Untitled

Chapter 1: Entrepreneurship - Concepts & History

• This chapter introduces entrepreneurship as the art of founding a business.
• Formal definitions of entrepreneurship are given, setting the subject in historical context.
• The growing importance of entrepreneurship in today's global work environment is also explained.
• Motivations for starting a business are discussed.
• Self-assessment questions help gauge whether entrepreneurship is a potential path.

Learning Objectives

• Define entrepreneurship.
• Understand how entrepreneurship evolved.
• Recognize successful entrepreneur stories.
• List the advantages and disadvantages of being an entrepreneur.
• Explain the trends under the entrepreneurial economy.
• Define social entrepreneurship and explain its relevance.

Definition of Entrepreneurship

• The word "entrepreneur" comes from the French word "entreprendre," which means "to undertake."
• According to Webster's, an entrepreneur organizes and directs a business undertaking, assuming the risk for profit.
• Entrepreneurship is the art and skill of founding a business.
• Creating a business that has added economic value is characterized by creativity.

The Business World Needs Entrepreneurs

• Entrepreneurial success benefits the whole society.
• A state's achievement translates into economic growth through entrepreneurship.
• The world re-focuses from big to small.

Advantages & Disadvantages of Entrepreneurship

• Advantages include achieving ambitions, feeling respected, being creative, being distinguished, being independent, and creating opportunities.
• Disadvantages include income instability, high pressure, working long hours, full responsibility, high risk, and less of a social life.

Ownership Structure of The Business

• Types of ownership: This includes sole proprieterships and general partnerships.
• Types of business: Buying into a franchise, staring up or buying an existing business.
• Size of the business: Micro, small and medium sized.

Sole Proprietorship

• The simplest, oldest, and most common form of business structure.
• The business has no legal existence separate from its owner.
• Personal assets can be claimed for business debts.

Sole Proprietorship - Pros

• You control the business.
• It's easy and cheaper to set up.
• You own all profits.
• It involves few administrative duties.
• You can decide matters quickly
• Profits are taxed as personal income.

Sole Proprietorship - Cons

• It's hard to obtain financing.
• You have to pay your businesses debts.
• It places a big burden on you.
• The salary is often low and benefits are minimal.
• You have to manage all aspects of the business.

General Partnership

• Partners are personally liable for all business transactions.
• Partners face the risk of unlimited liability in case of business failure.

General Partnership - Pros

• It raises capitol for the business.
• It's relatively easy to setup.
• Partners can pool their knowledge
• Partners share the liability
• There are few administrative duties.

General Partnership - Cons

• You are not protected from you partners bad financial decisions.
• There are limited tax saving available.
• Disagreements between partners can be unpleasant.
• It can be hard to dissolve.

Corporation

• A corporation is a legal entity separate from its creators.
• It is owned by shareholders and run by a board of directors elected by them.
• Shares of a corporation represent equal parts of ownership in the company.

Limited Liability Company

• A legal business form which provides limited liability to its owners.
• An LLC is more flexible than a corporation and well-suited for companies with a single owner.

Types of Businesses

• Start-ups: New companies built from scratch
• Buy an existing business: Purchase an already existing business
• Franchise: Buy into a trademarked and patented service.

Start-ups

• Start-ups are new companies built from scratch.
• Most startups won't evolve in to a large firm.
• More than 60% are out of business in the first six years, more than 70% are out of business in eight.
• Evidence suggests that those that survive remain small.

Start-ups - Advantages and Disadvantages

• Advantages include offering a unique idea or opportunity and having unlimited potential for growth and earnings.
• Disadvantages include many variables with initial assumptions instead of facts and no assurance of acquiring enough customers within a timeframe.

Buying an Existing Business - Advantages

• Review financial records to analyze the business' performance.
• Get trained by the current owner to ensure smooth takeover.
• Benefit from established customer base, supplier/vendor relationships.
• Take advantage of a prime location.
• Maintain an already established workforce.
• Easier to get loan approval.
• Potentially get financing from the existing owner.
• Already established record keeping and accounting systems.

Buying an Existing Business - Disadvantages

• The cost can be greater than starting up from scratch.
• Concerns about the validity of financial statements.
• Customer satisfaction levels may not what you are led to believe.
• The condition of assets may be worse than it appears.
• Existing employees may not be suitable for your business.
• Equipment and facilities may need repairs/be obsolete.
• Inventory is likely to be outdated.
• Receivable worth less than face value.
• Can be overpriced.

Franchise

• A franchise agreement grants the right to market or distribute a product/service with payment or royalties.
• In 2021 the top franchises included McDonalds, KFC, Burger King etc.

Franchise - Statistics

• There are more than 3000 franchise franchises in the US.
• Franchises cover every type of business imaginable and control 50% of all retail sales.
• A franchise opens somewhere in the world every six minutes.

Franchise - Advantages

• Franchises provide a proven formula for success.
• Training programs.
• Advertising and promotional programs are initiated by the franchise.
• Already established brand and trading name.
• Accounting system are pre-tested and established.
• Volume discounts on purchases.

Franchise - Disadvantages

• High start-up costs.
• Franchise fees and annual fees.
• Franchisees must abode by the operating restrictions.
• Some require renewal fees.
• Growth may be limited by contract.

Size of the Business

• Sizes available include Micro Medium and Large.
• A micro business in Saudi Arabia has 1-5 employess and less than 3M in sales per year.
• A Small business in Saudi Arabia has 6-49 employess and 3-40M in sales per year.
• A medium business in Saudi Arabia has 50-249 employess and 40-200M in sales per year.

Business Opportunity

• The business should satify what the customer wants.
• The business should satify what the entrepreneur wants to do.

What the Customer Wants

• Is looking for things that customers want to buy so that the products or services can fulfill a human need.
• Recognize that needs may not be easily met, if at all. There may be needs in a location that are not currently satisfied, and are unrecognosed.
• Needs can be identified at trade fairs, exporters conventions, business magazines, and interviews with the patent office and technology magazines. Useful website can be found online to generate ideas.
• To analyize whether the ideas should be percieved, trim a list of 100 to 10 to analyse whether these ideas can satisfy the need.

Considerations About Demand

• The product/service could be an existing product, a variation of an old product, a product to appeal to a new market, or a totally new product.
• Find out more about who will be interested in the business.
• Determine how the product can be marketed exclusively and the cost to produce.
• How much it will cost to produce, whether the business can offer the product quickly and can get funding quickly.
• Find the unique selling proppositions of the business. Is it faster, higher or stronger than competitors.

Protecting the Business Idea

• The ideas are intellectual propetty to protect the idea from copiers and money makers with commerical interests.
• There are 4 areas of intellectual properties which included: copyright, patent, trademark, and trade secrets.

Intellectual Properties - Copyright

• Protects composers, authors/writers, artists, and filmmakers.
• It endures during the lifetime of the creator and for many years after his/her death.
• Designated by the symbol ©.

Intellectual Properties - Patents

• A patent is the exclusive right to use and sell an invention.
• Types of Patents: Including patents on a device, an anistic design, mechanical design and patents on a plant (created by a botanist).

Intellectual Properties - Trademarks

• A trademark is a word or symbol used to distinguish goods.
• Symbol: ®.

Intellectual Properties - Trade Secret

• Is a secret formula, method or device which gives an entrepreneur an advantages over competitors