1. Chapter 6
Starting Your Own Business: The
Entrepreneurship Alternative
Define the term entrepreneur and
distinguish among entrepreneurs,
small-business owners, and
managers.
Identify four different types of
entrepreneurs.
Explain why people choose to
become entrepreneurs.
Discuss conditions that
encourage opportunities for
entrepreneurs.
Identify personality traits that
typically characterize successful
entrepreneurs.
Summarize the process of starting
a new venture.
Explain how organizations
promote intrapreneurship.
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2. WHAT IS AN ENTREPRENEUR?
Entrepreneur Person who seeks a profitable
opportunity and takes the necessary
risks to set up and operate a
business.
• Differ from many small-business
owners in their strong desire to make
their business grow.
• Differ from managers through their
overriding responsibility to sue the
resources of the organization to
accomplish their goals.
• Willing to take risks.

3. CATEGORIES OF ENTREPRENEURS

4. REASONS TO CHOOSE
ENTREPRENEURSHIP
AS A CAREER PATH
• More than 11 percent of Americans run
their own
business.
• In an average month, Americans start
approximately
550,000 new businesses.
• Motivated by dissatisfaction with
organizational work world.
• May believe their ideas are
opportunities to meet customer needs.

6. Being Your Own Boss
• Example: Liz Lange, founder and CEO of
Liz Lange Maternity.
• Had idea for upscale maternity wear.
• Borrowed $50,000 and opened an office
to sell her designs.
• Now has annual sales exceeding $10
million.
Financial Success
• Two-thirds of all millionaires are
self-employed.
• Path to riches is uncertain due to high
failure rate.

7. Job Security
• Over last decade, large companies have
downsized, eliminating more jobs than
they created.
• Key difference from traditional job is
that an entrepreneur’s job depends on
the decisions of customers and
investors and cooperation of one’s own
employees.
Quality of Life
Lifestyle Entrepreneur Person who starts a business
to reduce work hours and create a more
relaxed lifestyle.
• Yet, most entrepreneurs work long hours
and at the whims of their customers.
• Many define quality of life by their
ability to fulfill social objectives.

8. THE ENVIRONMENT FOR
ENTREPRENEURS

9. Globalization
• Market products abroad and hire
international talent.
• Growing internationally.

10. Education
• One hundred U.S. colleges and
universities offer entrepreneurship
majors, 73 offer an emphasis in
entrepreneurship, hundreds of others
offer courses.
• Universities are helping students
launch businesses.
• Some programs teach entrepreneurship
to young people.
• Students who graduate from
entrepreneurship programs are three
times as likely as others to be self-
employed and to help start new
businesses.

11. Information Technology
• Helps entrepreneurs work quickly and
efficiently, provide attentive
customer service, increase sales, and
project professional images.
• Entrepreneurs also produce and market
products that apply new information
technology.
• Internet also presents a challenge
because customers can check prices and
buy online from large or small
companies anywhere in the world.
Demographic and Economic Trends
• New opportunities:
• Aging of U.S. population.
• Emergence of Hispanics as nation’s

12. CHARACTERISTICS OF
ENTREPRENEURS

13. Vision
• An overall idea for how to make their
business a success.
High Energy Level
• Hard work of the entrepreneur
compensates for small staff and
limited resources available.
Need to achieve
• Enjoy the challenge of reaching
personal goals and
are dedicated to personal success.

14. Self-confidence and Optimism
• Believe in their own ability to succeed
and instill
optimism in others.
Tolerance for Failure
• Try and try again when others would
give up and
view setbacks and failures as learning
experiences.
Creativity
• Typically conceive new ideas for
products and services and devise
innovative ways to overcome difficult
problems and situations.

15. Tolerance for Ambiguity
• Take uncertainty in stride but not
reckless gamblers.
Internal Locus of Control
• Believe they control their own fates
and take personal responsibility for
success and failure.

18. STARTING A NEW VENTURE
Selecting a Business Idea
• Two most important considerations:
• Finding something you love to do and
are good at.
• Determining whether your idea can
satisfy a need in the marketplace.
• Guidelines for selecting an idea that
is a good entrepreneurial opportunity:
• List your interests and abilities.
• List the types of businesses that
match your interests and abilities.
• Identify future needs for products
that no one yet offers.
• Evaluate existing goods and services

19. Buying an Existing Business
• Advantages:
• Employees already in place serve
established customers and deal with
familiar suppliers.
• Good or service is known in the
marketplace.
• Necessary permits and licenses
secured.
• May be easier to get financing.
• Some buy successful businesses to build
on their success.
• Turnaround entrepreneurs buy struggling
businesses and improve them to
generate profits.
Buying a Franchise

20. Creating a Business Plan
• Forty-seven percent of the most recent
Inc. 500 CEOs did
not create a formal written plan.
• Still advisable because it helps an
entrepreneur prepare
enough resources and stay focused on
key objectives.
• AllBusiness.com
• Kaufman eVenturing
• MoreBusiness.com

21. Finding Financing
Seed capital Initial funding needed to launch
a new venture.
• Average amount of seed money is $1.5
million, but median is $50,000.
• Fifty-four percent of entrepreneurs
started with $50,000 or less.
Debt Financing
Debt financing Borrowed funds that
entrepreneurs must repay.
• When business fails, owner must often
declare bankruptcy.
• Can be difficult to get bank loan for
start-up.

22. Equity Financing
Equity financing Funds invested in new ventures
in exchange for part ownership.
• May benefit entrepreneur with a good
idea and skills but little or no
money.
Venture capitalists Business firms or groups of
individuals that invest in new and
growing firms in exchange for an
ownership share.
Angel investors Wealthy individuals who invest
directly in a new venture in exchange
for an equity stake.
• Angel networks match business angels
with entrepreneurs.
• Isabella Capital and Springboard
Enterprises focus on women.

23. INTRAPRENEURSHIP
Intrapreneurship Process of promoting innovation
within the structure of an existing
organization.
• Example: 3M
• Researchers spend 15 percent of their
time working on their own ideas
without approval from management.
• A skunkworks project is initiated by
an employee who conceives an idea and
then recruits resources from within to
turn it into a commercial product.
• Pacing programs are company-initiated
projects that focus on a few products
and technologies in which company sees
potential for rapid marketplace
winners.