Management 11e John Schermerhorn

Chapter 6Chapter 6

Entrepreneurship and Entrepreneurship and

New VenturesNew Ventures

Planning Ahead – Chapter 6 Study Questions

1. What is entrepreneurship?

2. What is special about small business entrepreneurship?

3. How do entrepreneurs start and finance new ventures?

Study Question 1: What is entrepreneurship?

Entrepreneurship • Risk-taking behavior that results in new

opportunities Serial entrepreneur

• Starts and runs business and nonprofits over and over again

First-mover advantage• First to exploit a niche or enter a market

Entrepreneurs Display entrepreneurial behavior as employees of

larger firms

Study Question 1: What is entrepreneurship?

Characteristics of entrepreneurs

Study Question 1: What is entrepreneurship?

Diversity and Entrepreneurship Women and minority entrepreneurs are growing in numbers Necessity-based entrepreneurship

People start a business because no other employment opportunities exist

Social entrepreneurship Unique form of ethical entrepreneurship that seeks new ways to

solve pressing social problems Social entrepreneurs

Take risks to find new ways to solve pressing social problems such as poverty, literacy, illness,homelessness

Study Question 2: What is special about small business entrepreneurship?

Small business have fewer than 500 employees

Study Question 2: What is special about small business entrepreneurship?

Starting a small business Startup

New and temporary venture that is trying to establish a profitable business model

Franchise One business owner sells to another the right to

operate the same business in another location

Lean startups Use free software and web services while staying

small and keeping operations simple

Study Question 2: What is special about small business entrepreneurship?

Options for starting a small business

Study Question 2: What is special about small business entrepreneurship?

Types of internet business models

Study Question 2: What is special about small business entrepreneurship?

Family owned businesses Largest percentage of businesses worldwide Feuds result when family members disagree

over how the business is run Possible succession problems

Who will run the business when the current head leaves?

Succession plan outlines leadership transition and financial matters

Why small businesses fail SBA reports

as many as 60 – 80% fail

Study Question 2: What is special about small business entrepreneurship?

Study Question 2: What is special about small business entrepreneurship?

Small business development Business incubator

Offers space, shared services and advice to get small businesses started

Small Business Development Centers Founded with U.S. Small Business Administration

to provide advice to new and existing small businesses

Study Question 3: How do entrepreneurs start and finance new ventures?

Life cycles of entrepreneurial firms

Study Question 3: How do entrepreneurs start and finance new ventures?

Business plan Describes goals, operating plans and

financing for a new business Banks want to see a well-developed

business plan before loaning money

Forms of ownership Sole Proprietorship

An individual or married couple pursuing business for a profit

Study Question 3: How do entrepreneurs start and finance new ventures?

Forms of ownership Partnership

Two or more people agree to contribute resources to start and operate a business together

Study Question 3: How do entrepreneurs start and finance new ventures?

Forms of ownership Corporation

A legal entity that exists separately from its owners

Limited Liability Company (LLC) A combination of sole proprietorship, partnership,

and corporation Protects owners against personal loss other than what

is invested in the company Treated as a proprietorship or partnership for tax

purposes

Study Question 3: How do entrepreneurs start and finance new ventures?

Financing Debt Financing

involves borrowing money from another person, a bank, or a financial institution

Equity Financing involves exchanging ownership shares for outside investment monies

Venture Capitalists Involves making large investments in new ventures in return for an equity

stake in the business Financing

Angel Investor A wealthy individual willing to invest in return for equity in a new venture

Initial Public Offering (IPO) An initial selling of shares of stock to the public at large

Chapter 6 Case

Sprinkles: Leading a sweet trend