29015772 Chapter 1 Entrepreneurship by Zubair a Khan

8/13/2019 29015772 Chapter 1 Entrepreneurship by Zubair a Khan

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Chapter 1 - Entrepreneurs: The Driving Force Behind Small Business

You can't cross the sea merely by standing and staring at the water.--Rabindranath Tagore

It's not how many times we stumble and fall down that matters.It's how many times we stumble and get back up that counts.--Max arey! "r.

Learning Obectives

#tudents will be able to$%. &efine the role of the entrepreneur in the .#. economy.(. &escribe the entrepreneurial profile.). &escribe the benefits of owning a small business.*. &escribe the potential drawbacks of owning a small business.

+. ,xplain the forces that are driing the growth in entrepreneurship.. &iscuss the role of diersity in small business and entrepreneurship./. &escribe the contributions small businesses make to the . #. economy.0. ,xplain the reasons small businesses fail.1. 2ut business failure into the proper perspectie.%3. ,xplain how small business owners can aoid the ma4or pitfalls of running a business.

!nstructor"s Outline

I. Introduction5. The dramatic resurgence of the entrepreneurial spirit$%. 5 recent study by the 6ational 2anel #tudy of .#. 7usiness #tart-ps found

that 0 million people! or one in (+ adults! were actiely engaged in trying to launch a newbusiness.(. This resurgence of the entrepreneurial spirit is the most significant economicdeelopment in recent business history.

). ,ntrepreneurs hae introduced innoatie products and serices! pushed backtechnological frontiers! created new 4obs! opened foreign markets.

*. 5s a result! they sparked the .#. economy into regaining its competitie edge inthe world.

+. In %11! entrepreneurs created (/*!333 new corporations8 today! the number ofnew incorporations exceeds 033!333 per year.

. In a recent surey of college seniors! *1 percent of the men and )% percent of thewomen said they were interested in pursuing entrepreneurship when theygraduate.

7. Increase in launch of new business$%. &ue to new technological deelopments! it is possible for companies to

accomplish more with fewer people. 5s a result! people who once saw launchinga business as being too risky now see it as the ideal way to create their own 4obsecurity.

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# #ection I - The hallenge of ,ntrepreneurship

(. 5lthough launching a business is neer easy! the resources aailable today makethe 4ob much simpler today than eer before since thousands of colleges anduniersities offer courses in entrepreneurship.

). Internet hosts a sea of information on launching a business including sources ofcapital.

*. 5nother significant shift in growth of small company has been due to significantshift in our nation's economic structure 9rapidly moing away from an industrialeconomy to a knowledge-based one:.

II. ;hat is an entrepreneur, ?@@T#T,2# @? 56 ,6TR,2R,6,R A ?rom the Ice 5ge to @uter #pace

Two characteristics common to entrepreneurs are creatiity and an eye for opportunity.

5n @pportunity from the Ice 5ge.Ronald #tamp has an idea about how to use the /+3 or so icebergs that break off from glacierseach year and drift south past Breenland into the 5tlantic. #tamp! a former fish wholesaler! islassoing icebergs and melting them down to make spring waterC Recogni=ing the marketingpotential of water made from glacial ice! #tamp has an eye on tapping into the D)3 billion-a-yearbottled water business.

The first obstacle #tamp faced was figuring out how to capture icebergs and process them.#tamp met 2aul 7enson! owner of a spring water business! and the two formed Iceberg

Industries. In addition to raising D+33!333 from inestors! #tamp and 7enson finally deeloped aworkable method for haresting icebergs. They purchased a barge with heated tanks onboardand conerted it into a floating water factory. @utfitted with a crane and a hydraulic grappleoriginally designed to bite chunks out of granite! the barge is towed by a tugboat into the 5tlanticeach spring! where it spends the next eight months haresting icebergs. The tugboat lassos theiceberg and pulls it next to the barge! where the grapple bites off a half-ton chunk of ice.5nother deice eEuipped with rotating steel teeth crushes the ice before it goes into the heatingtanks. There! the ice is melted and filtered. @nce the holding tanks are filled! the tug tows entirebarge to Iceberg IndustriesF processing plant in 6ewfoundland! where final filtering and bottlingtakes place.

