Entrepreneurship basics

Entrepreneurship and Small
Business

2
• A business is an organization that provides products
or services.
• An entrepreneur (on-tra-prah-NEWR) is someone
who creates and runs a business.
• Entrepreneurship isn’t for everybody. Many chose to
be an employee, a person who works for a business
owned by someone else.
Entrepre-What?
1.1: Entrepre-What?

How Employees and Entrepreneurs Differ
• When an entrepreneur starts a new business, it
involves risk.
• An entrepreneur makes an investment of money,
time, and energy in the hope of getting greater
rewards.
1.1: Entrepre-What?
Employee Entrepreneur
Works for someone else Works for themselves
Low risk High risk
Possibility of losing job Possibility of losing business

Big Business versus
Small Business
• Small firms employ about half of the private work
force.
• A small business has fewer than 100 employees.
• An entrepreneur’s goals will affect how large a
business becomes.

5
The biggest reward that most people cite for
becoming an entrepreneur is having ownership of
their choices and decisions.
To Be or Not To Be an Entrepreneur:
The Risks and Rewards
Rewards of Being an Entrepreneur
1.2: To Be or Not To Be an Entrepreneur

• Making Your Own Rules.
• Doing Work You Enjoy.
• Creating Greater Wealth.
• Helping Your Community.
To Be or Not To Be an Entrepreneur

Risks of Being an Entrepreneur
• Potential Business Failure.
• Unexpected Obstacles.
• Potential Business Failure.
• Unexpected Obstacles.
1.2:To Be or Not To Be an Entrepreneur

8
Entrepreneurship the process of being an
entrepreneur. More than just learning how to run a
business, learning entrepreneurship can impact
your business, the economy, your community, and
ultimately the world in which we live.
Entrepreneurship Through the Years
1.3: Entrepreneurship Through the Years

The 1800s
• By age 14, Thomas Edison had his own newspaper business, the
Weekly Herald.
• P.T. Barnum was 60 years old when his circus staged its first show. The
circus generated $400,000 in sales in the first year and later became
known as the “Greatest Show on Earth.”
1800s
Early
1900s
Mid-To-
Late 1900s
2000s

Early 1900s
• In 1903, William Harley and Arthur Davidson wanted to improve on
the two-wheeled bicycle, and the Harley-Davidson motorcycle was
born.
• Maggie Lena Walker became the first woman to charter a bank in the
United States. Today that bank has assets of over $116 million.
1800s
Early
1900s
Mid-To-
Late 1900s
2000s

Mid-to-Late 1900s
• When he was 17, Ingvar Kamprad used his investment
earnings to found IKEA. Today, IKEA has more than
300 stores in over 35 countries.
• In 1976, Steve Wozniak and Steve Jobs started a
company in order to bring computer technology to
everyone; thus Apple computer was born.
1800s
Early
1900s
Mid-To-
Late 1900s
2000s

Today’s Entrepreneurs
• Follow social trends to attract customers.
• Use the Internet and other technologies as their primary business
resource.
• Start numerous businesses. Serial entrepreneurs start businesses and
then do it again, applying what they have learned.
• Identify everyday problems and create solutions to those problems.
1800s
Early
1900s
Mid-To-
Late 1900s
2000s

Entrepreneurship
• Entrepreneurship has been described as the "capacity and willingness
to develop, organize and manage a business venture along with any
of its risks in order to make a profit".

Entrepreneurship?
• Academic Definition (Stevenson and Jarillo)
• Entrepreneurship is the process by which individuals pursue
opportunities without regard to resources they currently
control.
• Alternative View
• Entrepreneurship is the art of turning an idea into a business.
• Explanation of What Entrepreneurs Do
• Entrepreneurs assemble and then integrate all the resources
needed – the money, the people, the business model, the
strategy – to transform an invention or an idea into a viable
business.

