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CHAPTER 1

The Entrepreneurial Life

Entrepreneurship: A World of OpportunityPart 1

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Looking AHEAD

1. Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs.

2. Explain the nature of entrepreneurship and how it is related to small business.

3. Identify some motivators or rewards of entrepreneurial careers.

4. Describe the various types of entrepreneurs and entrepreneurial ventures.

5. Identify five potential advantages of small entrepreneurial firms.

6. Discuss factors related to readiness for entrepreneurship and getting started in an entrepreneurial career.

7. Explain the concept of an entrepreneurial legacy and the challenges involved in crafting a worthy legacy.

After you have read this chapter, you should be able to:

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Entrepreneurial Opportunities• Entrepreneurial Opportunity

An economically attractive and timely opportunity that creates value for interested buyers or end users.

• Success Stories Latemodel Restoration Supply (Waco, Texas)

http://www.latemodelrestoration.com Spanx (Atlanta, Georgia)

http://www.spanx.com MP4 Solutions (San Antonio, Texas)

http://www.airstripob.com

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Who Are Entrepreneurs?• Entrepreneurs are:

A person who starts and/or operates a business.

Individuals who discover market needs and launch new firms to meet those needs.

Risk takers who provide an impetus for change, innovation, and progress.

All active owner-managers (founders and/or managers of small businesses).

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The Contributions of Small Business • Small Businesses:

Produce 14 times as many patents per employee than do large companies, and are twice as likely to turn them into market successes.

Account for half of the private gross domestic product.

Create more than 60% of net new jobs annually.

Pay 44.3% of private payrolls.

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What Is a Small Business?• Criteria for Defining Smallness in Business

1. Financing supplied by one person or small group

2. Localized business operations (except marketing)

3. Business’ size small relative to larger competitors

4. Fewer than 100 employees

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Entrepreneurial Incentives1-2

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Why People Become Entrepreneurs• Reluctant Entrepreneur

A person who becomes an entrepreneur as a result of some severe hardship.

• Refugee A person who becomes an entrepreneur to

escape an undesirable situation.

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The Many Varieties of Entrepreneurship• Founder (“Pure” Entrepreneur)

A person who brings a new firm into existence.

• Administrative Entrepreneur An entrepreneur who overseas the operations of a

ongoing business.

• Franchisee An entrepreneur whose power is limited by the

contractual relationship with a franchising organization.

• Entrepreneurial Team Two or more people who work together as

entrepreneurs.

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Small Business Growth Potential and Profits• High-Potential Venture (Gazelle)

A small firm that has great prospects for growth.

• Attractive Small Firm A small firm that provides

substantial profits to its owner.

• Microbusiness A small firm that provides

minimal profits to its owner.

• Lifestyle Business A microbusiness that permits the owner to follow a

desired pattern of living.

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Artisan Entrepreneurs• Artisan Entrepreneur

A person with primarily technical skills and little business knowledge who starts a business.

• Characteristics: Technical training Paternalistic approach Reluctance to delegate Few sources of capital Narrow view of strategy Personal sales effort Short planning horizon

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Opportunistic Entrepreneurs• Opportunistic Entrepreneur

A person with both sophisticated managerial skills and technical knowledge who starts a business.

• Characteristics: Broad-based education Scientific approach to problems Willing to delegate Broad view of strategy Diversified marketing approach Longer planning horizon Sophisticated accounting

and financial control

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Women Entrepreneurs• More Women Entrepreneurs

The number of women-owned firms grew nearly twice as fast as that of all firms from 1997 to 2006.

Females owned 30% of all businesses as of 2006. Women are moving into nontraditional industries.

• Problems Facing Female Entrepreneurs Newness of entrepreneurial role Lack of access to credit Lack of networking

connections Discrimination

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The Winning Hand of Entrepreneurship

Customer Focus

Customer Focus

Quality Performance

Quality Performance

Competitive Advantages

of Entrepreneur

ial Firms

Competitive Advantages

of Entrepreneur

ial Firms

InnovationInnovation Integrity and Responsibility

Integrity and Responsibility

Special Niche

Special Niche

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Age

Early Career Concerns

1. Getting an education

2. Gaining work experience

3. Acquiring financial resources

Late Career Concerns

1. Fulfilling familyresponsibilities

2. Attaining seniorityin employment

3. Earning investment ina retirement program

25 35 4520

Getting Started• Age and Entrepreneurial Opportunity

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Getting Started (cont’d)

Characteristics of Successful Entrepreneurs

Characteristics of Successful Entrepreneurs

Strong Commitment

to the Business(Tenacity)

Strong Commitment

to the Business(Tenacity)

Moderate Risk Takers

(Financial, Career, Psychic Risks)

Moderate Risk Takers

(Financial, Career, Psychic Risks)

Strong Internal Locus of Control (Self-Reliance)

Strong Internal Locus of Control (Self-Reliance)

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Entrepreneurial Characteristics(Timmons and Spinelli)

Commitment and

Determination

Commitment and

Determination

LeadershipLeadershipMotivation to Excel

Motivation to Excel

Creativity, Self-Reliance,

and Adaptability

Creativity, Self-Reliance,

and Adaptability

Opportunity Obsession

Opportunity Obsession

Tolerance of Risk,

Ambiguity, and

Uncertainty

Tolerance of Risk,

Ambiguity, and

Uncertainty

Attitudes and

Behaviors of Entrepreneu

rs

Attitudes and

Behaviors of Entrepreneu

rs

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Getting Started (cont’d)• Taking the Plunge

Precipitating event

An event, such as losing a job, that moves an individual to become an entrepreneur.

• Finding “Go-To” Persons Mentors for advice and counsel

• Growing and Managing the Business

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Living the Entrepreneurial Life• Entrepreneurial Legacy

The tangible items and intangible qualities passed on not only to heirs but also to the broader society.Evaluating accomplishmentsDisappointments in winning the wrong game

• Crafting a Worthy Legacy The nature of the entrepreneurial endeavor reflects

personal goals and values.

• Beginning with the End in Mind Proper values and actions lead to a good exit.

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Key TERMS

• entrepreneurial opportunity

• entrepreneur• reluctant entrepreneur• refugee• founder• franchisee• high-potential venture

(gazelle)• attractive small firm

• microbusiness• lifestyle business• artisan entrepreneur• opportunistic entrepreneur• entrepreneurial team• internal locus of control• external locus of control• precipitating event• entrepreneurial legacy