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Welcome to Chapter 1: The Foundations of Entrepreneurship, of the ninth edition of Essentials of Entrepreneurship and Small Business Management by Norman M. Scarborough and Jeffrey R. Cornwall.
In this chapter, you will:
1. Define the role of the entrepreneur in business in the United States and around the world.
2. Describe the entrepreneurial profile.
In addition, you will:
3-A. Describe the benefits of entrepreneurship.
3-B. Describe the drawbacks of entrepreneurship.
4. Explain the forces that are driving the growth of entrepreneurship.
5. Explain the cultural diversity of entrepreneurship.
6. Describe the important role that small businesses play in our nation’s economy.
In addition, you will:
7. Put failure into the proper perspective.
8. Explain how an entrepreneur can avoid becoming another failure statistic.
9. Discover how the skills of entrepreneurship, including critical thinking and problem solving, written and oral communication, teamwork and collaboration, leadership, creativity, and ethics and social responsibility, apply to every career choice and every avenue of life.
Entrepreneurship is thriving in nearly every part of the world creating companies, jobs, wealth, and innovative solutions to some of the world’s most vexing problems.
Globally, the highest rates of entrepreneurial activity are among people between the ages of 25 and 34, but entrepreneurship is the desired career path for many people who are still in college.
This figure shows entrepreneurial activity across the globe.
Table 1.1 shows which nations are most friendly to entrepreneurs.
Today, small business is “cool” and entrepreneurs are the rock stars of the business world.
An entrepreneur is the one who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources to capitalize on them.
Entrepreneurs are essential change agents in the global economy, but unfortunately, in the United States, the percentage of private companies that are start-ups has been declining since the 1970s.
Entrepreneurs tend to exhibit certain traits including:
Desire for responsibility
Preference for moderate levels of risk
Willingness to break the rules
Confidence in their ability to succeed
Desire for immediate feedback
High level of energy
In addition, entrepreneurs:
Are skilled at organizing
Value achievement over money
Have a high degree of commitment
Have a tolerance for ambiguity
Have a willingness to work hard
No single set of characteristics describes successful entrepreneurs. Anyone can become an entrepreneur.
Entrepreneurship is not a genetic trait; it is a skill that most people can learn.
Some of the benfits of entrepreneurship are the opportunity to:
Create your own destiny.
Make a difference.
Reach your full potential.
Reap impressive profits.
Contribute to society and to be recognized for your efforts.
Do what you enjoy and to have fun at it.
Some of the drawbacks of entrepreneurship are:
Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business gets established
High levels of stress
To understand the growth in entrepreneurship, consider:
Entrepreneurs as heroes
Globally, the rate of entrepreneurial activity is highest among people between the ages of 25 and 44 .
In addition, consider:
Shift to a service economy
The Internet, cloud computing, and mobile marketing
Currently, about 54% of small business have Web sites.
International opportunities – micromultinationals
Virtually, anyone has the potential to become an entrepreneur.
For many women, the best way to break the “glass ceiling” is through entrepreneurship. The number of women-owned businesses is growing 1.5 times faster than the national average.
Like women, minorities also are choosing entrepreneurship more often than ever before. Hispanics, African Americans, and Asians are most likely to become entrepreneurs.
Minority-owned businesses have grown significantly over the last two decades, but still have a long way to go.
Immigrants or their children started more than 40% of Fortune 500 companies.
Many part-timers are “testing the entrepreneurial waters” to see whether their business ideas will work, whether there is sufficient demand for their products and services, and whether they enjoy being self-employed.
Twenty percent of home-based businesses generate between $100,000 and $500,000 in annual revenue.
A family-owned business is a business that includes two or more members of a family who have financial control of the company. Family-owned businesses account for 70 to 90% of global GDP.
Copreneurs are entrepreneurial couples who work together as co-owners of their businesses.
Some 20% of discharged corporate managers have become entrepreneurs, and many of those left behind in corporate America would like to join them.
Encore entrepreneurs people who drop out of the corporate world to become entrepreneurs.
Members of the Baby Boom Generation (born between 1946 and 1964) are retiring, but many of them are not idle; instead, they are launching businesses of their own.
One advantage that older entrepreneurs have is the wisdom that comes from experience.
A small business is a business that employs fewer than 100 people.
Gazelles are small companies that are growing at 20% or more per year with at least $100,000 in annual sales; they create 70% of net new jobs in the economy.
The majority of small businesses are concentrated in the service, construction, and retail industries.
Traditionally, small businesses have played a vital role in innovation, and they continue to do so today.
Successful entrepreneurs have the attitude that failures are simply stepping-stones along the path to success.
Failure isn’t necessarily bad! New companies that replace old ones with better ideas, market approaches, and products are a sign of a healthy entrepreneurial economy.
To avoid business failure:
Know your business in-depth
Build a viable business model – and test it
Use lean start-up principles
Know when to pivot
Develop a solid business plan
Understand financial statements
Manage financial resources
Understand financial statements
Build the right team
Learn to manage people effectively
Set your business apart from the competition
Maintain a positive attitude
Whether you choose to start your own business or work for someone else in either a for-profit or non-profit organization, the skills you will learn in this course with the help of this book will be extremely valuable to you.
As you can see, the journey down the road of entrepreneurship will be a fascinating and exciting one. Let’s get started!