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The Entrepreneurial Life. Part 1 Entrepreneurship: A World of Opportunity. Looking Ahead. After studying this chapter, you should be able to: Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs.

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the entrepreneurial life

The Entrepreneurial Life

Part 1 Entrepreneurship: A World of Opportunity

looking ahead
Looking Ahead

After studying this chapter, you should be able to:

  • Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs.
  • Explain the nature of entrepreneurship and how it is related to small business.
  • Identify some motivators or rewards of entrepreneurial careers.
  • Describe the various types of entrepreneurs and entrepreneurial ventures.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

looking ahead cont d
Looking Ahead (cont’d.)
  • Identify five potential advantages of small entrepreneurial firms.
  • Discuss factors related to readiness for entrepreneurship and getting started in an entrepreneurial career.
  • Explain the concept of an entrepreneurial legacy and the challenges involved in crafting a worthy legacy.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

entrepreneurial opportunities
Entrepreneurial Opportunities
  • Entrepreneurial Opportunity
    • A value-creating innovation with market potential
    • A desirable and timely innovation that creates value for interested buyers and end users
  • Success stories
    • SLR Contracting & Service Company
      • http://www.slrcontracting.com
    • FlavorX
      • http://www.flavorx.com
    • Auntie Anne’s
      • http://www.auntieannes.com

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

who are entrepreneurs
Who Are Entrepreneurs?
  • Entrepreneurs are:
    • People who start and/or operate 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).

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

the independent entrepreneur
The Independent Entrepreneur

Exhibit 1.1

Source: John L. Hart FLP, and Creators Syndicate, Inc.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

why people become entrepreneurs
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

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

entrepreneurial incentives
Entrepreneurial Incentives

Exhibit 1.3

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

reasons for starting a new business
Reasons for Starting a New Business

RECENT SURVEY RESULTS

  • 29% TO CREATE SOMETHING NEW
  • 24% TO CONTROL MY LIFE
  • 14% TO BE MY OWN BOSS
  • 14% TO MAKE MONEY
  • 10% TO PROVE I COULD DO IT
  • 08% FRUSTRATION AT LARGE COMPANY
  • 02% OTHER

Source of Your New Business Idea

    • 37% In-depth understanding of industry/profession
    • 36% Market niche spotted
    • 7% Brainstorm
    • 4% Copied somebody else
    • 4% Hobby that grew
    • 11% Other

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

varieties of entrepreneurship
Varieties of Entrepreneurship
  • Founder (“Pure” Entrepreneur)
    • A person who brings a new firm into existence
  • Administrative Entrepreneur
    • An entrepreneur who oversees 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

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

artisan entrepreneurs
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
    • Narrow view of strategy
    • Personal sales effort
    • Short planning horizon
    • Simple record keeping

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

opportunistic entrepreneurs
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

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

women entrepreneurs
Women Entrepreneurs
  • More Women Entrepreneurs
    • Represent 38% of entrepreneurs in U.S.
    • Revenues at female-owned firms have grown 33% from 1976 to 2000.
    • Women are moving into nontraditional industries.
  • Problems Facing Female Entrepreneurs
    • Newness of entrepreneurial role
    • Lack of access to credit
    • Lack of networking connections
    • Discrimination

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

age and entrepreneurial opportunity

Early Career Concerns

1. Getting an education

2. Gaining work experience

3. Acquiring financial resources

Late Career Concerns

1. Fulfilling family responsibilities

2. Attaining seniority in employment

3. Earning investment in a retirement program

20

25

35

45

Age

Age and Entrepreneurial Opportunity

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

characteristics of successful entrepreneurs
Characteristics ofSuccessful Entrepreneurs
  • Strong commitment to the business(tenacity)
  • Strong internal locus of control (self-reliant)
  • Moderate risk takers(financial, career, psychic risks)

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

entrepreneurial characteristics timmons and spinelli
Commitment and determination

