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Transcript of Chapter 1: Entreprenurship1 Copyright 1999 Prentice Hall Publishing Company Entrepreneurs: The...
Chapter 1: Entreprenurship 1Copyright 1999 Prentice Hall Publishing Company
Entrepreneurs: The Driving Force
Behind Small Businesses
Entrepreneurs: The Driving Force
Behind Small Businesses
Chapter 1: Entreprenurship 2Copyright 1999 Prentice Hall Publishing Company
The Age of the EntrepreneurThe Age of the Entrepreneur
More than 35 million U.S. households - More than 35 million U.S. households - 37% of the U.S. total - “have an intimate 37% of the U.S. total - “have an intimate involvement in a new or small business.” involvement in a new or small business.”
Survey of college seniors: 49% of men Survey of college seniors: 49% of men and 31% of womensaid they were and 31% of womensaid they were interested in pursuing entrepreneurship interested in pursuing entrepreneurship after graduation. after graduation.
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
Number of New Incorporations
Chapter 1: Entreprenurship 4Copyright 1999 Prentice Hall Publishing Company
What Is an Entrepreneur?What Is an Entrepreneur?
A person who creates a new business in A person who creates a new business in the face of risk and uncertainty for the the face of risk and uncertainty for the purpose of achieving profit and growth purpose of achieving profit and growth by identifying opportunities and by identifying opportunities and assembling the necessary resources to assembling the necessary resources to capitalize on those opportunities. capitalize on those opportunities.
Chapter 1: Entreprenurship 5Copyright 1999 Prentice Hall Publishing Company
Characteristics of EntrepreneursCharacteristics of Entrepreneurs
Desire for responsibility.Desire for responsibility. Preference for moderate risk.Preference for moderate risk. Confidence in their ability to succeed.Confidence in their ability to succeed. Desire for immediate feedback.Desire for immediate feedback. High level of energy.High level of energy. Future orientation.Future orientation. Skilled in organization.Skilled in organization. Value achievement over money.Value achievement over money.
Chapter 1: Entreprenurship 6Copyright 1999 Prentice Hall Publishing Company
Benefits of Small Benefits of Small Business OwnershipBusiness Ownership
The opportunity to gain control over your own The opportunity to gain control over your own destiny.destiny.
The opportunity to make a difference.The opportunity to make a difference. The opportunity to reach your full potential.The opportunity to reach your full potential. The opportunity to reap unlimited profits.The opportunity to reap unlimited profits. The opportunity to contribute to society and to be The opportunity to contribute to society and to be
recognized for your efforts.recognized for your efforts. The opportunity to do what you enjoy.The opportunity to do what you enjoy.
Chapter 1: Entreprenurship 7Copyright 1999 Prentice Hall Publishing Company
Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership
Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital
Chapter 1: Entreprenurship 8Copyright 1999 Prentice Hall Publishing Company
Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership
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
Number of Hours New Business Owners WorkHours per Week
1 - 398% 40 - 49
15%
50 - 5923% 60 - 69
29%
70 - 7913%
80+12%
Chapter 1: Entreprenurship 10Copyright 1999 Prentice Hall Publishing Company
Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership
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
Chapter 1: Entreprenurship 11Copyright 1999 Prentice Hall Publishing Company
Un
der
20
20
- 24
25
- 29
30
- 34
35
- 39
40
- 44
45
- 49
50
- 54
55
- 59
60
and
up
1%
8%
17%
21%
18%
15%
9%7%
3%1%
0%
5%
10%
15%
20%
25%
Un
der
20
20
- 24
25
- 29
30
- 34
35
- 39
40
- 44
45
- 49
50
- 54
55
- 59
60
and
up
Owner Age When Business Formed
Chapter 1: Entreprenurship 12Copyright 1999 Prentice Hall Publishing Company
Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership
High levels of stressHigh levels of stress Complete responsibilityComplete responsibility
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: Entreprenurship 13Copyright 1999 Prentice Hall Publishing Company
Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire
Entrepreneurs as heroes.Entrepreneurs as heroes. Entrepreneurial education.Entrepreneurial education. Economic and demographic factors.Economic and demographic factors. Shift to a service economy.Shift to a service economy. Technological advancements.Technological advancements. Independent lifestyles.Independent lifestyles. The World Wide Web.The World Wide Web.