Corporate Entrepreneurship (1 of 2)
• Corporate Entrepreneurship
‒ Is the conceptualization of entrepreneurship at the firm
level.
‒ All firms fall along a conceptual continuum that ranges
from highly conservative to highly entrepreneurial.
‒ The position of a firm on this continuum is referred to as
its entrepreneurial intensity.

Corporate Entrepreneurship (2 of 2)
Entrepreneurial Firms
• Proactive
• Innovative
• Risk taking
Conservative Firms
• Take a more “wait and see”
posture
• Less innovative
• Risk averse

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
1-17
What is an Entrepreneur?

• Desire and willingness to take initiative
• Preference for moderate risk
• Confidence in their ability to succeed
• Self-reliance
• Perseverance
• Desire for immediate feedback
1-18
Characteristics of an Entrepreneur

• High level of energy
• Competitiveness
• Future orientation
• Serial entrepreneurs
• Skilled at organizing
• Value of achievement over money
• High degree of commitment
• Tolerance for ambiguity
• Flexibility
• Tenacity
1-19
Characteristics of Entrepreneurs

• Conclusion?
• Diversity seems to be a central characteristic of
entrepreneurs
• Anyone – regardless of age, race, gender, color,
national origin, or any other characteristic – can
become an entrepreneur (although not everyone
should)
• Entrepreneurship is a skill that is learned
1-20
What is an Entrepreneur?

The Entrepreneurial Process
The Entrepreneurial Process Consists of Four Steps
Step 1: Deciding to become an entrepreneur.
Step 2: Developing successful business ideas.
Step 3: Moving from an idea to an entrepreneurial firm.
Step 4: Managing and growing the entrepreneurial firm.

THE THEORIES OF ENTREPRENEURSHIP

ECONOMIC THEORY:-
Many economists give their views about
entrepreneurship but Richard Cantillon was the first
person who recognise the role of entrepreneurship. He
said that farmer is an entrepreneur who promise to
pay landlord for his land without any assurance of
profits he can drive from his enterprise i.e. land. He
said that there is always a risk factor of fluctuation of
prices in market for an entrepreneur.
With this Schumpeter added the concept of
innovation. He said that an entrepreneur can be
helpful in economic development by introducing new
innovative ideas. Lack of innovation can reduce the
enthusiasm, physical and mental energy of
entrepreneur.

SOCIOLOGICAL THEORY:-
Sociologists suggests that entrepreneurship can be social movement.
Economists of this theory believes that cultural values deeply affect the
entrepreneurship and economic development. If strong family support
is with entrepreneur than this will be fruitful but if family does not care
about businessman that can cause adverse affect. According to Hoselitz
the persons who introduces innovative ideas reject the traditional ways
of doing the things.
Economists believes that special attention given to society can improve
the relations between the enterprise and its surroundings.

3.PSYCHOLOGICAL THEORY:-
Economists of this theory said that entrepreneurship is most
likely to emerge when a society has sufficient psychological
characteristics.
Joseph Schumpeter states that entrepreneur is motivated &
driven by 3 things:-
(a) ‘The dream and the will to found a private kingdom’ that
means the desire for power & independence.
(b) ‘The will to conquer’ that means the will to succeed.
(c) ‘The joy of creating’ that means satisfaction of getting things
done.
He asserts that matter is beheviour not the actor.

4.ANTHROPOLOGICAL THEORY:-
FREDRIK BARTEH develop this theory. According to berth
entrepreneurship has two connecting spheres in the society between
which there exits a difference in values. These spheres are as follows:-
 Something which is cheap and
 Something which is expensive.
Barth states that entrepreneurial beheviour means to connect 2
different spheres in the society, between there is a huge discrepancy in
the value.

Characteristics of Successful Entrepreneurs (1 of 3)
Figure 1.1 Four Primary Characteristics of Successful Entrepreneurs

• Passion for the Business
• The number one characteristic shared by successful entrepreneurs is a passion for
the business.
• This passion typically stems from the entrepreneur’s belief that the business will
positively influence people’s lives.
• Product/Customer Focus
• A second defining characteristic of successful entrepreneurs is a product/customer
focus.
• An entrepreneur’s keen focus on products and customers typically stems from the
fact that most entrepreneurs are, at heart, craftspeople.

