Essentials of Entrepreneurship and Small Business Management PDF

10/8/2024 Essentials of Entrepreneurship and Small Business Management Ninth Edition Chapter 1 The Foundations of Entrepreneurship Copyright © 2019...

10/8/2024 Essentials of Entrepreneurship and Small Business Management Ninth Edition Chapter 1 The Foundations of Entrepreneurship Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives (1 of 3) 1. Define the role of the entrepreneur in business. 2. Describe the entrepreneurial profile. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 1  10/8/2024 Learning Objectives (2 of 3) 3-A. Describe the benefits of entrepreneurship. 3-B. Describe the drawbacks of entrepreneurship. 5. Explain the cultural diversity of entrepreneurship. 6. Describe the important role that small businesses play in our nation’s economy. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives (3 of 3) 7. Put failure into the proper perspective. 9. Discover how the skills of entrepreneurship, including critical thinking and problem solving, written and oral communication, teamwork and collaboration, leadership, creativity, and ethics and social responsibility. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 2  10/8/2024 The World of the Entrepreneur (1 of 2) Every year U.S. entrepreneurs launch more than 6.6 million new businesses. Entrepreneurial spirit - the most significant economic development in recent history. Globally, nearly one in eight adults is actively engaged in launching a business. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The World of the Entrepreneur (2 of 2) Global Entrepreneurship Monitor (GEM) study: – 12.6% of the U.S. population aged 18 to 64 is engaged in entrepreneurial activity. – 68% of working adults around the world perceive entrepreneurs as having high status. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 3  10/8/2024 1.1: Understanding Entrepreneurs and Entrepreneurship (1 of 2) What Is an Entrepreneur? Most Americans earn money by working in business. They are somehow engaged in the buying and selling of products or services to earn money. A product is something that exists in nature or is made by human beings. It is tangible, meaning that it can be physically touched. A service is labor or expertise exchanged for money. It is intangible. It cannot physically be touched. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What is an Entrepreneur? Entrepreneur: ‒ One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and gathering the necessary resources to capitalize on them. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 4  10/8/2024 Characteristics of Entrepreneurs (1 of 2) Desire for responsibility Desire for immediate Preference for moderate feedback levels of risk High level of energy Willingness to break the Competitive rules Future orientation Self-reliance Confidence in their ability to succeed Determination (‫)عزيمة‬ Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Characteristics of Entrepreneurs (2 of 2) Skilled at organizing Value achievement more than money High degree of commitment Creativity Flexibility Willingness to work hard Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 5  10/8/2024 Figure 1.3 Most Important Qualities of an Entrepreneur Source: Ryan Westwood, “What Traits Do We Need to Succeed as Entrepreneurs?” Forbes, September 4, 2015, www.forbes.com/sites/ryanwestwood/2015/09/04/what-traits-do-we-need-tosucceed-as-entrepreneurs/#4d7f537f8ff4. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Entrepreneurship One characteristic of entrepreneurs stands out: diversity! Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should). Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 6  10/8/2024 Benefits of Entrepreneurship (1 of 2) The opportunity to: – Create your own destiny (‫)مصير‬. – Self-esteem – Make a difference. – Reach your full potential capability. – Reap impressive profits. – Contribute to society and to be recognized for your efforts. – Do what you enjoy and to have fun at it. – Creation/Ownership – Contribution to Society Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Drawbacks of Entrepreneurship While there are many potential benefits of entrepreneurship, entrepreneurs also face numerous possible costs: – Uncertainty of income – Risk of losing your entire investment )Business Failure( – Long hours and hard work – Lower quality of life until the business gets established – High levels of stress – Discouragement – Obstacles Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 7  10/8/2024 Opportunity Cost Cost/benefit analysis is incomplete without considering opportunity cost. Opportunity cost - the value of what must be given up in order to obtain something else. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 1.5 U.S. Online Retail Sales Source: Based on data from Forrester Research, 2016. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 8  10/8/2024 The Cultural Diversity of Entrepreneurship (2 of 4) Young entrepreneurs Women entrepreneurs Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 1.6 Characteristics of Women-Owned Businesses Source: Based on data from the 2016 State of Women-Owned Businesses Report, American Express OPEN, 2016, p. 3. