Description
During this brief explanation related to starting your own business the entrepreneurship alternative.
Copyright ?2015 John Wiley & Sons, Inc.
Starting Your Own Business:
The Entrepreneurship Alternative
www.wileybusinessupdates.com
Chapter Six
Learning Objectives
Define entrepreneur
Identify the different categories of
entrepreneurs
Explain why people choose
entrepreneurship as a career path
Discuss the environment for
entrepreneurs
1
2
3
4
5
6
7
Identify the characteristics of
entrepreneurs
Summarize the process of starting
a new venture
Explain intrapreneurship
2
Copyright ©2015 John Wiley & Sons, Inc.
What is an Entrepreneur?
? A risk taker in the private enterprise system, who seeks a profitable opportunity,
and takes the necessary risks to set up and operate a business
? They differ from many small-business owners in their strong desire to expand
and grow their business
? Entrepreneurs differ from managers through their overriding responsibility to
use the resources of the organization to accomplish their goals
? Resources: www.entrepreneur.com and www.inc.com
3
Copyright ©2015 John Wiley & Sons, Inc.
Categories of Entrepreneurs
? Classic Entrepreneurs
? Identify business opportunities and allocate available resources to tap those markets
? Serial Entrepreneurs
? Start one business, run it, and then start and run additional businesses in succession
? Social Entrepreneurs
? Recognize a societal problem and use business principles to develop innovative solutions
? Lifestyle Entrepreneur
? Starts a business to gain flexibility in work
hours
4
Copyright ©2015 John Wiley & Sons, Inc.
Entrepreneurship as a Career
? In a recent year, 543,000 new businesses were created each month in the United
States
? The past two decades have shown a heightened interest in entrepreneurial
careers
? People choose entrepreneurship for many reasons:
? Dissatisfaction with traditional work
? To fill a gap in goods or services they could use themselves
? Financial necessity
? Heightened publicity surrounding celebrity entrepreneurs
5
Copyright ©2015 John Wiley & Sons, Inc.
Why People Become Entrepreneurs
? Freedom to make decisions and self-management
? Being first to bring an idea for a superior product
to market can translate to financial gains as
creators of wealth
? Working for a large company does not guarantee
job security
? Freedom to decide when, where, and how to work
6
Copyright ©2015 John Wiley & Sons, Inc.
The Environment for Entrepreneurship
? Globalization
? Education
? Demographic & Economic
Trends
? Information Technology
7
Figure 6.2
Copyright ©2015 John Wiley & Sons, Inc.
Globalization
? Figure 6.3 shows the highest levels of entrepreneurship activity in
various countries
? Factor Driven Economies
? Zambia, Nigeria, and Malawi
? Efficiency Driven Economies
? Ecuador, Indonesia, Chile, and Colombia
? Innovation-Driven Economies
? USA, Canada, Singapore, and Israel
8
Copyright ©2015 John Wiley & Sons, Inc.
The Environment for Entrepreneurs
(cont.)
? Education
? U.S. colleges and universities: entrepreneurship majors
? Universities are helping students launch businesses
? Teaching entrepreneurship to young people
? Information Technology
? Technology has provided entrepreneurs tools to compete
? Entrepreneurs have used IT to revolutionize industries
? Demographic and Economic Trends
? Aging of U.S. population
? Increasingly diverse ethnic groups
? Growth of two-income families
9
Copyright ©2015 John Wiley & Sons, Inc.
Characteristics of Entrepreneurs
10
Copyright ©2015 John Wiley & Sons, Inc.
Entrepreneurial Characteristics
? Vision - how to make business ideas
successful
? High Energy Level - a willingness to
work long and hard
? Need to Achieve competitive drive
and desire to excel
? Self-Confidence – optimism and
fearlessness
11
? Tolerance for Failure - not easily
discouraged
? Creativity –overcoming difficult
problems and situations
? Tolerance for Ambiguity –
uncertainties taken in stride
? Internal Locus of Control - control of
their own destiny
Copyright ©2015 John Wiley & Sons, Inc.
Figure 6.5 Entrepreneurial Quiz
12
Copyright ©2015 John Wiley & Sons, Inc.