Iceberg Industries went public in (333! but its two founders still own %+ percent of thecompanyFs stock. In addition to its line of bottled water! Iceberg Industries has partnered withother 6ewfoundland businesses to produce beer 97orealis Iceberg 7eer: and odka 97orealisIceberg Godka: with its pure water.

,ntrepreneurs in #pace.#ince ongress passed the ommercial #pace 5ct! which legali=ed priate manned space flights!in %11/. @ne organi=ation! the H 2RI, ?oundation! is offering D%3 million to the first


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness$

entrepreneur who can build a spacecraft that carries three people ( miles into space twice withintwo weeks. 5lthough no one has Eualified for the D%3 million pri=e yet! some entrepreneurs arenot waiting to get into the space tourism business. #pace 5dentures Jtd. is booking passengerson a ariety of space-related adenture acations! ranging from terrestrial tours of Meteor raterto high-altitude flights in Russian MiB fighter 4ets. Top Bun wannabes can fly with an

experienced pilot at speeds of up to Mach (.+ 9%!0+3 miles per hour: and altitudes up to 03!333feetC 5irborne thrills donFt come cheap! howeer8 prices range from D)!*33 up to D%)!333.ustomers also can experience weightlessness like astronauts in outer space without eer leaingearthFs atmosphere on the Russian-built ?lying Jaboratory 9nicknamed the KGomit ometL:. 5sthe plane flies in a series of parabolic cures! its occupants experience about (+ seconds of =erograity.

#pace 5denturesF most ambitious pro4ect is a sub-orbital space flight that will takeadenturers %33 kilometers into space. The fact that the company does not yet hae a ehiclecapable of accomplishing this mission has not slowed down hopeful space traelers. 5lready!more than %33 people hae paid the D!333 deposit to resere a spot on the D10!333 two-hour trip

into space. The company has agreements with six of the most promising companies working tobuild reusable space ehicles! so #pace 5dentures customers will be among the first tourist totrael into space when a ehicle is aailable.

%. 5ssume that you are a banker and these entrepreneurs approached you with a loan reEuestto start these companies. ;hat Euestions will you ask them< ;ould you approe theloan< ,xplain.%ns&er: The discussion should focus on the eidence of the iability of these businessesand what personal commitment the entrepreneurs hae in them! i.e.! personal inestment.

(. sing these business entures as a source of inspiration! work in a team with two or threeof your classmates to generate ideas for unusual business entures that you could start.

%ns&er: ,ach group will hae different idea. #tudent should consider the marketiability of their business entures.). #elect one idea from those your team generated in Euestion (. ;hat could you do to

conince skeptical lenders or inestors to put money into your company and to increasethe probability of its successoweer! students must understand that inregards to money! both lenders and inestors reEuire solid financial documentations!forecasting the success probability.

7. hoosing entrepreneurship$%. >ae been downsi=ed or laid off +(. ;anted to fulfill lifelong goal (+). Tired of working for someone else (/*. ;anted more control oer future )+. "oined family business *%

. ,ntrepreneurial profile%. &esire for responsibility.


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' #ection I - The hallenge of ,ntrepreneurship

a: They prefer to be in control of their resources and to use those resources toachiee self-determined goals.(. 2reference for moderate risk.a: ,ntrepreneurs are not wild risk-takers! but are instead calculatingrisk-takers.

). onfidence in their ability to succeed.a: They need to be optimistic about the chances for success.*. &esire for immediate feedback.a: ,ntrepreneurs like to know how they are doing and are constantly lookingfor reinforcement.+. >igh leel of energy.a: ,ntrepreneurs are more energetic than the aerage person. Typically! theywork long hours! often 3 to 03 hours a week.. ?uture orientation.a: ,ntrepreneurs tend to dream big and then formulate plans to transfer thosedreams into reality.

/. #kill at organi=ing.a: ,ntrepreneurs know how to put the right people and resources together toaccomplish a task.0. Galue achieement oer money.a: 5chieements seems to be the primary motiating force behindentrepreneurs - money is simply a way off keeping score off accomplishments.

&. @ther characteristics%. >igh degree of commitment.a: 5n ,ntrepreneurFs commitment to his or her and the business it spawnsdetermines how successful his or her company ultimately becomes.

