Chapter 6- Entrepreneurship

Entrepreneurship Definition

Risk-taking behavior that results in new opportunities; starting, organizing, managing, and assuming the risks of a new venture.

Why has Entrepreneurship Increased in Popularity?

Trends in New Business Start-Ups:

o Downsizing of large corporations- fewer people working there/ firing

o Necessity-Based Entrepreneurs- no better way to make money, fits schedule

o Crossovers to small business by former large business employees

o Increased options in franchising

o The emergence of E-commerce- making money online

What is the fastest growing segment of small-business enterprise?

Services

Internal Locus of Control

Belief that you control your own destiny.

High Energy Level

Persistent and willing to work hard.

Self-Confidence

Belief in your competence and decisions.

Tolerance for Ambiguity

Comfort with uncertainty and risk

Self-Reliance/ Independence

Preference to be your own boss

High Need for Achievement

Motivated by challenging goals and feedback.

Flexibility

Willing to change direction when plans fail

Passion and Action Orientation

Acts early, takes initiative, avoids wasting time

Entrepreneurial Truths:

1. Entrepreneurship is not reserved for startups.

2. Entrepreneurs do not share one personality type.

3. Entrepreneurship can be taught.

4. Entrepreneurs are not extreme risk takers.

5. Entrepreneurs collaborate more than compete.

6. Entrepreneurs act more than they plan.

7. Entrepreneurship is a life skill.

Role of Entrepreneurship in Society:

Small businesses employ about 52% of private workers.

Small businesses produce about 51% of private-sector output.

Small businesses receive about 35% of federal contract dollars.

Small businesses create 7 out of 10 new jobs.

Small businesses have fewer than 500 employees.

7 Types of Entrepreneurship:

1. Corporate Entrepreneurship (Intrapreneurship)

2. Entrepreneurship Inside

3. Franchising

4. Buying a Small Business

5. Social Entrepreneurship

6. Family Entrepreneurship

7. Serial Entrepreneurship

Business Plan

Describes direction of the new business and financial needs

Industry Analysis

Economic trends, regulations, risks.

Company Description

Mission, owners, legal form

Products and Services

Goods/ services offered and competitive uniqueness

Market Description

Size of market, competitor strengths and weaknesses, 5-year sales goal

Marketing Strategy

product characteristics, distribution, promotion, pricing, and market research

Operations description

manufacturing or service methods, supplies and suppliers, and control procedures

Personal Resources

Using your own money or borrowed funds from family or friends

Strategic Alliances

Partnering with established firms; mutually beneficial

Lenders

Funding from banks, gov. loans, independent investors. (Traditional ways of funding essentially)

Debt Financing

Borrowing money that must be repaid with interest

Equity Financing

Selling ownership shares for investment money

Venture Capitalist

People who make large investments in new ventures in exchange for equity

Angel Investor

Wealthy individual willing to invest in exchange for an equity stake

Initial Public Offering (IPO)

Selling shares to the public

Crowdfunding

Using online platforms to get financing from small investors

Sole Proprietorship

Business created by one individual

Partnership

When two or more people contribute resources to start and operate a business

Corporation

Separates legal entities from its owners

LLC

Hybrid form with advantages of sole proprietorship, partnership, and corporation.

What percent of businesses fail within the first 5 years?

60-80%