Starting a New Venture
? Considerations for choosing an idea for your business:
? Find something you love to do and are good at doing
? Determine whether your idea can satisfy a need in the marketplace
? Do what makes you happy and be true to yourself
13
Copyright ©2015 John Wiley & Sons, Inc.
Choosing a Business Idea
? Consider the following guidelines:
? List your interests and abilities, values, beliefs, goals and dreams
? List the types of businesses which match your interests and abilities
? Read, Read, Read to identify trends and ideas of future needs for products
? Evaluate ways to improve existing goods and services
? Conduct market research to determine customer interest in your idea or venture
? Become an industry expert by reading about your industry
14
Copyright ©2015 John Wiley & Sons, Inc.
Buying an Existing Business
? Established businesses may be less risky than starting a new one
? Employees and suppliers are in-place to serve established customers
? The company’s good or service is well known in marketplace
? Necessary permits and licenses are already secured
? In some cases, financing may be easier for an existing business
? Seller may be willing to finance
? There are many available resources for entrepreneurs considering the
15
Copyright ©2015 John Wiley & Sons, Inc.
Buying a Franchise
? A less risky way to begin a new business than establishing an
entirely new firm
? A franchise usually means better brand recognition
? Firms in franchises showing growth include those targeting children
and parents, such as photography, tutoring, and security
? Franchise fees can be costly
? See chapter 5 for more about franchising
16
Copyright ©2015 John Wiley & Sons, Inc.
Creating a Business Plan
? In the past, many entrepreneurs did not always create a business plan when
starting a new venture
? Although flexibility is crucial for any startup, particularly in quickly changing
markets, planning is essential
? Entrepreneurs typically solve problems as they arise, and change course as
necessary
? If seeking funds from outside sources, some planning is necessary
? Part of the planning effort includes research needed to create a business plan, or
a road map of sorts
17
Copyright ©2015 John Wiley & Sons, Inc.
Business Plan Resources
18
Copyright ©2015 John Wiley & Sons, Inc.
Finding Financing
? Finding financing remains a key issue for most startups
? Seed capital, funds to launch a company, is a key issue for most startups
? There are two types of financing:
? Debt Financing – money borrowed to be repaid
? Equity Financing – a share of ownership is exchanged for money supplied
19
Copyright ©2015 John Wiley & Sons, Inc.
Startup Funding Sources
20
Copyright ©2015 John Wiley & Sons, Inc.
Debt Financing
? Money borrowed that must be repaid
? Sources include: banks, finance companies, families & friends, and credit
cards
? Very few startups are financed through bank loans, which are difficult to secure in
today’s environment
? Applying for a bank or SBA-backed loan requires careful preparation, planning
and analysis
? Entrepreneur’s credit history will be important
? A professional and detailed business plan is necessary
? A track record of profits may make it easier to obtain bank financing
21
Copyright ©2015 John Wiley & Sons, Inc.
Equity Financing
? Entrepreneurs exchange a share of ownership in their company for money
supplied by investors
? Sources of equity financing include family and friends, business partners,
venture capital firms, and private or angel investors
? Venture Capitalists
? Business organizations or groups of private individuals that invest in early-stage, high-
potential growth companies
? Angel Investors
? Wealthy individuals who invest money directly in new ventures in exchange for equity,
are a larger source of investment capital for start-up firms
22
Copyright ©2015 John Wiley & Sons, Inc.
Government Support for New Ventures
? Federal, state, and local governments support new ventures
? The SBA, state and local agencies, and business incubators all offer information,
resources, and access to financing
? Enterprise Zones - Entrepreneurship is also encouraged through specific geographic
areas designated for economic revitalization
? Enterprise zones encourage investment, often in distressed areas, by offering tax
advantages and incentives to businesses
? Government Legislation
? Immigration Act of 1990
23
Copyright ©2015 John Wiley & Sons, Inc.
Intrapreneurship
? Promoting innovation within the organizational structures of established
companies
? An idea to promote creativity and innovation in order to maintain a competitive
advantage in a fast-changing business climate
? Skunkworks is a form of intrapreneurship whereby an employee conceives of an
idea and convinces management to provide resources for potential
commercialization
? 30 percent of large firms now allocate funds toward intrapreneurship
24
Copyright ©2015 John Wiley & Sons, Inc.
doc_222601188.pdf
During this brief explanation related to starting your own business the entrepreneurship alternative.