(. Tolerance for ambiguity.a: ,ntrepreneurs tend to hae a high tolerance for ambiguous! eer-changingsituations.). ?lexibility.a: ,ntrepreneurs must be willing to adapt their businesses to meet changes.*. Tenacity.a: #uccessful entrepreneurs hae the willpower to conEuer the barriers thatstand in the way of their success.

,. #tudy of business owners by Yankeloich 2artners for 2itney 7owes Inc. identified+ different entrepreneurial personalities$

%. Idealists.a: Idealists started their businesses because they had a great idea or wanted towork on something special.b: Idealists en4oy creatie work but are impatient with performingadministratie tasks such as financial analysis or legal matters.c: This group of entrepreneurs and their businesses are most dependent oncomputers.(. @ptimi=ers.


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness(

a: @ptimi=ers 9(% of all entrepreneurs: are the second largest category.b: The benefits of entrepreneurship are most important to them8 they en4oythe freedom and flexibility of owning a business and would not be willing to work forsomeone else.c: They want their companies to grow! but their focus is on profits rather

than on reenues.d: These business owners are highly knowledgeable about financial issuesand use technology to keep costs down and productiity up.e: They worry less than other business owners because they see themselesas maintaining control oer their businesses.f: They also hae learned the secrets of balancing their home and businesslies.). >ard ;orkers.a: >ard workers make up (3 of the entrepreneurial population.b: They loe their work and are more likely than any other group to put inextra hours to achiee the targets.

c: They tend to be detail-oriented and are the most growth-orientedentrepreneurial group.d: They are financially aggressie and exercise broad control oer the detailsof running their businesses.e: >ard workers typically hae long-term business plans and stick to them.*. "ugglers.a: "ugglers also make up (3 percent of the entrepreneurial population.b: They hae a difficult time delegating authority and responsibility.c: They prefer to do things themseles to make sure eerything meets theirhigh standards.d: They are highly energetic people who are good at handling multiple taskssimultaneously.e: They readily embrace technology in their companies and are alwayslooking for ways to improe their businesses.f: "ugglers feel pressure to maintain positie cash flow in their companies.+. #ustainers.a: #ustainers comprise %+ percent of all entrepreneursb: These entrepreneurs are more likely to hae inherited or bought theircompanies.c: They are the least comfortable with technology and prefer to put in moretime than to figure out how to apply technology to sole a particular problem.d: #ustainers are the most conseratie group and do not strie to achieesignificant leels of growth.e: Maintaining a good balance between business and home life is importantto them.

III. 7enefits and opportunities of small business ownership$5. @pportunity to gain control oer your own destiny%. @wning a business.(. Rewards of knowing you are the driing forces behind their businesses.


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) #ection I - The hallenge of ,ntrepreneurship

7. @pportunity to make a difference%. @pportunity to do what is important to you.(. ,xample of "osh Nanuer.a: KI hae no smaller goal than to hae a positie impact on our planet and to

create a positie future for my children and the world.L

. @pportunity to reach your full potential%. ,scape from boring and unchallenging work.(. ,ntrepreneurship is a ehicle for self-expression.

&. @pportunity to reap unlimited profits%. Money is not the primary motiator! but owning your own business is a greatway to create wealth.(. Typical 5merican millionaire is first-generation wealthy! owns a smallbusiness and works *+-++ hours a week.

). ,xample of "ohn #chnatter.a: In %10*! #chnatter sold his car! bought used restaurant eEuipment! andbegan selling pi==as. 6ow! he owns (!033 stores 9most of them franchises: in *1 states and%3 foreign countries! generating sales in excess of D( billion a year. >is net worth is morethan D+33 million.

I6 T>, ?@@T#T,2# @? 56 ,6TR,2R,6,ROThe Inca Birl

#tephanie >irsch! after graduating from college! moed to Jos 5ngeles! where she tried seeral

4obs before taking a 4ob as a fashion stylist in 6ew York. >irsch en4oyed the fashion business!but she felt stifled working for someone else8 an entrepreneurial spring was bubbling up insideher.

>irsch decided to go to Jima! 2eru to isit a friend and to celebrate the new year in #outh5merica. @n seeral trips to a festie open-air market in the city! the colorful fabrics anddesigns that surrounded her oerwhelmed >irsch. #he also drew inspiration from manychurches! cathedrals! and spiritual places she isited. ;hile hiking on the Inca Trail! >irschdecided to create a business selling fashionable plastic handbags made in the rich! ibrant colorsshe had seen on her trip. ;hen she returned to 6ew York! >irsch! then 4ust (*! designed a lineof bags! found a manufacturer! and launched Inca Birl ,nterprises.