Tenacious, decisive, and persistent in problem solving

Leadership

Self-starters and team builders who focus on honesty in their business relationships

Opportunity obsession

Aware of market and customer needs

Tolerance of risk, ambiguity, and uncertainty

Risk takers, risk minimizers, and uncertainty tolerators

Creativity, self-reliance, and adaptability

Open-minded, flexible, uncomfortable with the status quo, and quick learners

Motivation to excel

Goal oriented and aware of their weaknesses and strengths

Entrepreneurial Characteristics(Timmons and Spinelli)

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

characteristics of successful small business managers meir liraz bizmove
Drive

Initiative, Persistence, Responsibility

Thinking Ability

Original, Creative, Critical, Analytical

Competency in Human Relations

Emotional Stability, Consideration, Cooperation, Tactfulness

Communication Skills

Oral Comprehension and Expression, Writing Ability

Technical Knowledge

Thorough Knowledge of the Product/Service, and Customer

Characteristics of Successful Small Business Managers Meir Liraz - BizMove

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

entrepreneurial characteristics
Awareness of Passing Time

Sense of urgency, seize the opportunity now

High Need for Achievement

Ambitious, likes to set own goals

Internal Locus of Control

In control of own destiny, desire for independence

Self-Confident

Decisive and methodical

Self-Sacrificing and hard-working

High energy level

Tolerant of Ambiguity and Uncertainty

Future-Oriented

Good interpersonal skills

Technically knowledgeable

Entrepreneurial Characteristics

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

demographic factors
First-born within your family?

Were your parents entrepreneurs?

Are you a child of an immigrant?

Was your father absent during a part of your childhood?

Eight of every ten are over 40 years old

Demographic Factors

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

taking the plunge
Taking the Plunge
  • Precipitating Event
    • An event, such as losing a job, that moves an individual to become an entrepreneur

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

the contributions of small business
The Contributions of Small Business
  • Small Businesses:
    • Represent more than 99.7 percent of all employers.
    • Employ more than half of all private-sector employees.
    • Pay 44.5 percent of total U.S. private payrolls.
    • Generate 60 to 80 percent of net new jobs annually.
    • Produce 13 to 14 times more patents per employee than do large patenting firms.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

what is a small business
What Is a Small Business?
  • Our Text’s Criteria for Defining Smallness
    • Financing supplied by one person or small group
    • Localized business operations (except marketing)
    • Business’ size small relative to larger competitors
    • Fewer than 100 employees

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

more definitions of smallness in business
More Definitions of Smallness in Business
  • Committee for Economic Development
    • Owner manages company directly (independently)
    • Capital supplied by one individual or a small group
    • Area of operations is mainly local
    • Business is small in comparison with biggest competitors
  • Small Business Administration
    • Independently owned and operated
    • Not dominant in its field of operation
  • White House Conference on Small Business
    • < 500 employees
    • <$20 million in annual sales

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

major types of small businesses
Major Types of Small Businesses

CONCENTRATED

  • Agriculture
  • Construction
  • Real Estate
  • Retailing
  • Services
  • Wholesaling

SIGNIFICANT

  • Manufacturing
  • Mining
  • Transportation

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

small businesses growth and profits
Small Businesses, Growth, 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

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

competitive advantages of entrepreneurial firms
Customer Focus

Firms lack bureaucracy.

Quality Performance

Quality is not limitedto large firms.

Integrity and Responsibility

A solid reputation builds loyal customers.

Innovation

Small firms are the leading source of innovation.

Special Niche

Providing uniquely specialized services can be a powerful competitive advantage.

