Goals:

• identify characteristics of successful entrepreneurs
• recognize the importance of entrepreneurship in the economy
• describe opportunities and risks of entrepreneurship

Key Terms:

• entrepreneur
• entrepreneurship
• venture capital
• innovation
• improvement

Becoming an Entrepreneur  

• Characteristics of Entrepreneurs
• Entrepreneur – someone who takes a risk in starting a business to earn a profit.
• Entrepreneurship- the process of starting, organizing, managing, and assuming the responsibility for a business
• Key factors in starting your own business
• Real desire to be your own boss
• Developing a good initial plan
• Having special skills and abilities
• Coming up with innovative ideas
• Entrepreneurs in Action
• Joshua Moore a high school student and brother to 4 year old Sophie when he developed an idea for a baby stroller braking system. To fund his work started Personal Affections selling key chains, picture frames, mirrors and personalized stickers at his South Carolina high school. Named Entrepreneur of the Year  at age 15.
• Pankaj Arora  formed two companies: one to distribute software he created and another to sell his custom built computer systems and market his web designs while a high school student in Rochester, New York. He now works at General Electric.
• Rich Stachowski of Moraga, California was an avid scuba diver. While enjoying his hobby he recognized that he was unable to talk to others who were snorkeling with him. He put his imagination to work and created Water Talkies – walkie talkies that can be used underwater. He developed the manufacturing process and opened a business to make and sell his product before he was even a teenager. His products are now sold by 100 chain retailers around the world.
• Abby Fleck watched her father making bacon in the microwave. The bacon came out soaked in grease. She had an idea about creating a pan tha would cook the bacon while allowing the grease to drain out below. They were abel to convince the producers of Armour brand bacon to sell the tray with an advertisement and order form printed on each package or bacon. hey have sold more than $3 million worth of the trays.
• Not all ideas lead to successful businesses.
• What Does It Take?
• Confidence
• Capability
• All ages, races and ethnic groups
• Both genders
• An understanding of business operations and management
• See Figure 6-1 Page 128
• Entrepreneurship and the Economy – Nearly 10% of all Americans 18-64 are involved in some type of entrepreneurship. More than 670,000 new businesses are created annually. Nearly as many small businesses close as begin each year. 
• Employment
• Small businesses are responsible for most new employment
• More than 60% of new jobs were created by businesses with fewer than 500 employees.
• Financing
• Most of the money needed to start a new business comes from the entrepreneur and his or her friends and family
• 20% of Americans have invested in a business of someone they know
  • 29% give money to neighbors and friends
  • 8% invest in businesses started by work colleagues
  • Friends and families invest more than $100 billion in new businesses each year
• Venture Capital – money provided by large investors to finance new products and new businesses that they think have a good chance to be very profitable
  • Many venture capital companies formed in the late 1990s
  • Supplied more than $100 billion each year to new businesses
  • Many of the businesses were e-commerce  and high-tech startups
  • Many of these businesses failed
  • The amount of venture capital declined to less than $22 billion in 2005
  • More than 2,900 businesses receive venture capital each year
• Loans from Banks and Financial Institutions and credit by businesses that sell products and services to the new business also provide sources of financing for new businesses
• Productivity
• Businesses with just a single owner and no staff account for more than $600 billion in sales annually
• Small businesses are responsible for more than half of the U.S. GDP each year
• Small businesses account for 55% of all innovative products and services developed
• Opportunities and Risks
• New Business Opportunities
• The American private enterprise economy promotes innovation and new business development.
• Individuals are able to take the risk and start a new business.
• Consumers are always looking for new and better choices to meet their needs and wants.
• Many opportunities are open to prospective entrepreneurs.
• Innovation – an invention or creation that is brand new
• Improvement – a design change that increases the usefulness of a product, service, or process.
• Inventors often develop innovations
• Innovations become the basis for a new business
• The inventor may sell them to another company for development and sale
• Examples:         
  • Steven Jobs and Stephen Wozniak – Apple Computer
  • Arthur Fry and Spencer Silver – Post-it Notes
  • Miniaturized artificial heart
  • Virtual keyboard
  • Frederick Smith envisioned an economical worldwide system for quickly and efficiently shipping packages – Federal Express (FedEx)
  • After graduating from college, Paul Orfalea developed neighborhood walk-in photocopying centers – Kinko’s
  • When the IRS no longer prepared individual income tax returns for free, Henry and Richard Block created the H&R Block company where trained people provided efficient, low-cost tax preparation services to individual taxpayers
• Recognizing Risks
• Many successful entrepreneurs and their businesses are well-known. Their successes encourage others to think about starting a new business.
• Developing a new business is not easy.
• Many more new businesses fail than succeed.
• The time and energy required of new business owners is much higher than most people expect.
• Of all new businesses, the National Federation of Independent Business reports:          
  • About one third are profitable
  • One-third do not make a profit, but continue to operate
  • The remaining third lose money
  • Over a 10 year period, more than 50% of all new businesses are discontinued
• The primary reasons for businesses started by entrepreneurs close are:
  • Lack of adequate capital
  • Low sales
  • Higher than expected expenses
  • Competitive pressure
  • An owner unprepared to manage a growing business
  • Operations requiring  more time than the owner is willing to commit
• Entrepreneurs need to be aware of the many risks they may face and prepare for them. Many entrepreneurs have seen one or more of their business ideas fail before they are able to grow a successful company.

• Examples:
  • Steven Jobs and Stephen Wozniak – Apple Computer
  • Arthur Fry and Spencer Silver – Post-it Notes
  • Miniaturized artificial heart
  • Virtual keyboard
  • Frederick Smith envisioned an economical worldwide system for quickly and efficiently shipping packages – Federal Express (FedEx)
  • After graduating from college, Paul Orfalea developed neighborhood walk-in photocopying centers – Kinko’s
  • When the IRS no longer prepared individual income tax returns for free, Henry and Richard Block created the H&R Block company where trained people provided efficient, low-cost tax preparation services to individual taxpayers
• Recognizing Risks
• Many successful entrepreneurs and their businesses are well-known. Their successes encourage others to think about starting a new business.
• Developing a new business is not easy.
• Many more new businesses fail than succeed.
• The time and energy required of new business owners is much higher than most people expect.
• Of all new businesses, the National Federation of Independent Business reports: 
  • About one third are profitable
  • One-third do not make a profit, but continue to operate
  • The remaining third lose money
  • Over a 10 year period, more than 50% of all new businesses are discontinued
• The primary reasons for businesses started by entrepreneurs close are:
  • Lack of adequate capital
  • Low sales
  • Higher than expected expenses
  • Competitive pressure
  • An owner unprepared to manage a growing business
  • Operations requiring  more time than the owner is willing to commit
• Entrepreneurs need to be aware of the many risks they may face and prepare for them. Many entrepreneurs have seen one or more of their business ideas fail before they are able to grow a successful company.