Inca 7ags became a tremendous hit! showing up first on the arms of celebrities such as ameron&ia=! Ji Tyler! >alle 7erry! ourtney ox! ,li=abeth >urley! indy rawford! and manyothers. >irsch has expanded Inca BirlFs product line to include mini skirts! sarongs! belts!beaded bathing suits! and beach mats. The company receied a huge publicity boost whenSports Illustratedused Inca Birl swimsuits on some of its models in the maga=ineFs famousK#wimsuitL issue. Inca Birl suits garnered four full pages of coerage in the popular issue.


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness*

>irsch continues to expand her business! selling her products through outlets such as >enri7endel! #aks ?ifth 5enue! and 7ergdorf Boodman as well as through the companyFs ;eb site.>irsch also runs her company with an eye on its social responsibility. Through her business! shesupports a ariety of charitable organi=ations! including >ale >ouse and the &oe ?und.#tephanie >irsch proes that age puts no limit on entrepreneurial ability. >er creatiity and hard

work hae enabled her to guide her company to more than D) million in sales.

%. In addition to the normal obstacles of starting a business! what other barriers do youngentrepreneurs faceard ;orker.

,. @pportunity to contribute to society and be recogni=ed for your efforts%. @ften small business owners are among the most trusted and respectedmembers of their communities.(. ,ntrepreneurs en4oy the recognition they get from customers for doing a 4obwell.

?. @pportunity to do what you en4oy doing

%. Their work is not really work8 it's their aocation turned into a ocation.(. Mike Manclark story.a: Mike Manclark transformed his passion for airplanes and flying into alucratie business. In %10* at age %1! with borrowed D)!333! he launched Jeading ,dge5iation #erices. Jeading ,dge now generates more than D( million in annual sales. KIdonFt do this for the money!L he says. KI do it for the loe of airplanes.L

IG. 2otential drawbacks of entrepreneurship$5. ncertainty of income%. The regularity of income from working for someone is gone.(. PThe entrepreneur is the last one to be paid.P

7. Risk of losing your entire inested capital%. )* fail within ( years.(. +3 shut down within * years.). 3 fold within years.*. onsider the risk-reward trade-off.a: ;hat is the worst thing that could happen if my business failsow likely is it that the worst to happen


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+ #ection I - The hallenge of ,ntrepreneurship

c: ;hat can I do to lower the risk that my business will fail. International opportunities%. 1+ of the world's population lies outside of .#. borders.(. #mall businesses account for 1 percent of all exporters8 howeer! theyaccount for 4ust (3 percent of total exports.). Richard 5llred story.a: Richard 5llred launched a company that produces surf-related clothingand apparel. Toes on the 6ose orporation domestic sales grew Euickly! but 5llred also sawopportunities to sell his products in foreign markets such as 5ustralia! anada! Breat 7ritain!and "apan.

GI. The ultural &iersity of ,ntrepreneurship5. Young ,ntrepreneurs%. Beneration H! people born between %1+ and %103! is the mostentrepreneurial generation in history.(. Members of this generation are responsible for /3 percent of all business start-upsC). Recent sureys hae found that 3 percent of %0-to (1-year-olds say they hopeto launch their own businesses.*. KBeneration HL might be more appropriately called KBeneration ,.L

7. ;omen ,ntrepreneurs%. #mall business has been a leader in offering women opportunities foreconomic expression through employment and entrepreneurship.(. Increasing numbers of women are discoering that the best way to break thePglass ceilingP that preents them from rising to the top of many organi=ations is to start theirown companies 9see ?igure %.):.). ;omen are opening businesses at a rate twice that of the national aerage


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1 #ection I - The hallenge of ,ntrepreneurship

*. ;omen are launching businesses in fields that traditionally hae been male-dominated.+. The 1.% million women-owned companies across the nited #tates employ(/.+ million workers! about (3 percent of all company workers in the country.. ;omen own about )0 percent of all businesses! and these companies generate

approximately D)./ trillion in sales each year.

