The Foundations of Entrepreneurship

1. The Foundations of Entrepreneurship Edited by: Noémi Piricz Based on: Thomas W. Zimmerer – Norman M. Scarborough: Essentials of Entrepreneurship and Small Business Management, Pearson Education International 2005, Chapter 1

2. Who is an Entrepreneur? • Let’s collect his/her most important characteristics! • Entrepreneur is one who creates a new business, taking certain risks and uncertainty, • for the purpose of achieving profit and growth, • by identifying opportunities and assembling the necessary resources

3. Personal Benefits of Entrepreneurship • 1. Opportunity to create your own destiny – „being able to follow his/her own interests, desire and fun” • 2. Opportunity to reap more profits (e.g. Bill Gates, M. Dell) • 3. Opportunity to contribute to society – trust and respect

4. Drawbacks of Entrepreneurship • Uncertainty of income • Risk of losing your entire investment • Long hours and hard work • High level of stress • Complete responsibility • Discouragement and disillusionment

5. The Cultural Diversity of Entrepreneurship • Young entrepreneurs – comparing with other generations they are 3 times more likely to launch businesses • Women entrepreneurs- still certain discrimination in work market,- the rate of women entrepreneurs is growing dynamically

6. Part-time entrepreneurs- popular gateway to entrepreneurship,- lower risk • Family business: two or more members of the same family have the financial control of the company- deep roots in family values, long term plans, trust etc.- bitter disputes, business and private life mixed, problem of finding a good leader after retirement

7. The Power of „Small” Business • Small business: employs fewer than 100 people (US) • In the US small firms employ 51 % of the nation’s private sector workforce, even though they posses less than one-fourth of total business assets! • Small businesses produce 51% of the American private GDP.

8. Small companies create four times more innovation per research and development dollar than medium-sized firms

9. The 10 Deadly Mistakes of Entrepreneurship • 1. Management mistakes – capacity, leadership ability, knowledge etc. • 2. Lack of experience – professional, economic, organizational, dealing with human resources etc. • 3. Poor financial control – undercapitalization (consequence: the firm runs out of capital before it is able to generate positive cash flow)

10. 4. Weak marketing efforts – mistake: if the entrepreneurs dream it, customers will automatically come; instead of providing them with value, quality, convenience, service and fun! • 5. Failure to develop a strategic plan – „I don’t have time for it” • 6. Uncontrolled growth – expansion should be financed by the profit they generate or by capital contributions from the owners

11. 7. Poor location – they often choose a vacant building • 8. Improper inventory control – neglected in many cases, problems: too much or too few inventory, and even too much of the wrong type of inventory • 9. Incorrect pricing – costs, aims, methods • 10. Inability to make the „entrepreneurial transition” – after the start up, growth usually requires radical changes in several fields…

12. Key Definitions (of Chapter 1): • Entrepreneur • Part-time entrepreneurs • Family business • Small business • undercapitalization • cash flow