Because learning changes everything.

Part 1

Laying the Groundwork for

Your Business

Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
 Because learning changes everything. ®

Chapter 1

The Twenty-First-
Century Entrepreneur
 Learning Objectives

• Explain the rationale behind starting an entrepreneurial business.

• Discuss the history of entrepreneurship in the United States.
• Identify the type of people who are entrepreneurs.
• Describe the impact of entrepreneurial businesses on society.
• Discuss the worldwide impact of entrepreneurial businesses.
• Define an entrepreneurial business.

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 Why Start a Business?

New businesses are an essential element in any economy.

• The United States Small Business Administration (SBA) provides
statistics to prove entrepreneurial businesses’ importance.
• 99.9 percent of all businesses in the United States are small.

• 48 percent of private sector employees.

• 33.6 percent of known export value.

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 The SBA

• Officially organized in 1953 as a part of the Small Business Act.

• Provides a wealth of information and assistance at all levels of
organizational development and management for new entrepreneurial
businesses.
• Link: U.S. Small Business Administration.
• Published annually by Fortune magazine and documents the 500
largest corporations, by sales, in the United States.
• Though not all new ventures will grow big, they are the foundation for
all businesses.

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 Pierre Omidyar

• Excellent example of a small business owner with a vision that

exceeded expectations.
• Took his personal website which he used to auction off items he found
and created a phenomenon.
• Do you know any successful entrepreneurs?
• Why do you think they are successful?
• How would they define success?

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 Economies of Scale

Economies of scale are cost advantages reaped by companies when

production becomes efficient. Companies can achieve economies of
scale by increasing production and lowering costs
Obtained by large firms.
Condition that allows the long-run average cost to continue downward as
production increases.
• Advertising is cheaper per unit for Walmart as it is purchased in large
volume.
• Cost per unit in manufacturing decreases when high volumes are
produced.

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 What is the meaning of Intrapreneurship?

An intrapreneurship is a phenomenon of empowering the employees

within the organization, by valuing their ideas and converting them into a
profit-making model for the business.
Critical Elements an Entrepreneur Must Solve for Success
• Effective sales generation model.
• Sustainable operating profit margins.
• Being properly financed.

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 How Does Society Benefit?

New business development drives the economic success of a

community, a region, and a state.

Civic leaders use entrepreneurs to promote economic strength.

• Entrepreneurs generate new employment, and provide a basis to
improve an area's economic vitality.

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 Entrepreneurship around the World

The World Bank estimates that one of the strongest factors in the growth
of any nation’s GNP is the presence of small- and medium-sized
enterprises or SMEs.
• Almost all nations encourage SME development.
• Some of the efforts to encourage SMEs are quite small, such as
microloans.

• Large efforts include a full range of programs to assist new venture start-
ups.

Result of the efforts is that the pace of start-ups is increasing around the
world.

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 What Is an Entrepreneurial Business?

People typically associate small and entrepreneurial businesses together.

The United States government considers any business with fewer than
500 employees to be a small business.

Multiple terms can be used to refer to the same types of businesses.

• Entrepreneurial businesses, small businesses, small- to medium-
sized-businesses or enterprises, known as SMBs or SMEs, and family
businesses.

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 Characteristics of Entrepreneurial Firms

• Self-funded or closely funded.

• Oriented around positive cash flow.
• Structured to harness the skills of the founders.
• Designed in the image of the founders.
• Oriented toward the personal goals of the founders.
• May consist of zero employees or as few as one and not more than
100.

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 Facebook

Mark Zuckerberg is a great example of massive entrepreneurial business

success.
• His story is more the exception than the rule.

What lessons can we learn from Zuckerberg’s success that might apply
to businesses on a smaller scale?

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 Business Planning Process

Business planning is the process whereby an organization’s leaders

figure out the best roadmap for growth and document their plan for
success.
The business planning process includes diagnosing the company’s
internal strengths and weaknesses, improving its efficiency, working out
how it will compete against rival firms in the future, and setting milestones
for progress so they can be measured.

SWOT ANALYSIS:
A SWOT analysis is a planning tool which seeks to identify the
Strengths, Weaknesses, Opportunities and Threats involved in a
project or organization. It's a framework for matching an organization's
goals, programes and capacities to the environment in which it operates

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 Lean Start-Up

• Indicates that a start-up business will need to rapidly change.

• Focuses on building a business that generates something that the
customer actually desires.
• Seeks a model that is scalable.
• Seeks to shorten the product or service cycles by quickly testing and
experimentation of a product.
• Suggests that an entrepreneur must be flexible and adaptable to
change, which will be the nature of the business.

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 Chapter Review

• Chapter began by discussing the impact that new businesses have on

the economy.
• Brief history of new ventures was discussed, with the observation that
every business one can think of, regardless of size, was started by
one person or a small group of people.
• Remainder of the chapter set up three main principles: (1) No cookie-
cutter business plan programs should be used, (2) build your own
business plan along with the chapters in this book, and (3) this is a
process, so take it in bite-sized pieces.
• The concepts of a lean start-up were discussed.

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 End of Main Content

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Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.