. Minority ,nterprises%. 5sians! >ispanics! and 5frican-5mericans! respectiely! are most likely tobecome entrepreneurs.(. Jike women! minorities cite discrimination as a principal reason for theirlimited access to the world of entrepreneurship.). #tudies show that the nationFs minority entrepreneurs own ).( millionbusinesses that generate D*1+ billion in reenues and employ nearly * million workers.

&. Immigrant ,ntrepreneurs

%. Many are lured to the .#. by its economic freedom.(. ome with few assets but lots of drie and dreams.). Marty and >elen #hih from Taiwan.*. Mil Nitchko and Michael Marko story.a: In %11(! Mik Nitchko and Michael Marko! migrated from Russia to thenited #tates! started a business based on a program they had written to help financialadisers ealuate the Euality of inestments. Today! Marko 2rocesses Internationalgenerates more than D% million in sales.

,. 2art-time entrepreneurs%. 2ermits people to try it with low-risk.

(. % million 5mericans are self-employed part-time.). se it to Ptest the waters.P*. harles Manning! "r. storya: harles Manning! "r. ran a part-time business$ accident inestigation! askill he learned while sering in the 5ir ?orce during the Norean ;ar. In %103! a full-timebusiness! he worked on such high-profile cases as the hallenger space shuttle and Galu"etexplosions and generates annual reenues of D). million.

?. >ome-based business owners%. +) of all businesses are home-based! but about 03 percent of them are ery

small with no employees.

(. #tudy reported more than ++!333 home-based businesses generating sales of morethan D% million per year.). The biggest adantage is the cost saings of not haing to lease or buy an external

location.*. They also en4oy the benefits of flexible work and lifestyles.+. #tudies suggest that the success rate for home-based businesses is high.. &orn Nennison #tory


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness11

a: &on Nennison launched his business! &MN 2roductions! a company thatcreates )-& computer animations and sound effects for a ariety ofapplications! from his kitchen table. >is first step was to create a businessplan! and then he began calling on prospectie clients. 5lthough NennisonFsbusiness has experienced tremendous growth! he still runs the company from

his home in #imi Galley! alifornia./. Table %.( - %0 guidelines home-based entrepreneurs should follow.Managing a #uccessful >ome-7ased 7usiness.a: &o your homeworkb: ?ind out what your =oning restrictions arec: hoose the most efficient location for your officed: ?ocus your home-based business ideae: &iscuss your business rules with your familyf: #elect an appropriate business nameg: 7uy the right eEuipmenth: &ress appropriately

i: Jearn to deal with distractions4: Reali=e that your phone can be your best friend ... or your worst enemyk: 7e firm with friends and neighborsl: Take adantage of tax breaksm: Make sure you hae adeEuate insurance coeragen: nderstand the special circumstances under which you can hire outside

employeeso: 7e prepared if your business reEuires clients to come to your homep: Bet a post office boxE: 6etwork! network! networkr: 7e proud of your home-based business

B. ?amily business owners%. @f the (+.+ million businesses in the nited #tates! 13 are family-ownedand managed.(. These companies account for 3 of total employment in the nited #tatesand generate more than +3 of the .#. Bross &omestic 2roduct 9B&2:.). )/ of theFortune 500companies are family businesses.

*. @nly )) of family businesses surie to the second generation8 4ust %( make itto the third generation8 and only ) surie to the fourth generation and beyond.

>. opreneurs.%. ,ntrepreneurial couples who work together as co-owners of their businesses.(. ompanies co-owned by spouses represent one of the fastest growing business

sectors.). #ome of the characteristics they rely on include$

a: personalities that mesh.b: mutual respect.c: compatible goals.d: eEual partnership.


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1# #ection I - The hallenge of ,ntrepreneurship

e: complementary business skills.f: open communication.g: clear diision of roles and authority.h: ability to encourage each other.i: separate work spaces.

4: boundaries between work and personal life.k: a sense of humor.l: may not work with eery couple.

I. orporate castoffs%. 5s ma4or .#. companies hae Ptrimmed their ranks!P many of these displacedworkers hae launched their own companies.(. (3 of these managers start their own companies.). 5n entrepreneurial offense is the best defense to corporate layoffs.

