The

The Foundations
Foundations of
of
Entrepreneurship
Entrepreneurship

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

The World of the Entrepreneur

A new business is born every 11 seconds
in the United States
Study of influential Americans the
defining issue of the 21st Century:
Entrepreneurship!
One of 12 Americans is actively involved
in trying to start a new business.

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

Entrepreneurial Activity Across the Globe

Percentage of Adult Population Working to Start a New Business
8.5%

United States
6.8%

Canada
5.4%

Country

Israel
3.4%

Italy

3.3%

Great Britain
2.2%

Germany

2.0%

Denmark
France
J apan
Finland

0.0%

1.8%
1.6%
1.4%

2.0%

4.0%

6.0%
Percent

8.0%

10.0%

What is an Entrepreneur?
One who creates a new business in the face
of risk and uncertainty for the purpose of
achieving profit and growth by
identifying opportunities and assembling
the necessary resources to capitalize on
them.

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

Characteristics of Entrepreneurs

Chapter 1: Entrepreneurship

Desire for responsibility

Preference for moderate risk
Confidence in their ability to succeed
Desire for immediate feedback
High level of energy
Future orientation
Skilled at organizing
Value achievement over money

Copyright 2002 Prentice Hall Publishing Company

The Type E Personality

Common Traits of Entrepreneurs:

Chapter 1: Entrepreneurship

Aggressively pursues goals; pushes self and others

Seeks autonomy, independence and freedom from boundaries

Sends consistent messages; very focused

Acts quickly, often without deliberating

Keeps distance and maintains objectivity

Pursues simple, practical solutions

Willing to take risks; comfortable with uncertainty

Exhibits clear opinions and values; has high expectations

Impatient; just do it mentality

Positive, upbeat, optimistic; communicates confidence

Copyright 2002 Prentice Hall Publishing Company

Common Themes in Definitions

of Entrepreneurship
Process
The
Entrepreneur

Uniqueness

Growth

Profit or
Nonprofit

Chapter 1: Entrepreneurship

Defining
Entrepreneurship

Creating
Value

Copyright 2002 Prentice Hall Publishing Company

Innovation

Organization
Creation

The Development of
Entrepreneurship Theory
18th Century

Richard Cantillon:
Coins term
entrepreneur
(go-between or
between taker)
Chapter 1: Entrepreneurship

Entrepreneur bears
risks and plans,
supervises,
organizes, and
owns factors of
production

Copyright 2002 Prentice Hall Publishing Company

The Development of
Entrepreneurship Theory
19th Century

Jean Baptiste Say:

Proposed that profits
from entrepreneurship
were separate from
profits of capital
ownership

Chapter 1: Entrepreneurship

Distinction made
between those who
supplied funds and
earned interest and
those who profited from
managerial abilities

Copyright 2002 Prentice Hall Publishing Company

The Development of
Entrepreneurship Theory
20th Century

Chapter 1: Entrepreneurship

Joseph Schumpeter:

Peter Drucker:

Described the
entrepreneur as
someone who is an
innovator and someone
who creatively
destructs

Described the
entrepreneur as
someone who
maximizes opportunity

Copyright 2002 Prentice Hall Publishing Company

10

Myths About
Entrepreneurship
1. Successful entrepreneurship takes only a great idea.
2. Entrepreneurship is easy.
3. Entrepreneurship is a risky gamble.
4. Entrepreneurship is found only in small businesses.
5. Entrepreneurial ventures and small businesses are identical.

