Entrepreneurs: The Driving Force Behind Small Business

Entrepreneurs: The
Driving Force Behind

Small Business
Chapter 1 Entrepreneurs Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 1-1
1-1
The World of the
Entrepreneur
 In the U.S., entrepreneurs start more
than 6 million businesses a year!
 Global Entrepreneurship Monitor (GEM)
 Approximately 8% of the U.S. population is
actively involved in entrepreneurial activity
 Nearly 11% of people in 49 GEM countries
studied are involved in starting a new
business
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What is an
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
assembling the necessary resources
to capitalize on them
Chapter 1 Entrepreneurs Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
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What is an Entrepreneur?
An entrepreneur is someone who

is willing to work 16 hours a day to
keep from working 8 hours a day
for someone else!
Characteristics of
Entrepreneurs
Survey: 61% of adults in the U.S. would
like to start their own business
 Willingness to take initiative
 Preference for moderate risk
 Confidence in their ability to succeed
 Independence
 Determination
 Desire for immediate feedback
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Characteristics of
Entrepreneurs
 High level of energy
 Competitiveness
 Future orientation
 Serial entrepreneurs
 Skilled at organizing
 Value achievement over money
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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)
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How to Spot Entrepreneurial
Opportunities
 Creativity vs. Innovation

 Creativity – the ability to develop
new ideas and to discover new
ways of looking at problems and
opportunities
 Innovation – the ability to apply
creative solutions to problems and
opportunities to enhance or to
enrich people’s lives
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Opportunities
 Monitor trends and exploit them early on

 Sonic Mule
 Take a different approach to an existing
market
 Poo Poo Paper Company
 Put a new twist on an old idea
 Green Grass at Last
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Opportunities
 Look for creative ways to use existing

resources
 Greenfields Coal
 Realize that others have the same problem
that you do
 SkirtSports
 Notice what is missing
 Dogs on Wheels
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Benefits of Small Business
Ownership
The opportunity to:
 Control your own destiny
 Make a difference
 Social entrepreneurs
 Reach your full potential
 Reap impressive profits
 Contribute to society and to be recognized
for your efforts
 Do what you enjoy and to have fun at it
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Drawbacks of Small
Business Ownership
 Uncertainty of income
 Risk of losing your entire investment
 Long hours and hard work
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Small Business Owners' Work Week
Number of Hours Worked per Week
1 to 39 hours
More than 70 hours 10%
20%
40 to 49 hours
29%
60 to 69 hours
19%
50 to 59 hours
22%
Average workweek = 54 hours

Source: MasterCard Global Small Business Survey, 2007.
Drawbacks of Small
Business Ownership
 Lower quality of life until the business gets
established
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Owner Age at Business Formation
33.5%
35.0% 3 1. 1%
30.0%
25.0%
20.0% 17 . 8 %
15.0%
9.8%
10.0% 6 . 1%
5.0% 1. 7 %
0.0%
Under 25 25-34 35-44 45-54 55-64 65+
Age
Source: National Federation of Independent Businesses and Wells Fargo Bank, 2002.
Drawbacks of Small
Business Ownership
 Lower quality of life until the business gets
established
 High levels of stress
 Complete responsibility
 Discouragement
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Feeding the
Entrepreneurial Fire
 Entrepreneurs as heroes
 Entrepreneurial education
 Demographic and economic
factors
 Shift to a service economy
 Technological advancements
 Outsourcing
 Independent lifestyles
 E-Commerce and the World Wide
Web
 International opportunities
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The Cultural Diversity
of Entrepreneurship
 Young entrepreneurs
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Entrepreneurial Activity by Age
Group
Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 1996-2009.
of Entrepreneurship
 Women entrepreneurs
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Entrepreneurial Activity by Gender
Source: 2008 Kauffman Index of Entrepreneurial Activity.
of Entrepreneurship
 Minority-owned enterprises
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Minority Business Ownership in
the United States
90
80
70
60
50 East
40 West
30 Nort h
20
10
0
1st Qt r 2nd Qt r 3rd Qt r 4t h Qt r
Source: based on Minorities in Business: A Demographic Review of

Small Business Ownership, Small Business Administration, Office of
Advocacy, April 2007.
Chapter 1 Entrepreneurs Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
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of Entrepreneurship
 Minority-owned enterprises
 Immigrant entrepreneurs
 Part-time entrepreneurs
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The Cultural Diversity of
Entrepreneurship
 Home-based business owners
 Family business owners
 Copreneurs
 Corporate castoffs
 Corporate dropouts
 Retired Baby Boomers
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Small Business by
Industry
Source: Small Business Administration, 2009.
Small Businesses...
 Make up 99.7% of all the 29.3 million
businesses in the U.S.
 Employ 50.2% of the nation’s private
sector workforce
 Pay 45% of total private payroll
 Create more jobs than big businesses
 SBA estimates they create 79% of all net new
jobs in the U.S.
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Small
Businesses...
 Are leaders in offering training and
advancement opportunities to workers
 Provide 67% of workers with their first jobs
 Produce 51% of the nation’s private GDP
 Account for 47% of business sales
 Key role in innovation:
 Produce 13 times more patents per
employees than large companies
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Small Business Survival Rate
100%
100%
90%
% of Small Firms Surviving
81%
80%
70% 65%
60% 54%
50% 46%
40%
40% 36%
32% 29%
30% 27% 25%
20%
10%
0%
New 1 2 3 4 5 6 7 8 9 10
# of Years in Business
Source: National Federation of Independent Businesses Business Policy Guide,
2003.
Putting Failure into
Perspective
 About 54% of new companies fail
within 4 years
 Entrepreneurs are not paralyzed by
the prospect of failure
 Failure – a natural part of the creative
process
 Successful entrepreneurs learn to fail
intelligently
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Avoiding the Pitfalls
of
Small Business
Failure
 Know your business in depth
 Prepare a business plan
 Manage financial resources
 Understand financial
statements
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Avoiding the Pitfalls
of
Small Business
Failure
 Learn to manage people
effectively
 Set your business apart from
the competition
 Maintain a positive attitude
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All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the United
States of America.
Copyright ©2012 Pearson Education, Inc.

Publishing as Prentice Hall
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Entrepreneurs: The

Driving Force Behind

An entrepreneur is someone who

 Creativity vs. Innovation

 Monitor trends and exploit them early on

 Look for creative ways to use existing

Average workweek = 54 hours

Source: Kauffman Foundation, Kauffman Index of Entrepreneurial Activity, 1996-2009.

Source: 2008 Kauffman Index of Entrepreneurial Activity.

Source: based on Minorities in Business: A Demographic Review of

Source: Small Business Administration, 2009.

Copyright ©2012 Pearson Education, Inc.

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