chapter 1: entreprenurship1 copyright 1999 prentice hall publishing company entrepreneurs: the...

Chapter 1: Entreprenurship 1Copyright 1999 Prentice Hall Publishing Company

Entrepreneurs: The Driving Force

Behind Small Businesses

Entrepreneurs: The Driving Force

Behind Small Businesses


The Age of the EntrepreneurThe Age of the Entrepreneur

More than 35 million U.S. households - More than 35 million U.S. households - 37% of the U.S. total - “have an intimate 37% of the U.S. total - “have an intimate involvement in a new or small business.” involvement in a new or small business.”

Survey of college seniors: 49% of men Survey of college seniors: 49% of men and 31% of womensaid they were and 31% of womensaid they were interested in pursuing entrepreneurship interested in pursuing entrepreneurship after graduation. after graduation.

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

Number of New Incorporations


What Is an Entrepreneur?What Is an Entrepreneur?

A person who creates a new business in A person who creates a new business in the face of risk and uncertainty for the the face of risk and uncertainty for the purpose of achieving profit and growth purpose of achieving profit and growth by identifying opportunities and by identifying opportunities and assembling the necessary resources to assembling the necessary resources to capitalize on those opportunities. capitalize on those opportunities.


Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Desire for responsibility.Desire for responsibility. Preference for moderate risk.Preference for moderate risk. Confidence in their ability to succeed.Confidence in their ability to succeed. Desire for immediate feedback.Desire for immediate feedback. High level of energy.High level of energy. Future orientation.Future orientation. Skilled in organization.Skilled in organization. Value achievement over money.Value achievement over money.


Benefits of Small Benefits of Small Business OwnershipBusiness Ownership

The opportunity to gain control over your own The opportunity to gain control over your own destiny.destiny.

The opportunity to make a difference.The opportunity to make a difference. The opportunity to reach your full potential.The opportunity to reach your full potential. The opportunity to reap unlimited profits.The opportunity to reap unlimited profits. The opportunity to contribute to society and to be The opportunity to contribute to society and to be

recognized for your efforts.recognized for your efforts. The opportunity to do what you enjoy.The opportunity to do what you enjoy.


Drawbacks of Small Drawbacks of Small Business OwnershipBusiness Ownership

Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital



Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital Long hours and hard workLong hours and hard work

Number of Hours New Business Owners WorkHours per Week

1 - 398% 40 - 49

15%

50 - 5923% 60 - 69

29%

70 - 7913%

80+12%



Lower quality of life until the business gets Lower quality of life until the business gets establishedestablished

Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital Long hours and hard workLong hours and hard work


Un

der

20

20

- 24

25

- 29

30

- 34

35

- 39

40

- 44

45

- 49

50

- 54

55

- 59

60

and

up

1%

8%

17%

21%

18%

15%

9%7%

3%1%

0%

5%

10%

15%

20%

25%

Un

der

20

20

- 24

25

- 29

30

- 34

35

- 39

40

- 44

45

- 49

50

- 54

55

- 59

60

and

up

Owner Age When Business Formed



High levels of stressHigh levels of stress Complete responsibilityComplete responsibility

Uncertainty of incomeUncertainty of income Risk of losing your entire invested capitalRisk of losing your entire invested capital Long hours and hard workLong hours and hard work Lower quality of life until the business gets Lower quality of life until the business gets establishedestablished


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroes.Entrepreneurs as heroes. Entrepreneurial education.Entrepreneurial education. Economic and demographic factors.Economic and demographic factors. Shift to a service economy.Shift to a service economy. Technological advancements.Technological advancements. Independent lifestyles.Independent lifestyles. The World Wide Web.The World Wide Web.

1996 1997 1998 1999 2000

$518$1,138

$2,371

$3,990

$6,579

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Mill

ions

of $

1996 1997 1998 1999 2000

On-Line Commerce


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroes.Entrepreneurs as heroes. Entrepreneurial education.Entrepreneurial education. Economic and demographic factors.Economic and demographic factors. Shift to a service economy.Shift to a service economy. Technological advancements.Technological advancements. Independent lifestyles.Independent lifestyles. The World Wide Web.The World Wide Web. International opportunities.International opportunities.