• Tenacity Despite Failure
• Because entrepreneurs are typically trying something new, the failure rate is
naturally high.
• A defining characteristic for successful entrepreneurs is their ability to
persevere through setbacks and failures.
• Execution Intelligence
• The ability to fashion a solid business idea into a viable business is a key
characteristic of successful entrepreneurs.

Common Myths About Entrepreneurs (1 of 7)
• Myth 1: Entrepreneurs Are Born, Not Made
• This myth is based on the mistaken belief that some people
are genetically predisposed to be entrepreneurs.
• The consensus of many studies is that no one is “born” to
be an entrepreneur; everyone has the potential to become
one.
• Whether someone does or doesn’t become an
entrepreneur is a function of their environment, life
experiences, and personal choices.

Although no one is “born” to be an entrepreneur, there are common traits and characteristics
of successful entrepreneurs
• A moderate risk taker
• Persuasive
• Promoter
• Resource assembler/leverager
• Creative
• Self-starter
• Tenacious
• Tolerant of ambiguity
• Visionary
• Optimistic disposition
• A networker
• Achievement motivated
• Alert to opportunities
• Self-confident
• Decisive
• Energetic
• A strong work ethic
• Lengthy attention span

• Myth 2: Entrepreneurs Are Gamblers
• Most entrepreneurs are moderate risk takers.
• The idea that entrepreneurs are gamblers originates from
two sources:
• Entrepreneurs typically have jobs that are less
structured, and so they face a more uncertain set of
possibilities than people in traditional jobs.
• Many entrepreneurs have a strong need to achieve
and set challenging goals, a behavior that is often
equated with risk taking.

• Myth 3: Entrepreneurs Are Motivated Primarily by Money
• While it is naïve to think that entrepreneurs don’t seek
financial rewards, money is rarely the reason
entrepreneurs start new firms.
• In fact, some entrepreneurs warn that the pursuit of
money can be distracting.

• Myth 4: Entrepreneurs Should Be Young and Energetic
• Entrepreneurial activity is fairly evenly spread out over
age ranges.
• While it is important to be energetic, investors often cite
the strength of the entrepreneur as their most important
criterion in making investment decisions.
• What makes an entrepreneur “strong” in the eyes of
an investor is experience, maturity, a solid reputation,
and a track record of success.
• These criteria favor older rather than younger
entrepreneurs.

Table 1.4 Age Distribution of Business Owners
Age Percentage of Business Owners
20-34 24.7
35-44 22.9
45-54 26.6
55-64 25.8
Source: R. W. Fairlie, A. Morelix, E.J. Reedy, and J. Russell, 2015 The Kauffman Index of
Startup Activity: National Trends.

• Myth 5: Entrepreneurs Love the Spotlight
• While some entrepreneurs are flamboyant, the vast
majority of them do not attract public attention.
• As evidence of this, consider the following question: “How
many entrepreneurs could you name?”
• Most of us could come up with Jeff Bezos of
Amazon.com, Mark Zuckerberg of Facebook, Larry Page
and Sergey Brin of Google or maybe Elon Musk of Tesla
and SpaceX.
• But few could name the founders of Netflix, YouTube,
or DIRECTV, even though we frequently use those firms’
services.

Figure 1.2 Types of Start-Up Firms

Changing Demographics
of Entrepreneurs (1 of 5)
• Women Entrepreneurs
• While men are more likely to start businesses than women, the number of
women-owned businesses is increasing.
• According to a study commissioned by American Express OPEN, as of 2016,
there were 11.3 million women-owned businesses in the United States.
• Over the past nine years, the number of women-owned businesses has grown
at a rate five times faster than the national average.