1996 1997 1998 1999 2000
$518$1,138
$2,371
$3,990
$6,579
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Mill
ions
of $
1996 1997 1998 1999 2000
On-Line Commerce
Chapter 1: Entreprenurship 15Copyright 1999 Prentice Hall Publishing Company
Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire
Entrepreneurs as heroes.Entrepreneurs as heroes. Entrepreneurial education.Entrepreneurial education. Economic and demographic factors.Economic and demographic factors. Shift to a service economy.Shift to a service economy. Technological advancements.Technological advancements. Independent lifestyles.Independent lifestyles. The World Wide Web.The World Wide Web. International opportunities.International opportunities.
Chapter 1: Entreprenurship 16Copyright 1999 Prentice Hall Publishing Company
New 2 4 6 8 100%
20%
40%
60%
80%
100%
% o
f Sm
all F
irm
s S
urvi
ving
New 2 4 6 8 10
# of Years in Business
Small Business Survival Rate
Chapter 1: Entreprenurship 17Copyright 1999 Prentice Hall Publishing Company
Trends in EntrepreneurshipTrends in Entrepreneurship WomenWomen
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
0
1
2
3
4
5
6
7
8
Mill
ions
of B
usin
esse
s
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
Women-Owned Businesses
Chapter 1: Entreprenurship 19Copyright 1999 Prentice Hall Publishing Company
Minority enterprisesMinority enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs Home-based businessesHome-based businesses
WomenWomenTrends in EntrepreneurshipTrends in Entrepreneurship
Chapter 1: Entreprenurship 20Copyright 1999 Prentice Hall Publishing Company
1988
1989
1990
1991
1992
1993
1994
1995
1996
9.5
7.6
10.1
7.7
11.2
9.4
11.8
10.5
12.1
11.7
12.4
12.1
12.8
12.7
14.0
13.1
14.9
15.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Mill
ions
1988
1989
1990
1991
1992
1993
1994
1995
1996
The Growth of Home-Based Businesses
Part-time Self-EmployedWorkers
Primary Self-EmployedWorkers
Chapter 1: Entreprenurship 21Copyright 1999 Prentice Hall Publishing Company
Trends in Trends in EntrepreneurshipEntrepreneurship
Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts
WomenWomen Minority enterprisesMinority enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs Home-based businessesHome-based businesses
A Profile of Small Business by Industry
Retail28%
Service24%
Construction14%
Wholesale11%
Manufacturing9%
Finance7%
Other7%
Chapter 1: Entreprenurship 23Copyright 1999 Prentice Hall Publishing Company
Entrepreneurial ProfilesEntrepreneurial Profiles
Women.Women. Minorities.Minorities. Immigrants.Immigrants. Part-time entrepreneurs.Part-time entrepreneurs. Home-based entrepreneurs.Home-based entrepreneurs. Family business owners.Family business owners. Copreneurs.Copreneurs. Corporate castoffs.Corporate castoffs. Corporate dropouts.Corporate dropouts.
Chapter 1: Entreprenurship 24Copyright 1999 Prentice Hall Publishing Company
Small Businesses...Small Businesses... make up 98.5% of all the businesses in the U.S.make up 98.5% of all the businesses in the U.S. employ 53% of the nation's private sector employ 53% of the nation's private sector
workforce.workforce. create more jobs than big businesses.create more jobs than big businesses. lead the way in training workers for jobs. lead the way in training workers for jobs. produce 50% of the nation's GDP.produce 50% of the nation's GDP. account for 47% of business sales.account for 47% of business sales. create 4X more innovations per R & D dollar create 4X more innovations per R & D dollar
spent than medium-sized firms and 24X as spent than medium-sized firms and 24X as many as large companies.many as large companies.
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
0
20
40
60
80
100
120
140
160
# of
Fai
lure
s pe
r 10
,000
Li
sted
Con
cern
s
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
The Business Failure Rate
Chapter 1: Entreprenurship 26Copyright 1999 Prentice Hall Publishing Company
The Small Business The Small Business Failure RecordFailure Record
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. 63% fail within six years.63% fail within six years.
Chapter 1: Entreprenurship 27Copyright 1999 Prentice Hall Publishing Company
Putting Failure Into Putting Failure Into PerspectivePerspective
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: Entreprenurship 28Copyright 1999 Prentice Hall Publishing Company
Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure
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.