The Entrepreneurial Life

1. The Entrepreneurial Life Part 1 Entrepreneurship: A World of Opportunity

2. Looking Ahead After studying this chapter, you should be able to: • Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs. • Explain the nature of entrepreneurship and how it is related to small business. • Identify some motivators or rewards of entrepreneurial careers. • Describe the various types of entrepreneurs and entrepreneurial ventures. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

3. Looking Ahead (cont’d.) • Identify five potential advantages of small entrepreneurial firms. • Discuss factors related to readiness for entrepreneurship and getting started in an entrepreneurial career. • Explain the concept of an entrepreneurial legacy and the challenges involved in crafting a worthy legacy. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

4. Entrepreneurial Opportunities • Entrepreneurial Opportunity • A value-creating innovation with market potential • A desirable and timely innovation that creates value for interested buyers and end users • Success stories • SLR Contracting & Service Company • http://www.slrcontracting.com • FlavorX • http://www.flavorx.com • Auntie Anne’s • http://www.auntieannes.com Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

5. Who Are Entrepreneurs? • Entrepreneurs are: • People who start and/or operate a business. • Individuals who discover market needs and launch new firms to meet those needs. • Risk takers who provide an impetus for change, innovation, and progress. • All active owner-managers (founders and/or managers of small businesses). Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

6. The Independent Entrepreneur Exhibit 1.1 Source: John L. Hart FLP, and Creators Syndicate, Inc. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

7. Why People Become Entrepreneurs • Reluctant Entrepreneur • A person who becomes an entrepreneur as a result of some severe hardship • Refugee • A person who becomes an entrepreneur to escape an undesirable situation Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

8. Entrepreneurial Incentives Exhibit 1.3 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

9. Reasons for Starting a New Business RECENT SURVEY RESULTS • 29% TO CREATE SOMETHING NEW • 24% TO CONTROL MY LIFE • 14% TO BE MY OWN BOSS • 14% TO MAKE MONEY • 10% TO PROVE I COULD DO IT • 08% FRUSTRATION AT LARGE COMPANY • 02% OTHER Source of Your New Business Idea • 37% In-depth understanding of industry/profession • 36% Market niche spotted • 7% Brainstorm • 4% Copied somebody else • 4% Hobby that grew • 11% Other Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

10. Varieties of Entrepreneurship • Founder (“Pure” Entrepreneur) • A person who brings a new firm into existence • Administrative Entrepreneur • An entrepreneur who oversees the operations of a ongoing business • Franchisee • An entrepreneur whose power is limited by the contractual relationship with a franchising organization • Entrepreneurial Team • Two or more people who work together as entrepreneurs Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

11. Artisan Entrepreneurs • Artisan Entrepreneur • A person with primarily technical skills and little business knowledge who starts a business • Characteristics • Technical training • Paternalistic approach • Reluctance to delegate • Narrow view of strategy • Personal sales effort • Short planning horizon • Simple record keeping Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

12. Opportunistic Entrepreneurs • Opportunistic Entrepreneur • A person with both sophisticated managerial skills and technical knowledge who starts a business • Characteristics • Broad-based education • Scientific approach to problems • Willing to delegate • Broad view of strategy • Diversified marketing approach • Longer planning horizon • Sophisticated accounting and financial control Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

13. Women Entrepreneurs • More Women Entrepreneurs • Represent 38% of entrepreneurs in U.S. • Revenues at female-owned firms have grown 33% from 1976 to 2000. • Women are moving into nontraditional industries. • Problems Facing Female Entrepreneurs • Newness of entrepreneurial role • Lack of access to credit • Lack of networking connections • Discrimination Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

14. Early Career Concerns 1. Getting an education 2. Gaining work experience 3. Acquiring financial resources Late Career Concerns 1. Fulfilling family responsibilities 2. Attaining seniority in employment 3. Earning investment in a retirement program 20 25 35 45 Age Age and Entrepreneurial Opportunity Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

15. Characteristics ofSuccessful Entrepreneurs • Strong commitment to the business(tenacity) • Strong internal locus of control (self-reliant) • Moderate risk takers(financial, career, psychic risks) Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

16. Commitment and determination Tenacious, decisive, and persistent in problem solving Leadership Self-starters and team builders who focus on honesty in their business relationships Opportunity obsession Aware of market and customer needs Tolerance of risk, ambiguity, and uncertainty Risk takers, risk minimizers, and uncertainty tolerators Creativity, self-reliance, and adaptability Open-minded, flexible, uncomfortable with the status quo, and quick learners Motivation to excel Goal oriented and aware of their weaknesses and strengths Entrepreneurial Characteristics(Timmons and Spinelli) Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

17. Drive Initiative, Persistence, Responsibility Thinking Ability Original, Creative, Critical, Analytical Competency in Human Relations Emotional Stability, Consideration, Cooperation, Tactfulness Communication Skills Oral Comprehension and Expression, Writing Ability Technical Knowledge Thorough Knowledge of the Product/Service, and Customer Characteristics of Successful Small Business Managers Meir Liraz - BizMove Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

18. Awareness of Passing Time Sense of urgency, seize the opportunity now High Need for Achievement Ambitious, likes to set own goals Internal Locus of Control In control of own destiny, desire for independence Self-Confident Decisive and methodical Self-Sacrificing and hard-working High energy level Tolerant of Ambiguity and Uncertainty Future-Oriented Good interpersonal skills Technically knowledgeable Entrepreneurial Characteristics Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

19. First-born within your family? Were your parents entrepreneurs? Are you a child of an immigrant? Was your father absent during a part of your childhood? Eight of every ten are over 40 years old Demographic Factors Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

