Exploring management 3rd ch18

• What is entrepreneurship and who are entrepreneurs?• What should we know about small businesses and how to start one?... Women and Minorities• Women and minority entrepreneurs are gro

Chapter 18

Entrepreneurship

and Small Business

• What is entrepreneurship and who are entrepreneurs?

• What should we know about small

businesses and how to start one?

• Social entrepreneurs seek novel solutions to

pressing social problems

Entrepreneurs Are Risk Takers

Entrepreneurs Are Risk Takers

• First mover advantage

– Exploiting a new market opportunity before competitors

Anita Roddick, founder of The Body Shop, PLC

Earl Graves, founder of Earl G Graves Ltd, a

multimedia company including Black

Enterprise.com

David Thomas, founder of Wendy's

Caterina Fake and Stuart Butterfield founders of

Flickr

Entrepreneurs Are Risk Takers

• Successful entrepreneurs

Entrepreneur Characteristics

• Similar backgrounds

– Family environment

– Career and work history

– Windows of career opportunity

Entrepreneur Characteristics

• Intrapreneurs

– Employees of a larger firm that display

entrepreneurial behavior such as developing a new product or process

Internal locus

of control High energy level High need for achievement Tolerance for ambiguity confidence

Self-Passion and action orientation Flexibility Self-reliance

Entrepreneur Characteristics

• Who are the entrepreneurs?

Women and Minorities

• Women and minority entrepreneurs are growing in numbers

• Necessity-based entrepreneurship

– People start a business because no other employment

opportunities exist

Small Businesses

• Small businesses are mainstays of the economy

• Small businesses must master three

life-cycle stages

• Family owned businesses can face unique challenges

• Most small businesses fail within five years

• Assistance is available to help small businesses get started

• A small business should start with a sound business plan

• There are different forms of small business ownership

• There are different ways of financing a small business

Importance of Small Business

• Small business

– Fewer than 500 employees

• Small business statistics

– Employ some 52 percent of private workers

– Provide 51 percent of private-sector output

– Receive 35 percent of federal government contract dollars

– Provide as many as 7 out of every 10 new jobs in the economy

Small Business Life Cycle

• Family owned businesses

– Largest percentage of businesses worldwide

– Feuds result when family members disagree over how the business is run

• Most small businesses fail within five years

– As many as 60% to 80% fail

Small Business Assistance

• Business incubator

– Provides services to help new businesses get started

• Small Business Development Centers

– Supported by Small Business Administration– Offer help to small business owners to set up and manage their businesses

Business Plans

• Business plan

– Describes goals, operating plans and

financing for a new business

– Banks want to see a well-developed business plan before loaning money

Forms of Ownership

• Sole Proprietorship

– An individual or married couple pursuing business for a profit

General Partnership

• General partner manages the business

• Limited partners share profit but losses are

limited to the amount of their investment

Limited Liability Partnerships

• Professional partnerships (accountants, doctors, lawyers) limits the liability

Forms of Ownership

• Corporation

– A legal entity that exists separately from its owners

• Limited Liability Company (LLC)

– A combination of sole proprietorship, partnership, and corporation.

• Protects owners against personal loss other than what

is invested in the company

• Treated as a proprietorship or partnership for tax

purposes

• Angel Investor

– A wealthy individual willing to invest in return for equity in a new venture

• Initial Public Offering (IPO)

– An initial selling of shares of stock to the

public at large