Part 2

Starting and Growing Your Business

Chapter 6
Starting Your Own Business: The Entrepreneurship Alternative

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Chapter Objectives
1. Define the term entrepreneur and distinguish among entrepreneurs, small-business owners, and managers. 2. Identify three different types of entrepreneurs. 3. Explain why people choose to become entrepreneurs. 4. Discuss conditions that encourage opportunities for entrepreneurs. 5. Describe the role of entrepreneurs in the economy. 6. Identify personality traits that typically characterize successful entrepreneurs. 7. Summarize the process of starting a new venture. 8. Explain how organizations promote intrapreneurship. 2
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What Is An Entrepreneur?
A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.
Entrepreneurs differ from small business owners 1. Both possess the same drive, creative energy, and desire to become big-business owners. 2. Most small business owners (versus entrepreneurs) are content to operate a business that provides a comfortable living. 3. Typical entrepreneurs try to make the business grow. 4. Entrepreneurs combine their ideas and drive with money, employees, and other resources to create a business that fills a market need. Entrepreneurs also differ from managers. In what way?
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AUSTRALIA

HAWAII

4 MALAYSIA

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Categories of Entrepreneurs

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 Why People Become Entrepreneurs

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Reasons to Choose Entrepreneurship as a Career Path

Desire to Be Your Own Boss
Self-management is the motivation of many entrepreneurs

Financial Success
Entrepreneurs:
Are wealth creators Believe they wont get rich working for others

Path to riches can be long and uncertain

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Reasons to Choose Entrepreneurship as a Career Path

Job Security
Many workers lack job security (because of downsizing, contract workers position, etc) However, job security is not guaranteed to the entrepreneur; but greater control is. Entrepreneurs job security is depend on customers and investors, the entrepreneurs commitment to employees and customers.
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Reasons to Choose Entrepreneurship as a Career Path

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

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 Factors Supporting and Expanding Opportunities for Entrepreneurs

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The Environment for Entrepreneurs

A favorable public perception (the status of entrepreneurship as a career choice has been rising) The growing number of financing options, ex: patent Globalization
Creates many opportunities for entrepreneurs including partnership with foreign partners Allows products to be sold overseas Provides international talent pool
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The Environment for Entrepreneurs

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
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The Environment for Entrepreneurs

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 Internet is also a challenge for entrepreneurs. Customers can go online, quickly get needed information, and buy from anywhere in the world. Entrepreneurs need to find distinctive advantage over big competitors.
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The Environment for Entrepreneurs

Demographic and Economic Trends
Demographic trends create opportunities for new goods and services ex: aging population, two-income families, etc.

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The Environment for Entrepreneurs

Entrepreneurship around the World
Growth of entrepreneurship is a worldwide phenomenon Level of entrepreneurship varies considerably even among industrialized nations

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Influence of Entrepreneurs on the Economy

Influence of Entrepreneurs on the Economy

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Influence of Entrepreneurs on the Economy

Innovation
Entrepreneurs:
Create new products Build new industries Bring new life to old industries Some innovations are born of the entrepreneurs personal experiences. Ex : OpenTable.com, parking solution? Innovation rarely takes place in major leaps but moves in small steps.
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Influence of Entrepreneurs on the Economy

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 Gazelles
The fastest growing start-ups
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Influence of Entrepreneurs on the Economy

Diversity
Entrepreneurship offers excellent economic opportunities for women and minorities

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Characteristics of Entrepreneurs

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Characteristics of Entrepreneurs
Vision
Have an overall idea for how to make a business inspiration a success

High Energy Level

Willingly work hard to realize their visions (because of small staffs and limited capital)

Need to Achieve
Need to work hard because they want to excel
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Characteristics of Entrepreneurs
Self-Confidence and Optimism
Believe in ability to succeed, and they instill their optimism in others

Tolerance for Failure

Entrepreneurs view setbacks and failures as learning experiences Not easily discouraged or disappointed when things dont go as planned
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Characteristics of Entrepreneurs
Creativity
Entrepreneurs typically conceive new ideas for goods and services Devise innovative ways to overcome difficult problems and situations Often achieve by making creative improvements, rather than revolutionizing entire industry single-handedly
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Characteristics of Entrepreneurs
Tolerance for Ambiguity
Take the uncertainties associated with launching a venture in stride Not gambling because entrepreneurs look for best strategies and quickly make adjustments when strategy isnt working They manage ambiguity by remaining close to their customers, so they can adjust accordingly to the customer desires

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
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Starting a New Venture

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
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Starting a New Venture

Buying an Existing Business
Some prefer not to assume the risks of starting a new firm

Advantages: employees already in place, serve established customers, deal with familiar suppliers, the good or service is already known in the marketplace, necessary permits and licenses are already secured, obtaining financing may be easier.
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Starting a New Venture

Buying a Franchise
Another less risky way to begin a business 1. Reduces risk 2. However, franchisees must agree to follow the procedures mandated by franchiser
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Starting a New Venture

Finding Financing Seed Capitalinitial funding needed to launch a new venture.
Debt Financingborrowed funds that entrepreneurs must repay.

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Starting a New Venture

Finding Financing
Equity Financingfunds invested in new ventures in exchange for part ownership. Drawbacks include: 1. investment partners may not agree on future direction of the business 2. if agreement cannot be reached, one partner may have to buy out the other
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Starting a New Venture

Finding Financing
Equity Financingfunds invested in new ventures in exchange for part ownership. Venture Capitalistsbusiness firm or group of individuals who invest in new and growing firms.

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Starting a New Venture

Finding Financing
Angel Investorswealthy individuals who invest directly in a new venture in exchange for an equity stake.

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Intrapreneurship
Intrapreneurshipprocess of promoting innovations within the structure of an existing organization.
Helps retain employees who might otherwise leave to start their own businesses Intrapreneurship practiced in:
3M (e.g. skunkworks) Thermo Electron Xerox Intuit
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