• Minority Entrepreneurs
• There has been a substantial increase in minority
entrepreneurs.
• An important factor facilitating the growth of minority
entrepreneurs is the number of organizations that promote
and provide assistance.

• Senior Entrepreneurs
• The numbers of seniors starting businesses is substantial
and growing.
• The percentage of individuals age 62 and older starting a
business increased from 4.2 percent in 1988 to 5.4
percent in 2015.
• Many people in the 60 and older age range have
substantial business experience, financial resources, and
excellent vigor and health.
• This makes them excellent candidates to start
businesses in many industries.

• Millennial Entrepreneurs
• A desire to pursue an entrepreneurial career is high
among millennials.
• Despite this desire, in 2013 only 3.6 percent of all
businesses were owned by someone under the age of 30.
• A 2016 study by EY and EIG found that the biggest
obstacles preventing millennials from starting businesses
are lack of finances, lack of desire, fear of failure, and lack
of knowledge of the business start-up process.

• Millennial Entrepreneurs (continued)
• There are many factors at work to encourage millennials
to consider entrepreneurship as a career.
• A number of organizations have been established to
encourage college students to consider becoming
entrepreneurs.

Economic Impact of Entrepreneurial Firms
• Innovation
• Is the process of creating something new, which is central to
the entrepreneurial process.
• Small innovative firms are 16 times more productive than
larger innovative firms in terms of patents per employee.
• Job Creation
• Small businesses create a substantial number of net new
jobs in the United States.
• Firms with 500 or fewer employees created two million of
the roughly three million private sector jobs in 2014.

Entrepreneurial Firms’ Impact on Society and Larger
Firms
• Impact on Society
• The innovations of entrepreneurial firms have a dramatic impact on society.
• Think of all the new products and services that make our lives easier, enhance
our productivity at work, improve our health, and entertain us.
• Impact on Larger Firms
• Many entrepreneurial firms have built their entire business models around
producing products and services that help larger firms become more efficient
and effective.

Functions of an Entrepreneur
• Entrepreneurs are broadly classified into/our categories as mentioned
below:
• 1. Entrepreneurial Functions
• 2. Managerial Functions
• 3. Promotional Functions
• 4. Commercial Functions

Types and Functions of an
Entrepreneur

I. On the basis of Stages of Economic
Development
1. Innovative ( new products, methods of production, new technology,
new markets, new source of supply of raw materials , etc.)
2. Imitative or Adoptive: imitates technology innovated by others
3. Fabian: lack of will to adopt new methods,
4. Drone: follows traditional methods of production, suffer losses,
laggards

II. On the basis of Attitude and knowledge
1. Empirical: hardly introduces anything revolutionary,
rule of thumb
2. Rational: well- informed about general economic
conditions
3. Cognitive: has complete knowledge about market
conditions.

III. On the Basis of Type of Business
Occupations
1. Business Entrepreneur: tap new opportunities
2. Trading Entrepreneurs: buying and selling activities,
not concerned with manufacturing work
3. Industrial Entrepreneurs: conveys resources into
economic utilities.
4. Corporate Entrepreneurs: has vision and imaginative
skill to organize and manage corporate undertaking
5. Agricultural Entrepreneurs: undertake agricultural
activities

IV. On the Basis of Use of Technology
1. Technical: possess technical expertise and know-how, develops
improved quality and designs of goods.
2. Non-Technical: simply deals with developing alternative marketing
and distribution strategies to promote business
3. Professional: He conceives new ideas to develop projects.

V. On the Basis of Ownership
1. Private: Motivated by profit
2. Public: Govenment acts an entrepreneur
3. Joint: partnership
4. Co-operative: association of persons who have voluntarily joined
together to achieve common ends.