Copyright ?2015 John Wiley & Sons, Inc.
Starting Your Own Business:
The Entrepreneurship Alternative
www.wileybusinessupdates.com
Chapter Six
Learning Objectives
Define entrepreneur
Identify the different categories of
entrepreneurs
Explain why people choose
entrepreneurship as a career path
Discuss the environment for
entrepreneurs
1
2
3
4
5
6
7
Identify the characteristics of
entrepreneurs
Summarize the process of starting
a new venture
Explain intrapreneurship
2
Copyright ©2015 John Wiley & Sons, Inc.
What is an Entrepreneur?
? A risk taker in the private enterprise system, who seeks a profitable opportunity,
and takes the necessary risks to set up and operate a business
? They differ from many small-business owners in their strong desire to expand
and grow their business
? Entrepreneurs differ from managers through their overriding responsibility to
use the resources of the organization to accomplish their goals
? Resources: www.entrepreneur.com and www.inc.com
3
Copyright ©2015 John Wiley & Sons, Inc.
Categories of Entrepreneurs
? Classic Entrepreneurs
? Identify business opportunities and allocate available resources to tap those markets
? Serial Entrepreneurs
? Start one business, run it, and then start and run additional businesses in succession
? Social Entrepreneurs
? Recognize a societal problem and use business principles to develop innovative solutions
? Lifestyle Entrepreneur
? Starts a business to gain flexibility in work
hours
4
Copyright ©2015 John Wiley & Sons, Inc.
Entrepreneurship as a Career
? In a recent year, 543,000 new businesses were created each month in the United
States
? The past two decades have shown a heightened interest in entrepreneurial
careers
? People choose entrepreneurship for many reasons:
? Dissatisfaction with traditional work
? To fill a gap in goods or services they could use themselves
? Financial necessity
? Heightened publicity surrounding celebrity entrepreneurs
5
Copyright ©2015 John Wiley & Sons, Inc.
Why People Become Entrepreneurs
? Freedom to make decisions and self-management
? Being first to bring an idea for a superior product
to market can translate to financial gains as
creators of wealth
? Working for a large company does not guarantee
job security
? Freedom to decide when, where, and how to work
6
Copyright ©2015 John Wiley & Sons, Inc.
The Environment for Entrepreneurship
? Globalization
? Education
? Demographic & Economic
Trends
? Information Technology
7
Figure 6.2
Copyright ©2015 John Wiley & Sons, Inc.
Globalization
? Figure 6.3 shows the highest levels of entrepreneurship activity in
various countries
? Factor Driven Economies
? Zambia, Nigeria, and Malawi
? Efficiency Driven Economies
? Ecuador, Indonesia, Chile, and Colombia
? Innovation-Driven Economies
? USA, Canada, Singapore, and Israel
8
Copyright ©2015 John Wiley & Sons, Inc.
The Environment for Entrepreneurs
(cont.)
? Education
? U.S. colleges and universities: entrepreneurship majors
? Universities are helping students launch businesses
? Teaching entrepreneurship to young people
? Information Technology
? Technology has provided entrepreneurs tools to compete
? Entrepreneurs have used IT to revolutionize industries
? Demographic and Economic Trends
? Aging of U.S. population
? Increasingly diverse ethnic groups
? Growth of two-income families
9
Copyright ©2015 John Wiley & Sons, Inc.
Characteristics of Entrepreneurs
10
Copyright ©2015 John Wiley & Sons, Inc.
Entrepreneurial Characteristics
? Vision - how to make business ideas
successful
? High Energy Level - a willingness to
work long and hard
? Need to Achieve competitive drive
and desire to excel
? Self-Confidence – optimism and
fearlessness
11
? Tolerance for Failure - not easily
discouraged
? Creativity –overcoming difficult
problems and situations
? Tolerance for Ambiguity –
uncertainties taken in stride
? Internal Locus of Control - control of
their own destiny
Copyright ©2015 John Wiley & Sons, Inc.
Figure 6.5 Entrepreneurial Quiz
12
Copyright ©2015 John Wiley & Sons, Inc.
