Entrepreneurship • Historically – Few people controlled wealth and other
• It is starting your own business and becoming a self
– employed person.
• It is a system in economics as one agent of
production.
• A system in economy that venture into new
businesses creating many jobs and becoming a big
corporation
What is an Entrepreneur?
A person who organizes and manages an enterprise,
especially a business, usually with considerable initiative
and risk.
Initiative: Readiness and ability in initiating action.
Risk: The hazard or chance of loss.
Source: Webster’s College Dictionary (Random House/McGraw Hill)
Entrepreneur
“An entrepreneur is someone who perceives an
opportunity and creates an organization to pursue it.”
Economic Situation
In the U.S., approximately 4% of the adult population is
actively involved in starting a business at any given time.
One out of every two adults has tried to start a business
at some time in his or her life.
The Enterprising Spirit
“In entrepreneurship, luck is where preparation and
opportunity meet.”
Who Wants to be a Millionaire?
“Enter the Entrepreneurship World”
“Parable of the Talents”, Mathew 25: 14 – 30
What Does It Take to Be Successful?
“The idea is not what is important.
In entrepreneurship; ideas are a dime a dozen.
Developing the idea, implementing it, and building a
successful business are the important things.”
What is an Enterprise?
 A business, a company or a firm.
 Describes the actions of someone who shows some
initiative by taking a risk by setting up, investing in and
running a business.
What Does It Take to Be Successful Entrepreneur?
- observe and identified a market need
- A human skill: eagerness to do something new and
clever, despite any risks.
- The aim is to make a profit even with a difficult or
important challenges.
Ideas on Entrepreneurship
• The ideas of this system is as old as the aspirations
of man for a better life.
people worked for them.
• Changes – new wealth was made by inventions or
ideas
New Form of Wealth
• It could be made
• It could be transfer more easily
• Individual could become owner or boss.
• Aspiration and perseverance
Phenomenon of Entrepreneurship
• Joseph Schumpeter (1883 – 1950)
• Austrian finance minister
• Harvard professor
• Entrepreneur is a capitalist
• Associated to modern development
• Innovations and economic changes as economy
grow.
• Makes money from new idea or invention.
• Frank H. Knight and Peter Drucker
- Willing to take risks to begin a new business
- Bring new venture to move forward.
- Trend setters for convenience
Where Do You Start?
- Think about WHO is going to want your product/service,.
- What they will PAY for it, what you will NEED to carry it
off, and how you will MAKE MONEY someday. That is,
make a PLAN.
- Success depends on positive cash flow, growth, and
value creation.
Owners and investors who forget that tend to get
“naturally deselected.”
Famous Entrepreneur
• A person who takes the initiative is someone who
makes things happen.
• He or she tends to be decisive.
• A business opportunity is identified and the person
does something about it.
• Showing initiative is about taking decisions and being
bold.
The Importance of Value Creation
Value creation - create value for themselves by creating
value for others.
Successful business is one that delivers value to its
customers and creates value for its owners.
Value is delivered to your customers when you do – Waterpower
something for them – Steam
• Better – Nuclear
• Cheaper – Internet
• Faster – Wireless
• Cooler
• Different Difficulties
However, it is likely that none of these will work for long, • Have a half-baked idea
so continuous improvement and innovation are essential. • Have a meatless business plan
• Can’t articulate your value proposition
Value is created for the owners when: • Can’t identify your market potential
– You do more with their money than they could do with • Can’t justify your sales projections
it themselves • Can’t show your investors an exit
– You invest in productive activities that earn rates of • Can’t show your investors a reasonable expectation
return greater than their risk-adjusted costs of capital. of a reasonable return on investment
– The present value of future cash flows exceeds the • Don’t think about risk
startup costs. • Take no risk yourself
• Don’t take time to do your homework
Value is created by: • Try to fund a “lifestyle” venture
– Exploiting proprietary physical resources
– Possessing proprietary knowledge or expertise A Lifestyle Venture
– Creating a new or improved product, process, or • 5-year revenue projections under 5 million
service • Started by people with life-style motives (live your
– Staying ahead of the competition through constant hobby)
improvement and innovation • 90% of all startups
• Zero interest to venture capitalists
Revenue Models
Revenue comes from: Funding Your Venture
– Selling or licensing a product • The hardest funding to raise is the first funding. You
– Selling or licensing a service are probably on your own.
– Creating a transaction pipeline • Later funding gets progressively easier depending on
– Trading products or services the results you can show to investors and what you
– Selling advertising need to fund.
– Investing • BANKS are probably not going to help.
• The best funding is INTERNAL funding (reinvested
Planning for Success earnings).
Don’t plan a business for today – Plan it for at least a year • PRIVATE EQUITY is the current buzzword for the
from now. major capital source for business ventures.
– Moore’s Law: Computing power will roughly double
every 18 months. Private Equity Firms
– Bandwidth will continue to increase for most users As surveyed in 2006 US economy
almost ad infinitum. • As of October, 436 new private equity funds had
– People will live longer and maintain active lifestyles raised a record $300 billion in 2006, providing a huge
far after retirement. pool of funds to be invested. (BusinessWeek, Oct. 15,
– Energy sources and consumption patterns will 2006)
change drastically. • These firms are generally very HANDS ON with their
– The world will continue to be a very dangerous place. company.