". orporate dropouts

%. &ownsi=ing has diminished employee loyalties.(. Many are striking out on their own for more opportunity! better income! andmore K4ob security.L

GII. The ontributions of #mall 7usiness5. Introduction%. (+.+ million businesses! 10.+ of all businesses in the .#. would Eualify assmall businesses.(. #mall business employs more than +( of the priate sector work force.). Girtually all 4ob growth in %113s came from small business! creating /+.0 ofnew 4obs.

*. #mall companies bear the heaiest load of training new workers.+. #mall businesses produce +% of the B&2 and */ of business sales.. They also generate (3 more innoations per employee than largecompanies./. #ee ?igure %./.

I6 T>, ?@@T#T,2# @? 56 ,6TR,2R,6,ROMonopolyFs Inentor

,ntrepreneurs hae exhibited persistence! determination! and courage in the face of adersity.onsider the following entrepreneurFs story.

In %1)*! 5mericans were suffering from the deastating effects of the Breat &epression! whichhad caused so many businesses to fail and the unemployment rate to peak at (+ percent. harles&arrow of Bermantown! 2ennsylania had lost his 4ob as a heating eEuipment salesman in %1)3and had worked at odd 4obs to support his family. &uring this down time! he reali=ed that peoplein the nited #tates needed a diersion from the worries of eeryday liing. >e deeloped aboard game that allowed players to wheel and deal like the real millionaires of the period.&arrow called the game KMonopolyL and! unable to finance its production and marketing on his


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness1$

own! he took it to 2arker 7rothers! one of the nationFs oldest and best-known game makers.2arker 7rothers reiewed the game but re4ected it.

&arrow managed to borrow a small amount of money and with the help of a friend who was aprinter! constructed a few hand-made game sets! which he peddled from store to store.

;anamakerFs &epartment #tore in 2hiladelphia placed a consignment order for +!333 games.They sold Euickly! and Monopoly was soon the rage among residents of the city. The popularityof the game caused 2arker 7rothers to reconsider its decision! and in %1)+! the companypurchased from &arrow the rights to the game. &emand for the game was so strong that 2arker7rothers could not manufacture enough games sets to meet it een though the company wasturning out (3!333 sets a week. To date! more than (33 million Monopoly sets hae been soldworldwide! making it one of the most popular games eer created. The game has been printed in( different languages. harles &arrow neer inented another game! but his legacy lies onthrough the game that more than +33 million people hae played. &arrow became a millionairefrom the royalties he receied on the sales of Monopoly.

%. ,xplain how harles &arrow exhibits the Pentrepreneurial spirit.P%ns&er: #tudentFs answer may ary. #ome common Kentrepreneurial spiritLcould be$ commitment! persistent! and belieing himself and his product.

(. Is &arrowFs story of continuing to try in the face of failure typical of successfulentrepreneurs< ,xplain.%ns&er: #tudentFs answer may ary. 5 common explanation is$ wanting tomake a difference.

GIII.The Ten &eadly Mistakes of ,ntrepreneurship5. #mall businesses hae a much higher failure rate than larger businesses.

%. 3 will fail in six years.(. auses of small business failurea: limited resources! inexperienced management! and lack of financialstability.

7. Managerial incompetence.%. Management inexperience or poor decision making ability is the chiefproblem of the failing enterprise.(. The owner-leader lacks the knowledge or ability needed.). 5ndrew Nay story.a: 5ndrew Nay was a pioneer in the earliest days of the portable computerwith his Naypro model. nfortunately! he had no experience in running a high-tech startup!and! despite the popularity of his computer! Nay made a series of managerial blunders thatultimately forced the company into bankruptcy.

. ndercapitali=ation.%. 5ny successful business enture reEuires proper financial control.(. Two pitfalls affecting small business's financial health are common$

undercapitali=ation and poor cash management.


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness1(

>. 2oor location.%. Jocation is part art and part science.(. @wners need to inestigate before they locate.a: It's critical in retail.

). Neys to location.a: ;hat it costs.b: ;hat it generates in sales olume.

I. Jack of Inentory ontrol%. Inentory control is one of the most neglected areas in small business.(. Insufficient inentory leels result in shortages and stockouts causing customers

to become disillusioned and not return.). >as too much inentory or has too much of the wrong type of inentory.

". Inability to Make the K,ntrepreneurial Transition.L

%. Many businesses fail when their founders are unable to make the transition fromentrepreneur to manager and are unwilling to bring in a professional managementteam.