New 2 4 6 8 100%

20%

40%

60%

80%

100%

% o

f Sm

all F

irm

s S

urvi

ving

New 2 4 6 8 10

# of Years in Business

Small Business Survival Rate


Trends in EntrepreneurshipTrends in Entrepreneurship WomenWomen

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

0

1

2

3

4

5

6

7

8

Mill

ions

of B

usin

esse

s

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

Women-Owned Businesses


Minority enterprisesMinority enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs Home-based businessesHome-based businesses

WomenWomenTrends in EntrepreneurshipTrends in Entrepreneurship


1988

1989

1990

1991

1992

1993

1994

1995

1996

9.5

7.6

10.1

7.7

11.2

9.4

11.8

10.5

12.1

11.7

12.4

12.1

12.8

12.7

14.0

13.1

14.9

15.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Mill

ions

1988

1989

1990

1991

1992

1993

1994

1995

1996

The Growth of Home-Based Businesses

Part-time Self-EmployedWorkers

Primary Self-EmployedWorkers


Trends in Trends in EntrepreneurshipEntrepreneurship

Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts

WomenWomen Minority enterprisesMinority enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs Home-based businessesHome-based businesses

A Profile of Small Business by Industry

Retail28%

Service24%

Construction14%

Wholesale11%

Manufacturing9%

Finance7%

Other7%


Entrepreneurial ProfilesEntrepreneurial Profiles

Women.Women. Minorities.Minorities. Immigrants.Immigrants. Part-time entrepreneurs.Part-time entrepreneurs. Home-based entrepreneurs.Home-based entrepreneurs. Family business owners.Family business owners. Copreneurs.Copreneurs. Corporate castoffs.Corporate castoffs. Corporate dropouts.Corporate dropouts.


Small Businesses...Small Businesses... make up 98.5% of all the businesses in the U.S.make up 98.5% of all the businesses in the U.S. employ 53% of the nation's private sector employ 53% of the nation's private sector

workforce.workforce. create more jobs than big businesses.create more jobs than big businesses. lead the way in training workers for jobs. lead the way in training workers for jobs. produce 50% of the nation's GDP.produce 50% of the nation's GDP. account for 47% of business sales.account for 47% of business sales. create 4X more innovations per R & D dollar create 4X more innovations per R & D dollar

spent than medium-sized firms and 24X as spent than medium-sized firms and 24X as many as large companies.many as large companies.

1927

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

0

20

40

60

80

100

120

140

160

# of

Fai

lure

s pe

r 10

,000

Li

sted

Con

cern

s

1927

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

The Business Failure Rate


The Small Business The Small Business Failure RecordFailure Record

24% of new businesses fail after two 24% of new businesses fail after two years.years.

51% fail within four years.51% fail within four years. 63% fail within six years.63% fail within six years.


Putting Failure Into Putting Failure Into PerspectivePerspective

Failure is a natural part of the creative Failure is a natural part of the creative process.process.

Failures are simply stepping stones along Failures are simply stepping stones along the path to success. the path to success.

The “secret” to success is the ability to The “secret” to success is the ability to fail fail intelligentlyintelligently, learning why you failed , learning why you failed so that you can avoid making the same so that you can avoid making the same mistake again. mistake again.


Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure

Know your business in depth.Know your business in depth. Prepare a business plan.Prepare a business plan. Manage financial resources.Manage financial resources. Understand financial statements.Understand financial statements. Learn to manage people effectively.Learn to manage people effectively. Set your business apart from the Set your business apart from the

competition. competition. Keep in tune with yourself.Keep in tune with yourself.

chapter 1: entreprenurship1 copyright 1999 prentice hall publishing company entrepreneurs: the...

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