VI. On the Basis of Scale of Entrepreneurs
1. Small Scale Entrepreneur: posses small capital resources, small
capital investment
2. Large Scale of Entrepreneur: large capital resources, huge capital
investment

VII. Other Types
1. Pure Entrepreneur: motivated by psychological and economic
needs
2. Induced Entrepreneur: due to policy measures of the
Government
3. Motivated Entrepreneur: desire for self-fulfillment
4. Growth Entrepreneur: choose and industry of high economic
growth
5. Super-Growth Entrepreneur: individual who has shown
enormous growth performance in his venture
6. First Generation: starts an industrial unit by means of an
innovative skill.
7. Modern Entrepreneur: cares for current marketing needs
8. Intrapreneurship:

9. Copreneurs: couples working together
10. Serial Entrepreneur: founds and operates multiple companies
during a career
11. Super Serial Entrepreneur: Net Buliders
12. Young Entrepreneurs: generation X
13. Women Entrepreneurs:
14. Part-time Entrepreneurs:
15. Institutional Entrepreneurs: to handle firms complex task
16. Rural Entrepreneurs: make use of rural based industrial
opportunity in either khadi or village industry
17. Entrepreneurs by Inheritance: Tata’s ,Birla’s Ambani’s ….
18.Forced Entrepreneurs: unemployed persons
19. Minority Entrepreneurs.

Functions
1.Planning
2. Risk Management
3. Organization building
4. Managing
5. Decision Making
6. Innovation (Factor, Product and Market)
7. Leading
8. Managing Growth

Entrepreneurs vs. Managers
Points Entrepreneur Manager
1. Aim To run business To Manage task
2. Risk High Low
3.Level of Responsibility Lot Little
4. Reward Profit Salary Plus incentives
5.Scope Big Small
6. Education/ Technical
abilities
Not necessary required

1-1
Entrepreneurship and
Effective Small Business
Management

• 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
1-58
How to Spot
Entrepreneurial Opportunities

• Monitor Trends and Exploit Them Early On
• Independa
• Travel – and Be Inspired
• Eileen Fisher
• Take A Different Approach To An Existing
Market
• I Do Now I Don’t
• Put a New Twist on an Old Idea
• Vitaband
1-59
How to Spot

• Look for Creative Ways to Use Existing
Resources
• Dig This
• Realize That Others Have the Same Problem
That You Do
• MileWise
• Take Time to Play
• Flash Pals
• Notice What Is Missing
• Viking Range Corporation
1-60
How to Spot

• The opportunity to:
• Gain control over your own destiny
• Make a difference
• Social entrepreneurs
• Reach your full potential
• Reap impressive profits
• Contribute to society and be recognized for your
efforts
• Do what you enjoy doing
1-61
The Benefits of
Owning a Small Business

• Uncertainty of income
• Risk of losing your entire invested capital
• Long hours and hard work
• Lower quality of life until the business gets
established
• High levels of stress
• Complete responsibility
• Discouragement
1-62
The Potential Drawbacks of
Entrepreneurship

• Entrepreneurs as heroes
• Entrepreneurial education
• Demographic and economic factors
• Shift to a service economy
• Technological advancements
• Outsourcing
• Independent lifestyles
• E-Commerce, the Internet, and mobile
computing
• International opportunities
1-63
Why the Boom: The Fuel Feeding the
Entrepreneurial Fire

• Young entrepreneurs
1-64
The Cultural Diversity of
Entrepreneurship

1-65
Entrepreneurship
New Entrepreneurs by Age Group

• Women entrepreneurs
1-66
Entrepreneurship

1-67
Entrepreneurship
Entrepreneurial Activity Index by Gender

• Minority enterprises
1-68
Entrepreneurship

1-69
Entrepreneurship
Percentage of New Entrepreneurs by Minority Group

• Immigrant entrepreneurs
• Part-time entrepreneurs
• Home-based business owners
1-70
Entrepreneurship

1-71
Entrepreneurship
Rules for a Successful Home-Based Business
Rule 1. Do your homework.
Rule 2. Find out what your zoning restrictions are.
Rule 3. Create distinct zones for your family and business dealings.
Rule 4. Focus your home-based business idea.
Rule 5. Discuss your business rules with your family.
Rule 6. Select an appropriate business name.
Rule 7. Buy the right equipment.
Rule 8. Dress appropriately.
Rule 9. Learn to deal with distractions.
Rule 10. Realize that your phone can be your best friend—or your
worst enemy.