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

11

The Entrepreneurial
Process
Starting the Venture:

Exploring the
Entrepreneurial
Context

Identifying
Opportunities/Possible
Competitive Advantage

Researching Feasibility

Planning the Venture

Organizing the Venture

Launching the Venture

Managing the Venture:

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

Managing Processes

Managing People

Managing Growth

Special Issues

12

Rewards of Being an
Entrepreneur
High degree of independence freedom
from constraints
Get to use a variety of skills and talents
Freedom to make decisions
Accountable to only yourself
Opportunity to tackle challenges
Feeling of achievement and pride
Potential for greater financial rewards
Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

13

Feeding the
Entrepreneurial Fire

Chapter 1: Entrepreneurship

Entrepreneurs as heroes
Entrepreneurial education
Demographic and economic factors
Shift to a service economy
Technological advancements
Independent lifestyles
E-Commerce and the World Wide Web
International opportunities

Copyright 2002 Prentice Hall Publishing Company

14

Challenges of
Being an Entrepreneur
Must be comfortable with change and
uncertainty
Must make a bewildering number of
decisions
May face tough economic choices
Must be comfortable with taking risks
Need many different skills and talents
Must be comfortable with the potential for
failure
Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

15

The Cultural Diversity of

Entrepreneurship

Young entrepreneurs
Women
Minority-owned enterprises
Immigrant entrepreneurs
Part-time entrepreneurs
Home-based businesses
Family businesses
Copreneurs
Corporate castoffs
Corporate dropouts

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

16

Nine Deadly Mistakes of

Entrepreneurship
1.
2.
3.
4.
5.

Chapter 1: Entrepreneurship

Management incompetence
Lack of experience
Poor financial control
Failure to develop a strategic plan
Uncontrolled growth

Copyright 2002 Prentice Hall Publishing Company

17

Nine Deadly Mistakes of

Entrepreneurship
(continued)

6.
7.
8.
9.

Chapter 1: Entrepreneurship

Poor location
Improper inventory control
Incorrect pricing
Inability to make the entrepreneurial
transition

Copyright 2002 Prentice Hall Publishing Company

18

Differences Between Small Businesses

and Entrepreneurial Ventures

Independently owned,
operated, and financed
Less than 100 employees
Doesnt emphasize new
or innovative practices

Innovative practices
Goals are profitability and growth
Seeks out new opportunities
Willingness to take risks

Little impact on industry

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

19

Benefits of Small Business

Ownership
The opportunity to:
create your own destiny
make a difference
reach your full potential
reap unlimited profits
contribute to society and be recognized for your
efforts
do what you enjoy and have fun at it

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

20

Drawbacks of Small Business

Ownership

Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business gets
established
High levels of stress
Complete responsibility
Discouragement

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

21

Small Businesses
Make up 99% of all businesses in the
United States.
Employ 53% of the nation's private
sector workforce.
Create more jobs than big businesses.
Are leaders in offering training and
advancement opportunities to
workers.

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

22

Small Businesses
(continued)

Produce 51% of the nation's private

GDP.
Account for 47% of business sales.
Create 4X more innovations per R & D
dollar spent than medium-size firms
and 24X as many as large companies.

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

23

Small Business by Industry

Financial
8.0%

Other
7.3%

Services
39.2%

Construction
11.8%
Manufacturing
5.8%
Wholesale
7.4%

Retail
20.5%

The Small Business

Failure Record
24% of new businesses fail after two
years.
51% fail within four years.
63% fail within six years.

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

25

Small Business Survival Rate

% of Small Firms
Surviving

100%
80%
60%
40%
20%
0%
New

# of Years in Business

10

Avoiding the Pitfalls of

Small Business Failure
Know your business in depth
Develop a solid business plan
Manage financial resources
Understand financial statements
Learn to manage people effectively
Keep in tune with yourself

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

27

10 Tips of Utahs Fastest Growing

Companies
1.
2.
3.
4.
5.

Chapter 1: Entrepreneurship

Stop paying lip service to customer

service
Be willing to share the pie with your
employees
Make your own luck
Be prepared to make sacrifices
Spread yourself out, not thin
Copyright 2002 Prentice Hall Publishing Company

28

10 Tips of Utahs Fastest Growing

Companies (continued)
6.
7.
8.
9.
10.

Chapter 1: Entrepreneurship

Break down the walls

Stay one step ahead
Invest in yourself
Be different
Look where youre going

Copyright 2002 Prentice Hall Publishing Company

29

Motto for Entrepreneurs

Conceive it
Believe it
Achieve it!

Chapter 1: Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

30