What is an Entrepreneur One who creates a

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. Ch. 1: The Foundations of Entrepreneurship 1 -1

What is an Entrepreneur? Critical Concepts: Create… not ‘Start’… not ‘Buy or Purchase’… not ‘Takeover’… not ‘Sign-up as a Distributor’… New Business… ‘not existing before’

Enterpreneur vs Sm. Bus. Owner Business Owner Wants to be Self-Employed Entrepreneur Motivated to build something with Lasting Value. Looks forward to the Exit Value of Company Seeking Financial Freedom Looks primarily to the SBA or Bank Loans for capital and funding Seeks the involvement of Equity Investors for capital Motivated to Create More Sales Motivated to Provide Greater Values Real Estate and Inventory as most valuable assets. Values Employees & Customers as the most valuable assets. Motivated by Stability of Revenue Motivated by Growth and is Willing To Fail Seeks to Hire Employees at Market Rate or Below Seeks to hire the Best Talent Available for the job. Motivated to Make a Living Seeking a steady Current Income Ch. 1: The Foundations of Entrepreneurship 1 -3

The World of the Entrepreneur n Every year U. S. entrepreneurs launch 565, 000 new businesses. n Entrepreneurial spirit - the most significant economic development in recent history. n GEM study: 12. 3% of adult population in the U. S. is actively involved in trying to start a new business. Ch. 1: The Foundations of Entrepreneurship 1 -4

Entrepreneurial Activity Across the Globe Ch. 1: The Foundations of Entrepreneurship 1 -5

Entrepreneurship-Friendly Nations Ch. 1: The Foundations of Entrepreneurship 1 -6

The World of the Entrepreneur n Global Entrepreneurship Monitor (GEM) study reports: ► Men are twice as likely to start a business as women. ► Most entrepreneurs turn to family members and friends for capital. ► Entrepreneurs are most likely to launch businesses when they are between the ages of 35 and 44. Ch. 1: The Foundations of Entrepreneurship 1 -7

Characteristics of Entrepreneurs n n n n n Desire for responsibility Preference for moderate levels of risk – risk eliminators Confidence in their ability to succeed Determination Desire for immediate feedback High level of energy Future orientation – opportunity, necessity, and serial entrepreneurs Skilled at organizing Value achievement over money Ch. 1: The Foundations of Entrepreneurship 1 -8

Characteristics of Entrepreneurs n Entrepreneurs tend to exhibit: ►A high degree of commitment ► Tolerance for ambiguity ► Flexibility ►A willingness to work hard ► Tenacity Ch. 1: The Foundations of Entrepreneurship 1 -9

Sources of Entrepreneurial Success Ch. 1: The Foundations of Entrepreneurship 1 - 10

Entrepreneurship n One characteristic of entrepreneurs stands out: Diversity! n Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should). Ch. 1: The Foundations of Entrepreneurship 1 - 11

Benefits of Entrepreneurship The opportunity to: ► Create your own destiny ► Make a difference ► Reach your full potential ► Reap impressive profits ► Contribute to society and to be recognized for your efforts ► Do what you enjoy and to have fun at it Ch. 1: The Foundations of Entrepreneurship 1 - 12

Drawbacks of Entrepreneurship n n n n 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 Ch. 1: The Foundations of Entrepreneurship 1 - 13

Feeding the Entrepreneurial Fire n n n n Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technology advancements Independent lifestyle The Internet and cloud computing Ch. 1: The Foundations of Entrepreneurship 1 - 14

U. S. Retail E-Commerce Revenues Ch. 1: The Foundations of Entrepreneurship 1 - 15

Feeding the Entrepreneurial Fire (continued) n n n n Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technology advancements Independent lifestyles The Internet and cloud computing International opportunities Ch. 1: The Foundations of Entrepreneurship 1 - 16

The Cultural Diversity of Entrepreneurship n Young entrepreneurs Ch. 1: The Foundations of Entrepreneurship 1 - 17

Entrepreneurial Activity by Age Group Ch. 1: The Foundations of Entrepreneurship 1 - 18

The Cultural Diversity of Entrepreneurship (continued) Young entrepreneurs n Women entrepreneurs n Minority-owned enterprises n Ch. 1: The Foundations of Entrepreneurship 1 - 19

Growth in Minority–Owned Businesses since 2002 Ch. 1: The Foundations of Entrepreneurship 1 - 20

The Cultural Diversity of Entrepreneurship (continued) Young entrepreneurs n Women entrepreneurs n Minority-owned enterprises n Immigrant entrepreneurs n Part-time entrepreneurs n Ch. 1: The Foundations of Entrepreneurship 1 - 21

The Cultural Diversity of Entrepreneurship (continued) Home-based businesses n Family businesses n Copreneurs n Corporate castoffs n Corporate dropouts n Social entrepreneurs n Retiring baby boomers n Ch. 1: The Foundations of Entrepreneurship 1 - 22