Changes and Market Needs Entrepreneurs Thoughts

Think about the next paradigm shift that will change “I find that the harder I work, the more luck I seem to
business and life: have.” Thomas Jefferson
– Fire “Whether you think you can, or that you can’t, you are
– Agriculture usually right.” Henry Ford
– Horsepower “I have not failed. I have just found 10,000 ways that won’t
– Writing work.” Thomas Edison
– Masonry
– Sail power
– Metallurgy
 Perspective of Entrepreneurship
 Component of a Capitalist economy
 Thrives in economic systems that support innovation
and hard work.
 Manages and assumes the risk of an enterprise
 Identifies an economic need
 Considers offering a business solution
 Proceeds to assemble the resources required
Example:
Entrepreneurship and Economic Development
Economic development – improving the living standards
of the people.
 Human resources (labor supply)
 Natural resources (land)
 Capital formation (machines)
 Technology (science, entrepreneurship)
Effective and Efficient utilization of various resources
could contribute to the economic growth.
The Entrepreneur’s Task
Assume role in a capitalist economy for development of
economy.
 Products and services for customers and producers.
 Employment
 Taxes
 Demand for suppliers’ products and services
 Training facilities for future entrepreneurs
Entrepreneurship and Innovation
The freedom of competition by the capitalist economy
serves to drive the entrepreneur to innovate and get
ahead to competitors
1) New products
2) New process of production
3) Substitution of a cheaper material in an unaltered
product
4) Reorganization of production, internal function, or
distribution arrangement leading to increase
efficiency, better support for a given product or lower
cost.
5) Improvement in instruments or methods of doing
innovation.
 Invention which refers to the discovery or devising of
new products and processes
 Development which refers to the process by which
the ideas and principles generated from the stage of
invention are embodied in concrete products and
techniques
NEW VENTURES AND LONG – TERM ENTERPRISES
New ventures
• Development of new business or grow into a bigger
company. Recoup the cost of opening a new venture
and take advantage of the opportunities presented by
a mature business.
• The transition from a new venture to a successful long
– term enterprise consists of four major stages as
follows:
1. Prestart – up stage; happens when the
entrepreneur starts to question the feasibility of an
idea, product or service. Seeks answers to questions
regarding potential markets, production and
financing.
2. Start – up stage; economic activities are
undertaken with formation of the business, generation
of necessary capital.
3. Early growth stage; follows after establishing
feasibility. Activities will be on a small scale. If losses
occur it will naturally be limited and if there is success
at this stage the option to move to the next stage can
be exercised.
4. Late – growth stage; the final stage before the
new venture matures into a stable enterprise. This is
when management is structured, long – term
financing is established and facilities planning are
undertaken.
Rewards for the Successful Ventures
• The use of any of the factors of production deserves
to receive some form of compensation.
• “Things required for making a commodity” consist of
land, labor and capital.
• When land is used in production activities – the owner
of the land are paid a compensation called rent.
• Laborers – they are paid wages or salaries
• Interest – is the compensation paid to owners of Small business – total assets approach
invested capital.  As one having total assets that fall within a certain
bracket.
Factors of production and the rewards  Example: Magna Carta for Small Enterprise – RA
• Factors of Production – land, capital, labor 6977, it indicates the firm or business must have total
entrepreneur assets valued at above 1 million considered small
• Economic Reward – rent, interest, wages/ salary, business.
profits  Classified as “microenterprises”
• Limiting Factor for Rewards Received – supply and  Assets values are affected by inflation.
demand
- Industry rates/ government mandated rates  From the point of view of business management, the
- Supply and demand legislation market share approach in defining small business is
- Skill of entrepreneur more appropriate.
 Target market share is evident in business objectives.
Predicament
• Competition – new venture reap profits for being Kinds of business according to size
ahead of the competitors.  Public enterprises
• Innovation – newer and better products or cycle  Private enterprises
continues until one or both find a reason to stop. • Micro business
• Entrepreneurship and business size – be undertaken • Cottage business
on a large scale. Both small and large businesses are • Small Business
confronted by problems. (entrepreneurial in nature) • Medium Business
• Large Business
How to be Ahead?
• Offering business service during Sundays’ or Types of small business
holidays.  Manufacturing
• Manufacture and sale new products.  Services
• Selling on deferred payment scheme.  Wholesaling
 Retailing
The Nature of Small Business  General Construction firms

