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Chapter 1: Entrepreneurship

Entrepreneurs: TheDriving Force BehindSmall Business

Chapter 1 EntrepreneursChapter 1 Entrepreneurs Copyright 2009 Pearson Education, Inc. 11

The World of theThe World of theEntrepreneurEntrepreneur

. .,. .,than 6 million businesses a year!than 6 million businesses a year!

Global Entrepreneurship Monitor (GEM)Global Entrepreneurship Monitor (GEM)Approximately 10% of U.S. population isApproximately 10% of U.S. population is

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

Chapter 1 EntrepreneursChapter 1 Entrepreneurs Co ri ht 2009 Pearson Education, Inc. 22

Approximately 9.5% of people in 42 GEMApproximately 9.5% of people in 42 GEMcountries studied are involved in starting acountries studied are involved in starting anew businessnew business


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Entrepreneurial Activity Across the GlobePersons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity25.0

al

x

0.0

5.0

10.0

15.0

20.0

iumpan

taly

denAEany

nce

enia

ssiaore

andarkicouth

nds

itedary

rkey

tvia

ada

pain

land

ech

ece

atia

way

hile

ited

tina

ndiasia

land

razil

ralia

uay

land

hina

esia

aica

nesbia

TotalEntrepreneuri

Activity

(TEA)Inde

TEA Index

Global TEA

Average

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

BelgJaI

Swe

GermFra

SlovRu

SingaFinl

DenMeS

NetherlaUn

HunTu L

CanSIr

eCz

Gre

Cro

Nor C

Un

Argen I

MalaIceB

Aust

Urug

ThaiC

Indon

Jam

Phillpi

Colo

Country

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

What Is an Entrepreneur?What Is an Entrepreneur?

the face of risk and uncertainty for thethe face of risk and uncertainty for thepurpose of achieving profit and growthpurpose of achieving profit and growthby identifying opportunities andby identifying opportunities andassembling the necessary resources toassembling the necessary resources to


cap ta ze on t emcap ta ze on t em


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What Is an Entrepreneur?What Is an Entrepreneur?

An entrepreneur is someone whoAn entrepreneur is someone whois willing to work 16 hours a dayis willing to work 16 hours a dayto keep from working 8 hours ato keep from working 8 hours aday for someone else!day for someone else!

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Characteristics ofCharacteristics ofEntrepreneursEntrepreneurs

SurveSurve : 72% of adults in the U.S. have: 72% of adults in the U.S. haveconsidered starting their own businessesconsidered starting their own businesses

Willingness to take initiativeWillingness to take initiative

Preference forPreference for moderatemoderateriskrisk

Confidence in their ability to succeedConfidence in their ability to succeed

Chapter 1 EntrepreneursChapter 1 Entrepreneurs 66

ee --re ancere ance PerseverancePerseverance

Desire for immediate feedbackDesire for immediate feedback


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Characteristics ofCharacteristics of

EntrepreneursEntrepreneurs

CompetitivenessCompetitiveness

Future orientationFuture orientation

Serial entrepreneursSerial entrepreneurs


Value achievement over moneyValue achievement over money

EntrepreneurshipEntrepreneurship

stands out:stands out:

Diversity!Diversity!

AnyoneAnyone regardless of age, race,regardless of age, race,gender, color, national origin, or anygender, color, national origin, or any


entrepreneur (although not everyoneentrepreneur (although not everyoneshould)should)


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How to Spot EntrepreneurialHow to Spot Entrepreneurial

OpportunitiesOpportunities

Creativity vs. InnovationCreativity vs. Innovation CreativityCreativity the ability to developthe ability to develop

new ideas and to discover newnew ideas and to discover newways of looking at problems andways of looking at problems andopportunitiesopportunities

InnovationInnovation the ability to applythe ability to apply


creat vecreat veso u ons o pro ems anso u ons o pro ems anopportunities to enhance or toopportunities to enhance or to

enrich peoples livesenrich peoples lives

How to Spot EntrepreneurialHow to Spot EntrepreneurialOpportunitiesOpportunities

Monitor trends and exploit them early onMonitor trends and exploit them early on StarwichStarwich

Take a different approach to an existingTake a different approach to an existingmarketmarket Goodwin Heart PineGoodwin Heart Pine


u a new w s on an o eau a new w s on an o ea PODSPODS


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How to Spot EntrepreneurialHow to Spot Entrepreneurial

OpportunitiesOpportunities

Look for creative ways to use existingLook for creative ways to use existingresourcesresourcesAlaska Glacial Mud CompanyAlaska Glacial Mud Company

Realize that others have the same problemRealize that others have the same problemthat you dothat you do


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

Benefits of Small BusinessBenefits of Small BusinessOwnershipOwnership

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 recognizedContribute to society and to be recognized

for your effortsfor your efforts

Do what you enjoy and to have fun at itDo what you enjoy and to have fun at it


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Drawbacks of SmallDrawbacks of Small

Business OwnershipBusiness Ownership

Risk of losing your entire investmentRisk of losing your entire investment

Long hours and hard workLong hours and hard work


Small Business Owners' Work WeekNumber of Hours Worked per Week

1 to 39 hours

40 to 49 hours

29%

60 to 69 hours

19%

20%

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

50 to 59 hours

22%

Average workweek = 54 hours


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Lower quality of life until the businessLower quality of life until the businessgets establishedgets established


3 3 .5 %

31.1%35.0%

Owner Age at Business Formation

9 .8 %

17.8%

6.1%

1.7%5.0%

10.0%

15.0%

20.0%

25.0%

.