20. Taking the Plunge • Precipitating Event • An event, such as losing a job, that moves an individual to become an entrepreneur Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

21. The Contributions of Small Business • Small Businesses: • Represent more than 99.7 percent of all employers. • Employ more than half of all private-sector employees. • Pay 44.5 percent of total U.S. private payrolls. • Generate 60 to 80 percent of net new jobs annually. • Produce 13 to 14 times more patents per employee than do large patenting firms. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

22. What Is a Small Business? • Our Text’s Criteria for Defining Smallness • Financing supplied by one person or small group • Localized business operations (except marketing) • Business’ size small relative to larger competitors • Fewer than 100 employees Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

23. More Definitions of Smallness in Business • Committee for Economic Development • Owner manages company directly (independently) • Capital supplied by one individual or a small group • Area of operations is mainly local • Business is small in comparison with biggest competitors • Small Business Administration • Independently owned and operated • Not dominant in its field of operation • White House Conference on Small Business • < 500 employees • <$20 million in annual sales Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

24. Major Types of Small Businesses CONCENTRATED • Agriculture • Construction • Real Estate • Retailing • Services • Wholesaling SIGNIFICANT • Manufacturing • Mining • Transportation Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

25. Small Businesses, Growth, and Profits • High-Potential Venture (Gazelle) • A small firm that has great prospects for growth • Attractive Small Firm • A small firm that provides substantial profits to its owner • Microbusiness • A small firm that provides minimal profits to its owner • Lifestyle Business • A microbusiness that permits the owner to follow a desired pattern of living Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

26. Customer Focus Firms lack bureaucracy. Quality Performance Quality is not limitedto large firms. Integrity and Responsibility A solid reputation builds loyal customers. Innovation Small firms are the leading source of innovation. Special Niche Providing uniquely specialized services can be a powerful competitive advantage. Competitive Advantages ofEntrepreneurial Firms Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

27. Success of Small Businesses Likely to Fail • Bakeries • Car Washes • Infant Clothing Stores • Laundries • Machine Shops • Restaurants • Trucking Firms • Used Car Dealerships 2/3 Fail Within Five Years • Likely to Succeed • Auto Tires & Accessories • Building Material Stores • Computer/Office Supplies & Equipment • Engineering/Scientific Equipment Mfrs • Funeral Homes & Crematories • Liquor Stores • Seed & Garden Supply Stores Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

28. Minimum Population Requirements to Support a Retail Store GROCERIES 700 RESTAURANTS 1200 DRUG STORES 3500 HARDWARE 6000 SHOES 7000 FLORISTS 9500 APPLIANCES 10000 SPORTING GOODS 15000 STATIONERY 25000 HOBBY/TOY 30000 DEPARTMENT STORE 40000 CAMERA/PHOTO SUPPLY 50000 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

29. Stages of Small Business Development EXISTENCE-- FINDING CUSTOMERS -- PROVIDING A VALUABLE PRODUCT OR SERVICE SURVIVAL-- GENERATING A STABLE CASH FLOW -- HIRING ADDITIONAL PEOPLE TO KEEP UP WITH THE WORK -- DEVELOPING A STRUCTURE SUCCESSDISENGAGEMENT FOLLOWS A STABILITY STRATEGY OWNER CONTENT TO SIT BACK AND TAKE IT EASY PERHAPS SELL THE BUSINES GROWTH SSTRATEGIC PLANS FOR GROWTH AND EXPANSION HIRE MANAGERS FOR THE FUTURE (AND FOR VISION) TAKE OFF-- HOW TO GROW RAPIDLY AND FINANCE THAT GROWTH -- DELEGATION OF CONTROL TO PROFESSIONAL MANAGERS -- PURSUIT OF VERTICAL & HORIZONTAL GROWTH STRATEGIES MATURITY -- HAS CHARACTERISTICS OF A FUNCTIONAL, ESTABLISHED FIRM -- HOW TO RETAIL FLEXIBILITY & ENTREPRENEURIAL SPIRIT? Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

30. Areas of Concern to Small Businesses ADEQUATE CAPITAL -- FINANCING ISN’T ENOUGH, WE NEED MORE $$$$ ECONOMIC CONDITIONS AND CYCLES -- CAN WE SURVIVE??? EXPERIENCE (More is needed) -- IN THE INDUSTRY AND IN MANAGEMENT GOVERNMENT REGULATION -- HARDER FOR SMALL BUSINESSES TO COMPLY GROWTH/MAINTAINING THE MARKET -- KEEPING CUSTOMERS AND ATTRACTING NEW ONES PERSONNEL -- FINDING AND KEEPING EXPERIENCED PROFESSIONALS PROFITS -- REINVESTED IN THE BUSINESS OR DRAWN BY THE OWNER? STRUCTURAL EVOLUTION -- LOSS OF CONTROL AS THE BUSINESS GROWS TECHNICAL ADVANCES -- HOW TO KEEP UP AND AVOID OBSOLESCENCE? Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

31. 10 Deadly Small Business MistakesMeir Liraz, President of BizMove • Sticking to a single idea too long • Not having a results-driven marketing plan • Not knowing your customers • Ignoring your cash position (working capital) • Ignoring your employees (morale) • Confusing likelihood with reality • Not having a sales plan • Being a Lone Ranger (learn to delegate) • No Mastermind (get an advisory group or mentor) • Giving Up Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.

32. Key Terms entrepreneurial opportunity entrepreneur reluctant entrepreneur refugee founder franchisee high-potential venture (gazelle) attractive small firm microbusiness lifestyle business entrepreneurial team artisan entrepreneur opportunistic entrepreneur internal locus of control external locus of control precipitating event entrepreneurial legacy Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.