Characteristics of small business

 Independent Management– the owner is also the
manager.
 Small Capital Requirement – small business
requires only small capital and this can be supplied
by a single or a few individuals.
 Mostly Local Operation - small business usually
operates in a certain locality though not confined to a
local area.

Economic importance of small business

New ventures in the market  Providers of economic opportunities to
 Small businesses to manage properly. entrepreneurs.
 Chances on becoming large enterprises are  Providers of products and services to consumers.
increased.  Suppliers of products and services to other business.
 Development of small business to large business.  Distributors of products and services of other
business.
Small business – market share  Supporters of government
Under the market share approach  Providers of employment
 As one which is independently owned and operated
and which is not dominant in its field of operation. Advantages of operating a small business
 “independently owned” – private individual, a  Be an employee
partnership, a corporation.  Be a professional
 “not dominant” – small business does not control a  Be a small business operator (SBO)
sizable share of its market. - Opportunity to gain control over his destiny.
- Opportunity to reach his full potential.
- Opportunity to reap unlimited profits.  To bear the risk inherent to the venture
- Opportunity to make contribution to society and
receive recognition for his effort.

Disadvantages of operating a small business

 Uncertainty of income.
 Risk of losing your entire capital investment.
 Lower quality of life until the business gets
established.
 Complete responsibility.
 Having to serve undesirable customers.
 Paperwork and other chores.
 Long hours and demanding work condition.

Entrepreneurship and economic development

 Economic development is a scheme aimed at
improving the living standards of the nation’s
citizenry.
- Human resources (labor, supply, education,
discipline, motivation )
- Natural resources (land, minerals, fuels, climate)
- Capital formation (machines, factories, roads )
- Technology (science, engineering, management,
entrepreneurship)
o As capitalist economy like the Philippines when
entrepreneurs become successful the nation is
immensely benefited.

Example of entrepreneurship activity

 Entrepreneurship’s concern
- Identifying an economic need
- Assembling resources required
- Assuming risk
o Problem at Hand
- Resources must be made available.
- Venture must be made.

 Entrepreneur’s Action
- Prepare project study, advertise, and maintain good
relationship with employees and customers among
others.

The entrepreneur’s task

 If all the requirements in a capitalist economy are in
place the entrepreneur can assume his assigned role
in the development of the economy.
 Products and services for customers and producers.
 Employment
 Taxes
 Demand for suppliers’ products and services and
 Training facilities for future entrepreneurs.

Specific functions of entrepreneur

 To supply the necessary capital
 To organize production by buying and combining
inputs like materials and labor
 To decide on the rate of output, in the light of his
expectation about demand.