Chapter 1 the foundations of entrepreneurship

The Foundations of The Foundations of EntrepreneurshipEntrepreneurship

The Foundations of The Foundations of EntrepreneurshipEntrepreneurship

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

CHAPTER CHAPTER 11


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Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1 - 5Ch. 1: The Foundations of Entrepreneurship

The World of the EntrepreneurThe World of the Entrepreneur

Every year U.S. entrepreneurs launch Every year U.S. entrepreneurs launch 550,000 new businesses.550,000 new businesses.

Entrepreneurial spirit - the most Entrepreneurial spirit - the most significant economic development in significant economic development in recent history.recent history.

GEM study: 18.7% of adult population GEM study: 18.7% of adult population in the U.S. is actively involved in trying in the U.S. is actively involved in trying to start a new business. to start a new business.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice HallCh. 1: The Foundations of Entrepreneurship

The World of the EntrepreneurThe World of the Entrepreneur

Global Entrepreneurship Monitor (GEM) Global Entrepreneurship Monitor (GEM) study reports:study reports: Men are twice as likely to start a business Men are twice as likely to start a business

as women.as women. Most entrepreneurs turn to family members Most entrepreneurs turn to family members

and friends for capital.and friends for capital. Entrepreneurs are most likely to launch Entrepreneurs are most likely to launch

businesses when they are businesses when they are between the ages of 25 and 44.between the ages of 25 and 44.

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What is an Entrepreneur?What is an Entrepreneur?

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

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Characteristics of Characteristics of EntrepreneursEntrepreneurs

Desire for responsibilityDesire for responsibility Preference for moderate levels of risk – Preference for moderate levels of risk –

risk eliminatorsrisk eliminators 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 orientation – Future orientation – serial entrepreneursserial entrepreneurs Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money

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EntrepreneurshipEntrepreneurship

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

Diversity!Diversity!

AnyoneAnyone – regardless of age, race, – regardless of age, race, gender, color, national origin, or any gender, color, national origin, or any other characteristic – can become an other characteristic – can become an entrepreneur entrepreneur (although not everyone (although not everyone should). should).

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Benefits of EntrepreneurshipBenefits of Entrepreneurship

The opportunity to:The opportunity to: Create your own destinyCreate your own destiny Make a differenceMake a difference Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to Contribute to society and to

be recognized for your effortsbe recognized for your efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it

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Drawbacks of Drawbacks of EntrepreneurshipEntrepreneurship

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 Lower quality of life until the business

gets establishedgets established High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement

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Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic factorsDemographic and economic factors Shift to a service economyShift to a service economy Technology advancementsTechnology advancements Independent lifestyleIndependent lifestyle E-commerce and the InternetE-commerce and the Internet

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FIGURE 1.3 U.S. Retail E-Commerce Revenues Source: Based on Forrester Research, 2008.


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic factorsDemographic and economic factors Shift to a service economyShift to a service economy Technology advancementsTechnology advancements Independent lifestylesIndependent lifestyles E-commerce and the InternetE-commerce and the Internet International opportunitiesInternational opportunities

(continued)

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The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

Young entrepreneurs Young entrepreneurs

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Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs

(continued)

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FIGURE 1.4 Why Women Start Businesses

Source: U.S. Small Business Administration, 2007.



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

(continued)

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Home-based businessesHome-based businesses Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts Social entrepreneursSocial entrepreneurs Retiring Baby BoomersRetiring Baby Boomers

(continued)

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Small Businesses ...Small Businesses ... Make up 99.7% of the 30.14 million Make up 99.7% of the 30.14 million

businesses in the U.S.businesses in the U.S. Employ 51% of the nation’s private Employ 51% of the nation’s private

sector workforce.sector workforce. Create more jobs than big businesses.Create more jobs than big businesses.

60% to 80% of net new jobs over the last 60% to 80% of net new jobs over the last decadedecade

Are leaders in offering Are leaders in offering training and advancement training and advancement opportunities to workers.opportunities to workers.

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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 13 times more patents per Create 13 times more patents per

employees than large companies.employees than large companies. Zipper, light bulb, FM radio, laser, Zipper, light bulb, FM radio, laser,

air conditioning, escalator, air conditioning, escalator, personal computer, personal computer, automatic transmission, automatic transmission, and many more!and many more!

Small Businesses ...Small Businesses ...(continued)

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FIGURE 1.5 Small Business by Industry

Source: U.S. Small Business Administration, 2007.


Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship

1.1. Management mistakesManagement mistakes

2.2. Lack of experienceLack of experience

3.3. Poor financial controlPoor financial control

4.4. Weak marketing effortsWeak marketing efforts

5.5. Failure to develop a strategic planFailure to develop a strategic plan

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Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship

6.6. Uncontrolled growthUncontrolled growth

7.7. Poor locationPoor location

8.8. Improper inventory controlImproper inventory control

9.9. Incorrect pricingIncorrect pricing

10.10. Inability to make the Inability to make the “entrepreneurial transition”“entrepreneurial transition”

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Putting Failure Into Putting Failure Into PerspectivePerspective

Entrepreneurs are Entrepreneurs are notnot paralyzed by paralyzed by the prospect of failure.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..

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Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure

Know your business in depthKnow your business in depth Develop a solid business planDevelop a solid business plan Manage financial resourcesManage financial resources Understand financial statementsUnderstand financial statements Learn to manage people effectivelyLearn to manage people effectively Set your business apart from the Set your business apart from the

competitioncompetition Maintain a positive attitudeMaintain a positive attitude

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ConclusionConclusion

Entrepreneurs:Entrepreneurs: Are an important part of the free Are an important part of the free

enterprise systementerprise system Are a diverse and talented group of Are a diverse and talented group of

peoplepeople Represent a cross-section of society as Represent a cross-section of society as

a wholea whole Are able to enhance the profitability of Are able to enhance the profitability of

their businesses through acquiring their businesses through acquiring additional knowledge and experienceadditional knowledge and experience


What is Ahead?What is Ahead?

Section 1: Section 1: The Challenge of EntrepreneurshipThe Challenge of Entrepreneurship

Section 2: Section 2: Building a Business Plan: Building a Business Plan: Beginning ConsiderationsBeginning Considerations

Section 3: Section 3: Building a Business Plan: Building a Business Plan: Marketing ConsiderationsMarketing Considerations

Section 4: Section 4: Building a Business Plan: Building a Business Plan: Financial MattersFinancial Matters

Section 5: Section 5: Putting the Business Plan to Work: Putting the Business Plan to Work: Making the New Venture a SuccessMaking the New Venture a Success


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

the publisher. Printed in the United States of America.

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Chapter 1 the foundations of entrepreneurship

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