(. Browth reEuires entrepreneurs to delegate authority.). They should aoid micromanaging.*. "oe Nraus story.

a: "oe Nraus launched the Internet portal ,xcite 9now ,xcite at >ome: andbecame ,xciteFs first chief executie officer. 5fter the company grew! he andhis co founders decided that ,xcite needed experienced! professionalmanagement to guide its rapid growth. >iring an experienced manger proedto be a wise moe for ,xcite and for Nraus.

IH. 2utting ?ailure into 2erspectie%. It is a natural part of the process. The only way to not fail is to not doanything.(. Jearn from failures and be more successful the next time. It's not mistakeaoidance but learning from mistakes that counts.). ,ntrepreneurship reEuires persistence and resilience.

I6 T>, ?@@T#T,2# @? 56 ,6TR,2R,6,ROTea Time

#eth Boldman and his classmates discussed a case on the beerage industry. @ne of the topics inprofessor 7arry 6alebuffFs class that day was which products were missing in the crowdedbeerage market. KThere were too many sweet drinks and too many bland drinks!L recallsBoldman. 5fter class! professor 6alebuff and Boldman spent time discussing the types of drinksthat might find a profitable niche in the industry.


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1+ #ection I - The hallenge of ,ntrepreneurship

,ntrepreneurs hae some common characteristics! including a desire forresponsibility! a preference for moderate risk! confidence in their ability tosucceed! a desire for immediate feedback! a high energy leel! a futureorientation! skill at organi=ing! and a alue of achieement oer money. In aphrase! they are high achieers.

). &escribe the benefits and opportunities of owning a small business.

&rien by these personal characteristics! entrepreneurs establish and managesmall businesses to gain control oer their lies! become self-fulfilled! reapunlimited profits! contribute to society! and do what they en4oy doing.

*. &escribe the potential drawbacks of owning a small business.

#mall business ownership has some potential drawbacks. There are noguarantees that the business will make a profit or een surie. The time andenergy reEuired to manage a new business may hae dire effects on the owner andfamily members.

+. ,xplain the forces that are driing the growth in entrepreneurship.

#eeral factors are driing the boom in entrepreneurship! including theportrayal of entrepreneurs as heroes! better entrepreneurial education! economicand demographic factors! a shift to a serice economy! technologicaladancements! more-independent lifestyles! and increased internationalopportunities.

. &iscuss the role of diersity in small business and entrepreneurship.

#eeral groups are leading the nation's drie toward entrepreneurship$ women!minorities! immigrants! Ppart-timers!P home-based business owners! family

business owners! copreneurs! corporate castoffs! and corporate dropouts.

/. &escribe the contributions small businesses make to the .#. economy.

The small business sector's contributions are many. They make up 11 percentof all businesses! employ +) percent of the priate sector workforce! create /+.0of the new 4obs in the economy! produce +% percent of the country's priate Bross&omestic 2roduct 9B&2:! and account for */ percent of business sales.

0. ,xplain the reasons small businesses fail.

The failure rate for small businesses is higher than for big businesses! and profitsfluctuate with general economic conditions. #75 statistics show that 3 percent of

new businesses will hae failed within six years. The primary cause of businessfailure is incompetent management. @ther reasons include poor financial control!failure to plan! inappropriate location! lack of inentory control! improper managerialattitudes! and inability to make the Pentrepreneurial transition.P

1. 2ut business failure into the proper perspectie.

7ecause they are building businesses in an enironment filled with uncertaintyand shaped by rapid change! entrepreneurs recogni=e that failure is likely to be a part


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hapter % - ,ntrepreneurs$ The &riing ?orce 7ehind #mall 7usiness1,

of their lies8 yet! they are not paraly=ed by that fear. #uccessful entrepreneurs haethe attitude that failures are simply stepping stones along the path to success.

%3. ,xplain how small business owners can aoid the ma4or pitfalls of running a business.

There are seeral general tactics the small business owner can employ to aoid

failure. The entrepreneur should know the business in depth! deelop a solid businessplan! manage financial resources effectiely! understand financial statements! learn tomanage people effectiely! set the business apart from the competition! and keep intune with yourself.

Discussion 0uestions

%. ;hat forces hae led to the boom in entrepreneurship in the nited #tates

29015772 Chapter 1 Entrepreneurship by Zubair a Khan

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