Starting Your Own Business

Chapter 6—Starting Your Own Business: The Entrepreneurship Alternative What is Entrepreneurship?  An entrepreneur is a person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business  Differ form many small-business owners in their strong desire to make their business grow  Differ from managers through their overriding responsibility to use the resources of the organization to accomplish their goals  Willing to take risks Categories of Entrepreneurs  Classic Entrepreneurs  Serial Entrepreneurs  Social Entrepreneurs Entrepreneurship as a Career  In a recent year, 560,000 new businesses created in the U.S. with the highest rate in construction and service industries  The past two decades have shown a heightened interest in entrepreneurial careers  People choose entrepreneurial careers  People choose entrepreneurship for many reasons: o Heightened publicity surrounding celebrity entrepreneurs o Dissatisfaction with traditional work o Their ideas fulfill customer needs Why People Become Entrepreneurs  Desire to be your own boss  Desire for job security  Desire to succeed financially  Desire for an improved quality of life Why Entrepreneurship?  Being your own boss o Self-management is the motivation that drives many entrepreneurs  Financial Success o Entrepreneurs are wealth creators  Job Security o Over the past ten years, large companies have eliminated more jobs than they have created  Quality of Life o Starting a business gives the founder some choice over when, where, and how to work The Environment for Entrepreneurship Expanded Opportunities for Entrepreneurs     Globalization Education Demographic and Economic Trends Information Technology Globalization  The rapid globalization of business has created many opportunities for entrepreneurs Education/IT/Demographic and Economic Trends  Education o 100 U.S. Colleges and Universities offer entrepreneurship majors o Universities are helping students launch businesses o Many programs teach entrepreneurship to young people  Information Technology o Technology has given entrepreneurs tools that help them compete o Entrepreneurs have used information technology to revolutionize industries  Demographic and Economic Trends o Aging of U.S. population o Emergence of Hispanics as nation’s largest ethnic group o Growth of two-income families Characteristics of Entrepreneurs  Vision  High Energy Level  Need to Achieve  Self-Confidence and Optimism  Tolerance for Failure  Creativity  Tolerance for Ambiguity  Internal Locus of Control Entrepreneurial Characteristics  Vision—entrepreneurs begin with an overall idea for how to make their business ideas successful  High Energy Level—a willingness to work  Need to Achieve—entrepreneurs work hard because they want to excel  Self-Confidence—fearlessness in the face of difficult odds  Tolerance for Failure—entrepreneurs are not easily discouraged  Creativity—entrepreneurs devise innovative ways to overcome difficult problems and situations  Tolerance for Ambiguity—entrepreneurs take in stride uncertainties  Internal Locus of Control—entrepreneurs believe they can control their own fates  QUIZ on figure 6.5 Starting a New Venture  Selecting a business idea o Find something you love to do and are good at doing o Can your idea satisfy a need in the market  Entrepreneurs must be sure that the idea they choose has interest in the marketplace  Business Plan Buying an Existing Business  Advantages: o Established Customers o Deal with familiar suppliers o Good/service known in marketplace o Necessary permits and licenses are already secured o Financing may be easier  Seller financing Creating a Franchise  Advantages: o Less risky than establishing entirely new firm o Firms in franchises showing growth include those targeting children and parents (I.E. photography, tutoring, security) Creating a Business Plan  58% of the most recent Inc. CEOs did not create a formal written plan  But business plans do help entrepreneurs prepare enough resources and stay focused on key objectives Finding Financing  Seed Capital  Debt Financing o Credit Cards o Family and Friends o Bank Loans (SBA backed)  Equity Financing o Venture Capitalists o Angel Investors Government Support for New Ventures  Business Incubators are a key way government supports new ventures o Clean Energy Incubator (CEI)  Enterprise Zone o Encourage entrepreneurship in specific geographic areas  Government Legislation o Immigration Act of 1990 Intrapreneurship    Promoting innovation within organizational structures An idea to promote creativity Companies promote in a variety of ways o Skunkworks o Access to resources