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

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

Age


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Lower quality of life until the business getsLower quality of life until the business getsestablishedestablished


Complete responsibilityComplete responsibility

DiscouragementDiscouragement

Feeding theFeeding theEntrepreneurial FireEntrepreneurial Fire

Entrepreneurial educationEntrepreneurial education

Demographic and economic factorsDemographic and economic factors

Shift to a service economyShift to a service economy

Technological advancementsTechnological advancements


EE--Commerce and the World WideCommerce and the World Wide

WebWeb

International opportunitiesInternational opportunities


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The Cultural DiversityThe Cultural Diversity

of Entrepreneurshipof Entrepreneurship


89%86%

79%

80%

90%

Aspir ing Teenage Entrepreneurs

Percent Interested in Starting a Business

30%

40%

50%

60%

70%

0%

10%

20%

Asian/Pacific Isl ander African-American Hispani c-Ameri can White

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


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The Cultural DiversityThe Cultural Diversity

of Entrepreneurshipof Entrepreneurship

Women entrepreneursWomen entrepreneurs


4 2 . 3 %4 5 . 0 %

Growth of Women-Owned Companies1997 to 2006

2 3 . 3 %

0 . 4 %

1 2 . 3 %

4 . 4 %

1 5 . 6 %

0 . 0 %

5 . 0 %

1 0 . 0 %

1 5 . 0 %

2 0 . 0 %

2 5 . 0 %

3 0 . 0 %

3 5 . 0 %

4 0 . 0 %

Women-owned firms

All firms

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

N u mb e r o f f i r ms N u mb e r o f e mp l o y e e s Sa l e s

Cat egory


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0.26%

0.30%0.29%

0.34%

0.30%

0.35%

pany

Entrepreneurial Activity by Age Group

0.21%

0.10%

0.15%

0.20%

0.25%

ntageofAgeGroupStartingaCom

Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activit y, 2006.Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activit y, 2006.

0.00%

0.05%

Perc

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

Age Gro up

Small Businesses by Indust ry

Construction, 12.81%Other, 5.53%

Manufacturing, 4.74%

Wholesale, 5.63%

Retail, 12.47%

Finance & Real Estate, 9.05%

Services, 49.77%

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


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Small Businesses...Small Businesses...

. .. .businesses in the U.S.businesses in the U.S.

Employ 52% of the nations private sectorEmploy 52% of the nations private sectorworkforceworkforce

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 all1996 to 2006: Between 60% and 80% of all

net new jobs in the U.S.net new jobs in the U.S.

Are leaders in offerin trainin andAre leaders in offerin trainin and

SmallSmallBusinesses...Businesses...

advancement opportunities to workersadvancement opportunities to workers

Provide 67% of workers with their first jobsProvide 67% of workers with their first jobs

Produce 51% of the nations private GDPProduce 51% of the nations private GDP

Account for 47% of business salesAccount for 47% of business sales


Produce 13X to 14X more patents perProduce 13X to 14X more patents per

employees than large companiesemployees than large companies


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100%

81%90%

100%

ing

Small Business Surv ival Rate

65%

54%

46%40%

36%32% 29% 27% 25%

10%

20%

30%

40%

50%

60%

70%

%o

fSmallFirmsSurviv

0%New 1 2 3 4 5 6 7 8 9 10

# of Years in Business

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

Putting Failure intoPutting Failure intoPerspectivePerspective

. .. .yearsyears

Entrepreneurs areEntrepreneurs are notnotparalyzed byparalyzed bythe prospect of failurethe prospect of failure

FailureFailure a natural part of the creativea natural part of the creative


Successful entrepreneurs learn to failSuccessful entrepreneurs learn to fail

intelligentlyintelligently


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Avoiding the Pitfalls ofAvoiding the Pitfalls of

Small Business FailureSmall Business Failure now your us ness n epnow your us ness n ep

Prepare a business planPrepare a business plan

Manage financial resourcesManage financial resources

Understand financialUnderstand financialstatementsstatements


Avoiding the Pitfalls ofAvoiding the Pitfalls ofSmall Business FailureSmall Business Failure

Learn to mana e eo leLearn to mana e eo leeffectivelyeffectively

Set your business apart fromSet your business apart fromthe competitionthe competition

Maintain a positive attitudeMaintain a positive attitude



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All rights reserved. No part of this publication may beAll rights reserved. No part of this publication may bereproduced, stored in a retrieval system, or transmitted,reproduced, stored in a retrieval system, or transmitted,in any form or by any means, electronic, mechanical,in any form or by any means, electronic, mechanical,hotoco in recordin or otherwise without the riorhotoco in recordin or otherwise without the rior


written permission of the publisher. Printed in thewritten permission of the publisher. Printed in theUnited States of America.United States of America.

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

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