CHAPTER SIX STARTING YOUR OWN BUSINESS THE ENTREPRENEURSHIP

CHAPTER SIX STARTING YOUR OWN BUSINESS: THE ENTREPRENEURSHIP ALTERNATIVE Text by Profs. Gene Boone & David Kurtz Multimedia Presentation by Prof. Milton Pressley The University of New Orleans milton. pressley@uno. edu Copyright © 2003 by South-Western. All Rights Reserved.

LEARNING GOALS • Define the term entrepreneur, and • • • distinguish among an entrepreneur, a small-business owner, and a manager Identify three different types of entrepreneurs Explain why people choose to become entrepreneurs Discuss conditions that encourage opportunities for entrepreneurs Copyright © 2003 by South-Western. All Rights Reserved.

LEARNING GOALS • Describe the role of entrepreneurs in • • • the economy Identify personality traits that typically characterize entrepreneurs Summarize the process of starting a new venture Explain how organizations promote intrapreneurship Copyright © 2003 by South-Western. All Rights Reserved.

CHAPTER OVERVIEW • People are increasingly choosing the • path of entrepreneurship To become an entrepreneur, learn as much as possible by: • Completing academic programs • Gaining practical experience working • Reading newspaper and magazine articles and biographies of successful entrepreneurs © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

Copyright © 2003 by South-Western. All Rights Reserved.

WHAT IS AN ENTREPRENEUR? • Entrepreneur: person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

CATEGORIES OF ENTREPRENEURS Figure 6. 1 Categories of Entrepreneurs Copyright © 2003 by South-Western.

CATEGORIES OF ENTREPRENEURS • Classic entrepreneurs: person who identifies a business opportunity and allocates available resources to tap that market © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

CATEGORIES OF ENTREPRENEURS • Intrapreneurs: • entrepreneurially oriented person who develops innovations within the context of a large corporation Change agents (turnaround entrepreneurs): manager who tries to revitalize an established firm to keep it competitive © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH • If you want to start

Figure 6. 2 U. S. Adults Currently Engaged in Starting a Business Copyright ©

Figure 6. 3 Why People Become Entrepreneurs Copyright © 2003 by South-Western. All Rights

REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss • Self-management

Figure 6. 4 Guru. com: Portraying an Entrepreneurial Icon Copyright © 2003 by South-Western.

REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss Financial Success • Entrepreneurs: • Are wealth creators • Believe they won’t get rich working for others • Path to riches can be long and uncertain © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss Financial Success Job Security • Many workers lack • job security Growing percentage of Americans create their own by starting their own firms © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

REASONS TO CHOOSE ENTREPRENEURSHIP AS A CAREER PATH Being One’s Own Boss Financial Success Job Security Quality of Life • Gives the founder • some choice over when, where, and how to work Many work extraordinarily long hours. . . often at the whim of their customers Copyright © 2003 by South-Western. All Rights Reserved.

THE ENVIRONMENT FOR ENTREPRENEURS • Factors that support and expand opportunities for entrepreneurs are shown on the next slide. . . © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

Figure 6. 5 Factors Supporting and Expanding Opportunities for Entrepreneurship Copyright © 2003 by

THE ENVIRONMENT FOR ENTREPRENEURS • Globalization • • • Creates many opportunities for entrepreneurs Allows products to be sold overseas Provides international talent pool 40% of the fastestgrowing small U. S. firms have international sales © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

THE ENVIRONMENT FOR ENTREPRENEURS • Globalization Education Tremendous growth in educational opportunity for would-be entrepreneurs via: • • • College Classes Business schools helping students start businesses Other organizations like the Center for Entrepreneurial Leadership © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

THE ENVIRONMENT FOR ENTREPRENEURS • Globalization • Education Information Technology • Provided a big boost for entrepreneurs Helps entrepreneurs work quickly and efficiently, provide attentive customer service, increase sales, and project a professional image Has created demand for new products © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

THE ENVIRONMENT FOR ENTREPRENEURS Globalization • Education • Information Technology • Internet is also a challenge for entrepreneurs Customers can go online, quickly get needed information, and buy from anywhere in the world Entrepreneurs need a distinctive advantage over big competitors © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

THE ENVIRONMENT FOR ENTREPRENEURS • Globalization Education • Information Technology Demographic & Economic Trends Demographic trends create opportunities for new goods and services Last decade’s strong economy created markets for products that consumers might do without in harder times © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

Entrepreneurship Around the World • Growth of entrepreneurship is a • worldwide phenomenon Level of entrepreneurship varies considerably even among industrialized nations © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

Figure 6. 6 Levels of Entrepreneurial Activities in Ten Countries Copyright © 2003 by

THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY • American entrepreneurs have given • the world goods and services that have changed the way people live, work, and play Products include: • Ball-point pens • Netscape Navigator software • Fiberglass skis • Velcro fasteners • Fed. Ex delivery service • Mac. Donald's © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

Figure 6. 7 Influence of Entrepreneurs on the Economy Copyright © 2003 by South-Western.

THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY Innovation • Entrepreneurs: • Create new products • Build new industries • Bring new life to old industries • Since WWII, behind: • 2/3 rds of Inventions • 95% of major innovations © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY Innovation Job Generation • • • Vital source of new jobs Typically hire small numbers of employees per firm. . . spread over many companies See potential employees where established firms overlook them © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMY Innovation • Entrepreneurship offers excellent economic opportunities for women and minorities Job Generation Diversity © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

Figure 6. 8 Diversity of 21 st Century Entrepreneurs Copyright © 2003 by South-Western.

CHARACTERISTICS OF ENTREPRENEURS Figure 6. 9 Characteristics of Entrepreneurs Copyright © 2003 by South-Western.

CHARACTERISTICS OF ENTREPRENEURS • Vision • Have an overall idea for how to make

CHARACTERISTICS OF ENTREPRENEURS • High Energy Level • Willingly work hard to realize their

CHARACTERISTICS OF ENTREPRENEURS • Need to Achieve • Need to work hard because they

CHARACTERISTICS OF ENTREPRENEURS • Self-Confidence and Optimism • Believe in ability to succeed, and

CHARACTERISTICS OF ENTREPRENEURS • Tolerance for Failure • Entrepreneurs view setbacks and failures • as learning experiences Not easily discouraged or disappointed when things don’t go as planned Copyright © 2003 by South-Western. All Rights Reserved.

CHARACTERISTICS OF ENTREPRENEURS • Creativity • Entrepreneurs typically conceive new • ideas for goods and services Devise innovative ways to overcome difficult problems and situations Copyright © 2003 by South-Western. All Rights Reserved.

CHARACTERISTICS OF ENTREPRENEURS • Tolerance for Ambiguity • Take the uncertainties associated with launching

CHARACTERISTICS OF ENTREPRENEURS • Internal Locus of Control • Believe that they control their own fates • Take personal responsibility for the success or failure of their actions rather than believing in luck or fate Copyright © 2003 by South-Western. All Rights Reserved.

Figure 6. 10 An Entrepreneur With an Internal Locus of Control Copyright © 2003

Figure 6. 11 Think You Might Be a Good Entrepreneur? Copyright © 2003 by

STARTING A NEW VENTURE Finding Financing Creating a Business Plan • Steps involved in beginning a new business Selecting a Business Idea Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

STARTING A NEW VENTURE • Important considerations: • • • Selecting a Business Idea Finding something you love to do and are good at doing Determining whether your idea can satisfy a need in the market Success also depends on your offering being appealing to the marketplace © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

STARTING A NEW VENTURE • Buying an Existing Business • • Selecting a Business Idea Some prefer not to assume the risks of starting a new firm Buying a Franchise • Another less risky way to begin a business © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.

STARTING A NEW VENTURE • Creating a Business Plan • Selecting a Business Idea © Photo. Disc Entrepreneurs have traditionally seized opportunities as they arise and changed course as necessary A formal business plan, however, is an integral part of managing a business Copyright © 2003 by South-Western. All Rights Reserved.

STARTING A NEW VENTURE • Finding Financing • Seed Capital: initial funding needed to launch a new venture Creating a Business Plan Selecting a Business Idea Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

Figure 6. 12 Preparing to Convince Others to Invest in Business Copyright © 2003

STARTING A NEW VENTURE • Finding Financing • Creating a Business Plan • Selecting a Business Idea © Photo. Disc Debt Financing: borrowed funds that entrepreneurs must repay Equity Financing: funds invested in new ventures in exchange for part ownership Venture Capitalists: business firm or group of individuals who invest in new and growing firms Copyright © 2003 by South-Western. All Rights Reserved.

Figure 6. 13 Where Venture Capital Dollars Go Copyright © 2003 by South-Western. All

STARTING A NEW VENTURE • Finding Financing Creating a Business Plan Angel Investors: wealthy individuals who invest directly in new ventures in exchange for an equity stake Selecting a Business Idea Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

INTRAPRENEURSHIP • Intrapreneurship: process of promoting innovation within the structure of an existing organization • Helps retain employees who might otherwise leave to start their own businesses • Intrapreneurship practiced in: • • 3 M Thermo Electron Xerox Intuit Copyright © 2003 by South-Western. All Rights Reserved. © Photo. Disc

WHAT’S AHEAD • Next Chapter: • Describes technology • behind electronic commerce Introduces challenges and opportunities available to those who want to use the Internet © Photo. Disc Copyright © 2003 by South-Western. All Rights Reserved.