Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER SIX STARTING YOUR OWN BUSINESS: THE ENTREPRENEURSHIP ALTERNATIVE Text by Profs. Gene Boone.

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

CHAPTER SIXCHAPTER SIX

STARTING YOUR OWN BUSINESS:STARTING YOUR OWN BUSINESS:THE ENTREPRENEURSHIP THE ENTREPRENEURSHIP

ALTERNATIVEALTERNATIVE

Text by Profs. Gene Boone & David KurtzText by Profs. Gene Boone & David KurtzMultimedia Presentation byMultimedia Presentation byProf. Milton PressleyProf. Milton PressleyThe University of New OrleansThe University of New Orleans

[email protected]@uno.edu


• Define the term Define the term entrepreneurentrepreneur, and , and distinguish among an entrepreneur, a distinguish among an entrepreneur, a small-business owner, and a managersmall-business owner, and a manager

• Identify three different types of Identify three different types of entrepreneursentrepreneurs

• Explain why people choose to Explain why people choose to become entrepreneursbecome entrepreneurs

• Discuss conditions that encourage Discuss conditions that encourage opportunities for entrepreneursopportunities for entrepreneurs

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


• Describe the role of entrepreneurs in Describe the role of entrepreneurs in the economythe economy

• Identify personality traits that typically Identify personality traits that typically characterize entrepreneurscharacterize entrepreneurs

• Summarize the process of starting a Summarize the process of starting a new venturenew venture

• Explain how organizations promote Explain how organizations promote intrapreneurshipintrapreneurship

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


CHAPTER OVERVIEWCHAPTER OVERVIEWCHAPTER OVERVIEWCHAPTER OVERVIEW

• People are increasingly choosing People are increasingly choosing the path of entrepreneurshipthe path of entrepreneurship

• To become an entrepreneur, learn as To become an entrepreneur, learn as much as possible by:much as possible by:• Completing academic programsCompleting academic programs• Gaining practical experience workingGaining practical experience working• Reading newspaper and magazine Reading newspaper and magazine

articles and biographies of successful articles and biographies of successful entrepreneursentrepreneurs

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WHAT IS AN ENTREPRENEUR?WHAT IS AN ENTREPRENEUR?WHAT IS AN ENTREPRENEUR?WHAT IS AN ENTREPRENEUR?

• Entrepreneur:Entrepreneur: person who person who seeks a profitable opportunity seeks a profitable opportunity and takes the necessary risks to and takes the necessary risks to set up and operate a businessset up and operate a business

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Figure 6.1 Categories of Entrepreneurs

Figure 6.1 Categories of Entrepreneurs

CATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURS


CATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURS• Classic entrepreneurs:Classic entrepreneurs:

person who identifies a person who identifies a business opportunity and business opportunity and allocates available resources allocates available resources to tap that marketto tap that market

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CATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURSCATEGORIES OF ENTREPRENEURS• Intrapreneurs: Intrapreneurs:

entrepreneurially oriented person entrepreneurially oriented person who develops innovations within who develops innovations within the context of a large corporationthe context of a large corporation

• Change agents (turnaround Change agents (turnaround entrepreneurs):entrepreneurs): manager who manager who tries to revitalize an established tries to revitalize an established firm to keep it competitivefirm to keep it competitive

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REASONS TO CHOOSE REASONS TO CHOOSE ENTREPRENEURSHIP AS A ENTREPRENEURSHIP AS A CAREER PATHCAREER PATH

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

own firm someday, you own firm someday, you have plenty of companyhave plenty of company


Figure 6.2 U.S. Adults Currently Engaged in Starting a BusinessFigure 6.2 U.S. Adults Currently Engaged in Starting a Business


Figure 6.3 Why People Become Entrepreneurs

Figure 6.3 Why People Become Entrepreneurs




Being One’s Own Boss

Being One’s Own Boss • Self-management Self-management

is the motivation is the motivation of many of many entrepreneursentrepreneurs

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Figure 6.4 Guru.com: Portraying an Entrepreneurial Icon





FinancialSuccess

FinancialSuccess

• Entrepreneurs:Entrepreneurs:• Are wealth creatorsAre wealth creators• Believe they won’t Believe they won’t

get rich working for get rich working for othersothers

• Path to riches can Path to riches can be long and be long and uncertainuncertain

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FinancialSuccess

JobSecurity

JobSecurity

• Many workers lack Many workers lack job securityjob security

• Growing Growing percentage of percentage of Americans create Americans create their own by their own by starting their own starting their own firmsfirms

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• Gives the founder Gives the founder some choice over some choice over when, where, and when, where, and how to workhow to work

• Many work Many work extraordinarily long extraordinarily long hours . . . often at hours . . . often at the whim of their the whim of their customerscustomers


FinancialSuccess

JobSecurity

Quality of Life

Quality of Life


THE ENVIRONMENT FOR THE ENVIRONMENT FOR ENTREPRENEURSENTREPRENEURSTHE ENVIRONMENT FOR THE ENVIRONMENT FOR ENTREPRENEURSENTREPRENEURS• Factors that support and expand Factors that support and expand

opportunities for entrepreneurs are opportunities for entrepreneurs are shown on the next slide . . .shown on the next slide . . .