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 9  10/8/2024 Figure 1.8 Entrepreneurial Activity in the U.S. by Age Group Source: Based on data from Robert W. Fairlie and Inara Tareque, 2017 Kauffman Index of Startup Activity, Kauffman Foundation, 2017, p. 34. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 1.9 Small Businesses by Industry Source: Based on data from “Statistics of U.S. Businesses, U.S. and States, NAICS Sectors, Small Employment Sizes,” United States Census Bureau, 2013, www.census.gov/econ/susb/. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 10  10/8/2024 The Power of Small Businesses (2 of 2) Small businesses: – Produce 48.5% of the nation’s private GDP. – Achieve for 47% of business sales. – Create 16 times more patents per employees than large companies. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Putting Failure into Perspective Entrepreneurs are not worried about the potential of failure. Failure: a natural part of the creative process. Successful entrepreneurs learn to reduce the possibility of failure. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 11  10/8/2024 Figure 1.10 Small Business Failure Rate Source: Based on data from “Survival Rates of Establishments, by Year Started and Number of Years Since Starting, 1994–2016,” Business Employment Dynamics, U.S. Bureau of Labor Statistics, www.bls.gov/bdm/entrepreneurship/bdm_chart3.htm. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Avoiding the Pitfalls of Small Business Failure (1 of 2) Know your business in-depth Build a viable business model – and test it Know when to change (be flexible) Develop a solid business plan Understand financial statements Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 12  10/8/2024 Avoiding the Pitfalls of Small Business Failure (2 of 2) Manage financial resources Understand financial statements Build the right team Learn to manage people effectively Set your business apart from the competition Maintain a positive attitude Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. How Do Entrepreneurs Find Opportunities to Start New Businesses? Schumpeter’s definition describes five basic ways that entrepreneurs find opportunities to create new businesses: 1. Using a new technology to produce a new product 2. Using an existing technology to produce a new product 3. Using an existing technology to produce an old product in a new way 4. Finding a new supply of resources (that might enable the entrepreneur to produce a product more economically) 5. Developing a new market for an existing product Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 13  10/8/2024 An Idea Is Not Necessarily an Opportunity An opportunity is an idea that is based on what consumers need or want and are willing to buy sufficiently often at a high enough price to sustain a business. Timmons’s definition of a business opportunity includes these four characteristics: 1. It is attractive to customers because it creates or adds value for its customers. 2. It will work in the business environment. 3. It can be executed in a defined window of opportunity. 4. It can be implemented with the right team to make it durable. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. SWOT Analysis Entrepreneurial Wisdom… A useful way to evaluate a business idea is to look at its strengths, weaknesses, opportunities, and threats (S W O T). This is called S W O T analysis. Strengths - All the company's capabilities and positive points are internal to the organization. Weaknesses - All the negatives the company faces, such as lack of capital or training These are internal to the organization. Opportunities - Any positive external event or circumstance that can help the entrepreneur get ahead of the competition Threats - Any external factor, event, or circumstance that can harm the business, such as competitors, legal issues, or declining economies. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 14  10/8/2024 The Entrepreneurial Process The Entrepreneurial Process Consists of Four Steps Step 1: Decision to become an entrepreneur Step 2: Developing successful business ideas Step 3: Moving from an idea to an entrepreneurial firm Step 4: Managing and growing the entrepreneurial firm Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A Business Must Make a Profit to Stay in Business Profit - amount of money remaining after all costs are deducted from the income of a business. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 15  10/8/2024 Developing Career Skills Critical thinking and problem solving Written and oral communication Teamwork and collaboration Leadership Creativity Ethics and social responsibility Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Conclusion Entrepreneurs: – Are an important part of the free enterprise system – Are a diverse and talented group of people – Represent a wide variety of society as a whole – Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 16  10/8/2024 Copyright Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 17