Small Businesses. . . n n n Make up 99. 7% of the 27. 5 million businesses in the U. S. Employ 50% of the nation’s private sector workforce. Create more jobs than big businesses. ► 65% n of net new jobs over the last decade 3% of small companies create 70% of net new jobs in the economy. Ch. 1: The Foundations of Entrepreneurship 1 - 23

Small Businesses. . . n n n n 21. 6 Million (78%) have no employees… just the owner. 5. 9 Million (22%) have employees other than the owner 3. 6 Million (13%) have 1 -4 employees 1. 04 Million (4%) have 5 -9 employees 633 Thousand (2%) have 10 -19 employees 526 Thousand (1. 9%) have 20 -99 employees 90 Thousand (. 3%) have 100 -499 employees 18. 5 Thousand (. 07%)have over 500 emps. Source: US Census Department Ch. 1: The Foundations of Entrepreneurship 1 - 24

Small Businesses by Industry Ch. 1: The Foundations of Entrepreneurship 1 - 25

Small Businesses. . . (continued) n n n Produce 51% of the nation’s private GDP. Account for 47% of business sales. Create 13 times more patents per employees than large companies. n Zipper, light bulb, FM radio, laser, air conditioning, escalator, personal computer, automatic transmission, and many more! Ch. 1: The Foundations of Entrepreneurship 1 - 26

Putting Failure Into Perspective Out of 100 New Businesses: n 70 survive 2 years or longer n 50 survive 5 years or longer n 33 survive 10 years or longer n 25 survive 15 years or longer Source: US Census Department Ch. 1: The Foundations of Entrepreneurship 1 - 27

Putting Failure Into Perspective n Entrepreneurs are not paralyzed by the prospect of failure. n Failure – a natural part of the creative process. n Successful entrepreneurs learn to fail intelligently. Ch. 1: The Foundations of Entrepreneurship Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1 - 28

Putting Failure Into Perspective People who have gone Bankrupt: 1. George Foreman filed for Bankruptcy in 1983 and eventually went on to have a Net Worth in excess of $300 Million dollars. 2. William C. Durant, the Founder of General Motors, filed for Bankruptcy in 1936 and eventually went on to have a Net Worth in excess of $120 Million dollars. 3. Henry Ford's early businesses ventures failed and left him broke. . . five times. . . before he founded the Ford Motor Company. 4. Walt Disney was fired by his newspaper editor because, "he lacked imagination and had no good ideas. " Next he started a series of businesses. . . none of which lasted too long and all of which ended in bankruptcy or simple failure. Ch. 1: The Foundations of Entrepreneurship Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1 - 29

Business Starts and Closures Ch. 1: The Foundations of Entrepreneurship 1 - 30

What Rate of Growth is considered High Growth? < 20% / yr = Lifestyle 20 -50% / yr = Mid Growth >50% / yr = High Growth Caveat: Size of Annual Revenues makes a difference. Source: Goldman Sachs 10, 000 Small Businesses Workshop Ch. 1: The Foundations of Entrepreneurship Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1 - 31

Four Growth Curves Rapid Sales Time Episodic Plateau Sales Time Ch. 1: The Foundations of Entrepreneurship Incremental Time Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

The Rapid Growth Curve Characteristics & Considerations: 1. Right Product, Right Time, Right Price 2. Macro and Micro economic forces are largely favorable. 3. Competition is relatively little or restricted or company enjoys significant competitive advantage. 4. Strong customer relationships. Ch. 1: The Foundations of Entrepreneurship Rapid Sales Time Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1 - 33

The Incremental Growth Curve Characteristics & Considerations: 1. More controlled growth. 2. Leadership growth is in parallel with revenue growth. 3. Each stage of growth is planned or constrained until resources are available to support next level. Ch. 1: The Foundations of Entrepreneurship Incremental Sales Time Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1 - 34

The Episodic Growth Curve Characteristics & Considerations: 1. Caused by a variety of reasons. 2. Internal capabilities may be outstripped by growth demands causing regression of growth. 3. Blips in sales, often losses of major customers, cause setbacks Ch. 1: The Foundations of Entrepreneurship Episodic Sales Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Time 1 - 35

The Plateau Growth Curve Characteristics & Considerations: 1. Many firms experience plateaus 2. Plateaus need not be permanent. 3. Roadblocks become apparent and take time to identify and resolve. 4. Plateaus in growth usually turn into long term decline if not reversed. Ch. 1: The Foundations of Entrepreneurship Plateau Sales Time Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall 1 - 36

Avoiding the Pitfalls of Small Business Failure n n n n Know your business in depth Develop a solid business plan Manage financial resources Understand & use monthly financial statements Learn to manage people effectively Set your business apart from the competition Maintain a positive attitude Ch. 1: The Foundations of Entrepreneurship 1 - 37

Conclusion n Entrepreneurs: ► Are an important part of the free enterprise system ► Are a diverse and talented group of people ► Represent a cross-section of society as a whole ► Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience Ch. 1: The Foundations of Entrepreneurship