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Figure 6.5 Factors Supporting and Expanding Opportunities for Entrepreneurship

Figure 6.5 Factors Supporting and Expanding Opportunities for Entrepreneurship


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• Creates many opportunities for entrepreneurs

• Allows products to be sold overseas

• Provides international talent pool

• 40% of the fastest-growing small U.S. firms have international sales

GlobalizationGlobalization

THE ENVIRONMENT FOR THE ENVIRONMENT FOR ENTREPRENEURSENTREPRENEURSTHE ENVIRONMENT FOR THE ENVIRONMENT FOR ENTREPRENEURSENTREPRENEURS

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• 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



EducationEducation

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© PhotoDisc

InformationInformationTechnologyTechnology

• 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

EducationEducation



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• 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

EducationEducation



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Demographic &Demographic &Economic TrendsEconomic 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

EducationEducation




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Entrepreneurship Around Entrepreneurship Around the Worldthe WorldEntrepreneurship Around Entrepreneurship Around the Worldthe World

• Growth of entrepreneurship is a Growth of entrepreneurship is a worldwide phenomenonworldwide phenomenon

• Level of entrepreneurship Level of entrepreneurship varies considerably even varies considerably even among industrialized among industrialized nationsnations

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Figure 6.6 Levels of Entrepreneurial Activities in Ten Countries

Figure 6.6 Levels of Entrepreneurial Activities in Ten Countries


THE INFLUENCE OF ENTREPRENEURS THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMYON THE ECONOMYTHE INFLUENCE OF ENTREPRENEURS THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMYON THE ECONOMY• American entrepreneurs have given American entrepreneurs have given

the world goods and services that the world goods and services that have changed the way people live, have changed the way people live, work, and playwork, and play

• Products include:Products include:• Ball-point pensBall-point pens• Netscape Navigator softwareNetscape Navigator software• Fiberglass skisFiberglass skis• Velcro fastenersVelcro fasteners• FedEx delivery serviceFedEx delivery service• MacDonald'sMacDonald's

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Figure 6.7 Influence of Entrepreneurs on the Economy

Figure 6.7 Influence of Entrepreneurs on the Economy


THE INFLUENCE OF ENTREPRENEURS THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMYON THE ECONOMYTHE INFLUENCE OF ENTREPRENEURS THE INFLUENCE OF ENTREPRENEURS ON THE ECONOMYON THE ECONOMY

• Entrepreneurs:Entrepreneurs:• Create new productsCreate new products• Build new industriesBuild new industries• Bring new life to old Bring new life to old

industriesindustries• Since WWII, behind:Since WWII, behind:

• 2/32/3rdsrds of Inventions of Inventions• 95% of major 95% of major

innovationsinnovations

InnovationInnovation

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• Vital source of new jobsVital source of new jobs• Typically hire small Typically hire small

numbers of employees numbers of employees per firm . . . spread over per firm . . . spread over many companiesmany companies

• See potential employees See potential employees where established firms where established firms overlook themoverlook them


Job GenerationJob Generation

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• Entrepreneurship Entrepreneurship offers excellent offers excellent economic economic opportunities for opportunities for women and minoritieswomen and minorities


Job GenerationJob Generation

DiversityDiversity© PhotoDisc


Figure 6.8 Diversity of 21st Century Entrepreneurs

Figure 6.8 Diversity of 21st Century Entrepreneurs


Figure 6.9 Characteristics of EntrepreneursFigure 6.9 Characteristics of Entrepreneurs

CHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURSCHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURS


CHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURSCHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURS• VisionVision

• Have an overall idea for how to make Have an overall idea for how to make a business inspiration a successa business inspiration a success



• High Energy LevelHigh Energy Level• Willingly work hard to Willingly work hard to

realize their visionsrealize their visions



• Need to AchieveNeed to Achieve• Need to work hard because Need to work hard because

they want to excelthey want to excel



• Self-Confidence and OptimismSelf-Confidence and Optimism• Believe in ability to succeed, and Believe in ability to succeed, and

they instill their optimism in othersthey instill their optimism in others


CHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURSCHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURS• Tolerance for FailureTolerance for Failure

• Entrepreneurs view setbacks and failures Entrepreneurs view setbacks and failures as learning experiencesas learning experiences

