Age at Business Formation
Chapter 1: Entrepreneurship 14Copyright 2003 Prentice Hall Publishing Company
Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership
High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement
Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital Long hours and hard workLong hours and hard work Lower quality of life until the business gets Lower quality of life until the business gets establishedestablished
Chapter 1: Entrepreneurship 15Copyright 2003 Prentice Hall Publishing Company
Feeding the Entrepreneurial FireFeeding the Entrepreneurial Fire
Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Economic and demographic factorsEconomic and demographic factors Shift to a service economyShift to a service economy
Chapter 1: Entrepreneurship 16Copyright 2003 Prentice Hall Publishing Company
Feeding the Entrepreneurial FireFeeding the Entrepreneurial Fire
Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide
WebWeb International OpportunitiesInternational Opportunities
Chapter 1: Entrepreneurship 17Copyright 2003 Prentice Hall Publishing Company
Trends in EntrepreneurshipTrends in Entrepreneurship
Young entrepreneursYoung entrepreneurs WomenWomen
0.0
2.0
4.0
6.0
8.0
10.0
Mill
ion
s o
f B
us
ine
ss
es
1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999
Women-Owned Businesses
Chapter 1: Entrepreneurship 19Copyright 2003 Prentice Hall Publishing Company
Minority enterprisesMinority enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs Home-based businessesHome-based businesses
Trends in EntrepreneurshipTrends in Entrepreneurship
Young entrepreneursYoung entrepreneurs WomenWomen
Chapter 1: Entrepreneurship 20Copyright 2003 Prentice Hall Publishing Company
Trends in EntrepreneurshipTrends in Entrepreneurship
Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts
Service40%
Retail20%
Construction12%
Wholesale8%
Manufacturing6%
Finance8%
Other6%
A Profile of Small Business by Industry
Chapter 1: Entrepreneurship 22Copyright 2003 Prentice Hall Publishing Company
Small Businesses...Small Businesses...
make up 98.5% of all the make up 98.5% of all the businesses in the U.S.businesses in the U.S.
employ 52% of the nation's employ 52% of the nation's private sector workforce.private sector workforce.
create more jobs than big create more jobs than big businesses.businesses.
lead the way in training workers lead the way in training workers for jobs. for jobs.
Chapter 1: Entrepreneurship 23Copyright 2003 Prentice Hall Publishing Company
Small Businesses...Small Businesses...
produce 51% of the nation's GDP.produce 51% of the nation's GDP. account for 47% of business sales.account for 47% of business sales. create 4X more innovations percreate 4X more innovations per
R & D dollar spent than medium-R & D dollar spent than medium-sized firms and 24X as many as sized firms and 24X as many as large companies.large companies.
0%
20%
40%
60%
80%
100%
% o
f Sm
all F
irm
s S
urv
ivin
g
New 2 4 6 8 10
# of Years in Business
Small Business Survival Rate
Chapter 1: Entrepreneurship 25Copyright 2003 Prentice Hall Publishing Company
The Small Business Failure The Small Business Failure RecordRecord
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. 60% fail within six years.60% fail within six years.
Chapter 1: Entrepreneurship 26Copyright 2003 Prentice Hall Publishing Company
Nine Deadly Mistakes of Nine Deadly Mistakes of EntrepreneurshipEntrepreneurship
Management incompetenceManagement incompetence Lack of experienceLack of experience UndercapitalizationUndercapitalization Poor cash managementPoor cash management Lack of strategic managementLack of strategic management
Chapter 1: Entrepreneurship 27Copyright 2003 Prentice Hall Publishing Company
Nine Deadly Mistakes of Nine Deadly Mistakes of EntrepreneurshipEntrepreneurship
Weak marketing effortWeak marketing effort Uncontrolled growthUncontrolled growth Poor locationPoor location Lack of inventory controlLack of inventory control Inability to make the Inability to make the
“entrepreneurial transition” “entrepreneurial transition”
Chapter 1: Entrepreneurship 28Copyright 2003 Prentice Hall Publishing Company
Putting Failure Into PerspectivePutting Failure Into Perspective
Failure is a natural part of the creative Failure is a natural part of the creative process.process.
Failures are simply stepping stones along Failures are simply stepping stones along the path to success. the path to success.
The “secret” to success is the ability to The “secret” to success is the ability to fail fail intelligentlyintelligently, learning why you failed , learning why you failed so that you can avoid making the same so that you can avoid making the same mistake again. mistake again.
Chapter 1: Entrepreneurship 29Copyright 2003 Prentice Hall Publishing Company
How to Avoid the PitfallsHow to Avoid the Pitfalls
Know your business in depth.Know your business in depth. Prepare a business plan.Prepare a business plan. Manage financial resources.Manage financial resources. Understand financial statements.Understand financial statements. Learn to manage people effectively.Learn to manage people effectively. Set your business apart from the Set your business apart from the
competition. competition. Keep in tune with yourself.Keep in tune with yourself.