Starting a New Venture
? Considerations for choosing an idea for your business:
? Find something you love to do and are good at doing
? Determine whether your idea can satisfy a need in the marketplace
? Do what makes you happy and be true to yourself
13
Copyright ©2015 John Wiley & Sons, Inc.
Choosing a Business Idea
? Consider the following guidelines:
? List your interests and abilities, values, beliefs, goals and dreams
? List the types of businesses which match your interests and abilities
? Read, Read, Read to identify trends and ideas of future needs for products
? Evaluate ways to improve existing goods and services
? Conduct market research to determine customer interest in your idea or venture
? Become an industry expert by reading about your industry
14
Copyright ©2015 John Wiley & Sons, Inc.
Buying an Existing Business
? Established businesses may be less risky than starting a new one
? Employees and suppliers are in-place to serve established customers
? The company’s good or service is well known in marketplace
? Necessary permits and licenses are already secured
? In some cases, financing may be easier for an existing business
? Seller may be willing to finance
? There are many available resources for entrepreneurs considering the
15
Copyright ©2015 John Wiley & Sons, Inc.
Buying a Franchise
? A less risky way to begin a new business than establishing an
entirely new firm
? A franchise usually means better brand recognition
? Firms in franchises showing growth include those targeting children
and parents, such as photography, tutoring, and security
? Franchise fees can be costly
? See chapter 5 for more about franchising
16
Copyright ©2015 John Wiley & Sons, Inc.
Creating a Business Plan
? In the past, many entrepreneurs did not always create a business plan when
starting a new venture
? Although flexibility is crucial for any startup, particularly in quickly changing
markets, planning is essential
? Entrepreneurs typically solve problems as they arise, and change course as
necessary
? If seeking funds from outside sources, some planning is necessary
? Part of the planning effort includes research needed to create a business plan, or
a road map of sorts
17
Copyright ©2015 John Wiley & Sons, Inc.
Business Plan Resources
18
Copyright ©2015 John Wiley & Sons, Inc.
Finding Financing
? Finding financing remains a key issue for most startups
? Seed capital, funds to launch a company, is a key issue for most startups
? There are two types of financing:
? Debt Financing – money borrowed to be repaid
? Equity Financing – a share of ownership is exchanged for money supplied
19
Copyright ©2015 John Wiley & Sons, Inc.
Startup Funding Sources
20
Copyright ©2015 John Wiley & Sons, Inc.
Debt Financing
? Money borrowed that must be repaid
? Sources include: banks, finance companies, families & friends, and credit
cards
? Very few startups are financed through bank loans, which are difficult to secure in
today’s environment
? Applying for a bank or SBA-backed loan requires careful preparation, planning
and analysis
? Entrepreneur’s credit history will be important
? A professional and detailed business plan is necessary
? A track record of profits may make it easier to obtain bank financing
21
Copyright ©2015 John Wiley & Sons, Inc.
Equity Financing
? Entrepreneurs exchange a share of ownership in their company for money
supplied by investors
? Sources of equity financing include family and friends, business partners,
venture capital firms, and private or angel investors
? Venture Capitalists
? Business organizations or groups of private individuals that invest in early-stage, high-
potential growth companies
? Angel Investors
? Wealthy individuals who invest money directly in new ventures in exchange for equity,
are a larger source of investment capital for start-up firms
22
Copyright ©2015 John Wiley & Sons, Inc.
Government Support for New Ventures
? Federal, state, and local governments support new ventures
? The SBA, state and local agencies, and business incubators all offer information,
resources, and access to financing
? Enterprise Zones - Entrepreneurship is also encouraged through specific geographic
areas designated for economic revitalization
? Enterprise zones encourage investment, often in distressed areas, by offering tax
advantages and incentives to businesses
? Government Legislation
? Immigration Act of 1990
23
Copyright ©2015 John Wiley & Sons, Inc.
Intrapreneurship
? Promoting innovation within the organizational structures of established
companies
? An idea to promote creativity and innovation in order to maintain a competitive
advantage in a fast-changing business climate
? Skunkworks is a form of intrapreneurship whereby an employee conceives of an
idea and convinces management to provide resources for potential
commercialization
? 30 percent of large firms now allocate funds toward intrapreneurship
24
Copyright ©2015 John Wiley & Sons, Inc.
doc_222601188.pdf