• Not easily discouraged or disappointed Not easily discouraged or disappointed when things don’t go as plannedwhen things don’t go as planned


CHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURSCHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURS• CreativityCreativity

• Entrepreneurs typically conceive new Entrepreneurs typically conceive new ideas for goods and servicesideas for goods and services

• Devise innovative ways to overcome Devise innovative ways to overcome difficult problems and situationsdifficult problems and situations



• Tolerance for AmbiguityTolerance for Ambiguity• Take the uncertainties Take the uncertainties

associated with launching a associated with launching a venture in stride venture in stride


CHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURSCHARACTERISTICS OF CHARACTERISTICS OF ENTREPRENEURSENTREPRENEURS• Internal Locus of ControlInternal Locus of Control

• Believe that they control their own fatesBelieve that they control their own fates• Take personal responsibility for the Take personal responsibility for the

success or failure of their actions rather success or failure of their actions rather than believing in luck or fatethan believing in luck or fate


Figure 6.10 An Entrepreneur With an Internal Locus of Control

Figure 6.10 An Entrepreneur With an Internal Locus of Control


Figure 6.11 Think You Might Be a Good Entrepreneur?Figure 6.11 Think You Might Be a Good Entrepreneur?


STARTING A NEW VENTURESTARTING A NEW VENTURESTARTING A NEW VENTURESTARTING A NEW VENTURE

Selecting a Business IdeaSelecting a

Business Idea

Creating aBusiness Plan


FindingFinancingFinding

Financing

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• Steps involved Steps involved in beginning in beginning a new businessa new business




Business Idea

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• Important Important considerations:considerations:• Finding something you Finding something you

love to do and are good love to do and are good at doingat doing

• Determining whether Determining whether your idea can satisfy a your idea can satisfy a need in the marketneed in the market

• Success also depends Success also depends on your offering being on your offering being appealing to the appealing to the marketplacemarketplace




Business Idea© PhotoDisc

• Buying an Existing Buying an Existing BusinessBusiness• Some prefer not to Some prefer not to

assume the risks of assume the risks of starting a new firmstarting a new firm

• Buying a FranchiseBuying a Franchise• Another less risky Another less risky

way to begin a way to begin a businessbusiness



Selecting a Selecting a Business IdeaBusiness Idea



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• Entrepreneurs haveEntrepreneurs have traditionally seized traditionally seized opportunities as opportunities as they arise and they arise and changed course as changed course as necessary necessary

• A formal business A formal business plan, however, is plan, however, is an integral part of an integral part of managing a managing a business business





Creating aCreating aBusiness PlanBusiness Plan


Financing

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• Finding FinancingFinding Financing• Seed Capital:Seed Capital: initial initial

funding needed to funding needed to launch a new venturelaunch a new venture


Figure 6.12 Preparing to Convince Others to Invest in BusinessFigure 6.12 Preparing to Convince Others to Invest in Business






Financing

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• Debt Financing:Debt Financing: borrowed funds that borrowed funds that entrepreneurs must entrepreneurs must repayrepay

• Equity Financing:Equity Financing: funds invested in new funds invested in new ventures in exchange ventures in exchange for part ownershipfor part ownership

• Venture Capitalists:Venture Capitalists: business firm or group business firm or group of individuals who of individuals who invest in new and invest in new and growing firmsgrowing firms


Figure 6.13 Where Venture Capital Dollars Go

Figure 6.13 Where Venture Capital Dollars Go






Financing

• Angel Investors:Angel Investors: wealthy individuals wealthy individuals who invest directly in who invest directly in new ventures in new ventures in exchange for an equity exchange for an equity stakestake

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INTRAPRENEURSHIPINTRAPRENEURSHIPINTRAPRENEURSHIPINTRAPRENEURSHIP

• Intrapreneurship:Intrapreneurship: process of process of promoting innovation within the promoting innovation within the structure of an existing organizationstructure of an existing organization• Helps retain employees who might Helps retain employees who might

otherwise leave to start their own otherwise leave to start their own businessesbusinesses

• Intrapreneurship practiced in:Intrapreneurship practiced in:• 3M3M• Thermo ElectronThermo Electron• XeroxXerox• IntuitIntuit

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WHAT’S AHEADWHAT’S AHEADWHAT’S AHEADWHAT’S AHEAD

• Next Chapter:Next Chapter:• Describes technology Describes technology

behind electronic behind electronic commercecommerce

• Introduces challenges and Introduces challenges and opportunities available to opportunities available to those who want to use the those who want to use the InternetInternet

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Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER SIX STARTING YOUR OWN BUSINESS: THE ENTREPRENEURSHIP ALTERNATIVE Text by Profs. Gene Boone.

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