1-72
Entrepreneurship
Rules for a Successful Home-Based Business
Rule 11. Be firm with friends and neighbors.
Rule 12. Maximize your productivity.
Rule 13. Create no-work time zones.
Rule 14. Take advantage of tax breaks.
Rule 15. Make sure you have adequate insurance coverage.
Rule 16. Understand the special circumstances under which you can
hire outside employees.
Rule 17. Be prepared if your business requires clients to come to your
home.
Rule 18. Get a post office box.
Rule 19. Network.
Rule 20. Be proud of your home-based business.

• Immigrant entrepreneurs
• Part-time entrepreneurs
• Home-based business owners
• Family business owners
• Family-owned business
1-73
Entrepreneurship

• Copreneurs
• Corporate castoffs
• Corporate “dropouts”
• Retired baby boomers
1-74
Entrepreneurship

1-75
Entrepreneurship
Entrepreneurial Activity by Age Group
1996-2012

• Small business: one that employs fewer than
100 people
• Small businesses:
• Comprise 99.7% of the 27.2 million businesses in the U.S.
• Employ 49.2% of the nation’s private sector workforce
• Pay 43% of the nation’s total private payroll
• Create more jobs than big businesses
1-76
The Contributions
of Small Business

1-77
The Contributions
of Small Businesses
Small Businesses by Industry

• Small businesses:
• Are leaders in offering training and advancement
opportunities to workers
• Provide 67% of workers with their first jobs
• Produce 46% of the nation’s private GDP
• Account for 47% of business sales
• Play a key role in innovation:
• Produce 16.5 times more patents per
employee than large companies
1-78
The Contributions
of Small Businesses

• About 52% of new companies fail within 5 years
• Entrepreneurs are not paralyzed by the prospect
of failure
• Failure is a natural part of the creative process
• Successful entrepreneurs learn to fail
intelligently
1-79
Putting Failure into Perspective

1-80
Putting Failure into Perspective
Small Business Survival Rate

• Know your business in depth
• Prepare a business plan
• Manage financial resources
• Understand financial statements
• Learn to manage people effectively
• Set your business apart from the competition
• Maintain a positive attitude
1-81
How to Avoid Pitfalls

82
• A business is an organization that provides products
or services.
• An entrepreneur (on-tra-prah-NEWR) is someone
who creates and runs a business.
• Entrepreneurship isn’t for everybody. Many chose to
be an employee, a person who works for a business
owned by someone else.
Entrepre-What?
1.1: Entrepre-What?

Big Business versus
Small Business
• Small firms employ about
half of the U.S. private work
force.
• A small business has fewer
than 100 employees.
• An entrepreneur’s goals will
affect how large a business
becomes.
1.1: Entrepre-What?

Life Cycle of the Business
1.1: Entrepre-What?

86
The biggest reward that most people cite for
becoming an entrepreneur is having ownership of
their choices and decisions.
To Be or Not To Be an
Entrepreneur: The Risks and
Rewards
1.2: To Be or Not To Be an Entrepreneur

89
Entrepreneurship the process of being an
entrepreneur. More than just learning how to run a
business, learning entrepreneurship can impact
your business, the economy, your community, and
ultimately the world in which we live.
Entrepreneurship Through
the Years

Mid-to-Late 1900s
• When he was 17, Ingvar Kamprad used his investment
earnings to found IKEA. Today, IKEA has more than
300 stores in over 35 countries.
• In 1976, Steve Wozniak and Steve Jobs started a
company in order to bring computer technology to
everyone; thus Apple computer was born.
• As a young man, Russell Simmons turned his passion
for hip-hop into a record label that today is worth
millions.
1800s
Early
1900s
Mid-To-
Late 1900s
2000s

Entrepreneurship basics

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