Competitive Advantages ofEntrepreneurial Firms

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

success of small businesses
Success of Small Businesses

Likely to Fail

  • Bakeries
  • Car Washes
  • Infant Clothing Stores
  • Laundries
  • Machine Shops
  • Restaurants
  • Trucking Firms
  • Used Car Dealerships

2/3 Fail Within Five Years

  • Likely to Succeed
  • Auto Tires & Accessories
  • Building Material Stores
  • Computer/Office Supplies & Equipment
  • Engineering/Scientific Equipment Mfrs
  • Funeral Homes & Crematories
  • Liquor Stores
  • Seed & Garden Supply Stores

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

minimum population requirements to support a retail store
Minimum Population Requirements to Support a Retail Store

GROCERIES 700

RESTAURANTS 1200

DRUG STORES 3500

HARDWARE 6000

SHOES 7000

FLORISTS 9500

APPLIANCES 10000

SPORTING GOODS 15000

STATIONERY 25000

HOBBY/TOY 30000

DEPARTMENT STORE 40000

CAMERA/PHOTO SUPPLY 50000

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

stages of small business development
Stages of Small Business Development

EXISTENCE-- FINDING CUSTOMERS

-- PROVIDING A VALUABLE PRODUCT OR SERVICE

SURVIVAL-- GENERATING A STABLE CASH FLOW

-- HIRING ADDITIONAL PEOPLE TO KEEP UP WITH THE WORK

-- DEVELOPING A STRUCTURE

SUCCESSDISENGAGEMENT

FOLLOWS A STABILITY STRATEGY

OWNER CONTENT TO SIT BACK AND TAKE IT EASY

PERHAPS SELL THE BUSINES

GROWTH

SSTRATEGIC PLANS FOR GROWTH AND EXPANSION

HIRE MANAGERS FOR THE FUTURE (AND FOR VISION)

TAKE OFF-- HOW TO GROW RAPIDLY AND FINANCE THAT GROWTH

-- DELEGATION OF CONTROL TO PROFESSIONAL MANAGERS

-- PURSUIT OF VERTICAL & HORIZONTAL GROWTH STRATEGIES

MATURITY -- HAS CHARACTERISTICS OF A FUNCTIONAL, ESTABLISHED FIRM

-- HOW TO RETAIL FLEXIBILITY & ENTREPRENEURIAL SPIRIT?

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

areas of concern to small businesses
Areas of Concern to Small Businesses

ADEQUATE CAPITAL

-- FINANCING ISN’T ENOUGH, WE NEED MORE $$$$

ECONOMIC CONDITIONS AND CYCLES

-- CAN WE SURVIVE???

EXPERIENCE (More is needed)

-- IN THE INDUSTRY AND IN MANAGEMENT

GOVERNMENT REGULATION

-- HARDER FOR SMALL BUSINESSES TO COMPLY

GROWTH/MAINTAINING THE MARKET

-- KEEPING CUSTOMERS AND ATTRACTING NEW ONES

PERSONNEL

-- FINDING AND KEEPING EXPERIENCED PROFESSIONALS

PROFITS

-- REINVESTED IN THE BUSINESS OR DRAWN BY THE OWNER?

STRUCTURAL EVOLUTION

-- LOSS OF CONTROL AS THE BUSINESS GROWS

TECHNICAL ADVANCES

-- HOW TO KEEP UP AND AVOID OBSOLESCENCE?

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

10 deadly small business mistakes meir liraz president of bizmove
10 Deadly Small Business MistakesMeir Liraz, President of BizMove
  • Sticking to a single idea too long
  • Not having a results-driven marketing plan
  • Not knowing your customers
  • Ignoring your cash position (working capital)
  • Ignoring your employees (morale)
  • Confusing likelihood with reality
  • Not having a sales plan
  • Being a Lone Ranger (learn to delegate)
  • No Mastermind (get an advisory group or mentor)
  • Giving Up

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

key terms
Key Terms

entrepreneurial opportunity

entrepreneur

reluctant entrepreneur

refugee

founder

franchisee

high-potential venture (gazelle)

attractive small firm

microbusiness

lifestyle business

entrepreneurial team

artisan entrepreneur

opportunistic entrepreneur

internal locus of control

external locus of control

precipitating event

entrepreneurial legacy

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.