CHAPTER 1: THE ENTREPRENEURIAL LIFE
CHAPTER OUTLINE
Spotlight: Table Occasions, Inc.
(http://www. tableoccasions.com)
1) Small Size, Great Significance
LO1: Explain the importance of small business and entrepreneurship in our society.
a) U.S. Small Business Administration reports the following:
i) As of 2012, there are 27.8 million businesses in the United States with fewer than
500 employees. Small companies account for 99.7% of all business; 90% have fewer
than 20 employees.
ii) The companies with fewer than 500 employees hired almost 50% of all employees
and accounted for 42% of all the salaries paid to employees.
iii) Small enterprises hire 43% of all high-tech employees (scientists, engineers,
computer programmers, and others).
iv) Many small companies have been going global, representing 97% of all exporters.
v) Fifty percent of business owners had college degrees, a increase of 32% from 2000 to
2010.
vi) About one-fourth of the 23.5 million military veterans in the United States are
interested in starting or buying their own business.
b) Many people talk about owning a business but never make it happen.
2) Small Business and Entrepreneurial Opportunity: Is There a Difference?
LO2: Distinguish between the terms small business and entrepreneurial opportunity.
a) What Is a Small Business?
i) High Potential Ventures or Gazelles- the few businesses that have phenomenal
prospects for growth.
ii) Attractive Small Firms- these businesses offer substantial financial rewards for their
owners.
iii) Microbusiness or Lifestyle Business- the least profitable types of small businesses
and provide modest returns to the owners. These types of businesses permit an
owner to follow a desired lifestyle.
(1) For the purposes of this textbook a small business meets the following criteria, at
least in spirit:
(a) Compared to the largest firms in the industry, the business is small; in most
instances, the business has fewer than 100 employees.
(b) Except for its marketing function, operations are geographically localized
(c) Financing for the business is provided by no more than a few individuals
(d) The business may begin with a single individual, but it has the potential to
become more than a “one-person-show” and may eventually grow to be a
mid-sized company or even a large firm.
, b) What Is an Entrepreneurial Opportunity?
i) Entrepreneurial Opportunity- an economically attractive and timely opportunity that
creates value both for prospective customers and for the firm’s owners.
ii) Entrepreneur- a person who relentlessly pursues an opportunity, in either a new or an
existing enterprise, to create value while assuming both the risk and the reward for
her or his efforts.
iii) Bootstrapping- entrepreneurs who work to do more with less.
c) Entrepreneurial Opportunities: Three Success Stories
i) Kelly’s Delight (Hewitt, Tx)
(1) Patrick Linstrom founder
(2) All natural liquid cane sugar
(3) Changed his strategy to reach more customers
(4) Persistent business owner who stayed prepared for the opportunity when it
arrived.
ii) Blank Label (Boston, MA)
(1) Fan Bi, owner
(2) Came up with the idea for affordable custom shirts during his study abroad
program at Babson College.
(3) Despite obstacles, Fan Bi partnered with Danny Wong and brought the business
online where overhead expenses were lower and potential market was larger.
(4) Since going online in 2010 they’ve gone from generating $345,000 in their first
year to over $1.1milling in 2011.
iii) Hughes Group (Tacoma, WA)
(1) Patrick L. Hughes, owner
(2) Logistics company serving both government and commercial markets
(3) Opened in 2004 and in 2011 had 213 employees in 11 locations across the
nation..
(4) Revenue in 2011 were just over $8 million.
3) Entrepreneurial Qualities: No Big Ego Required
LO3: Explain the basic characteristics of entrepreneurs and describe several different
kinds of entrepreneurship.
Spinelli and Adams research on entrepreneurial characteristics on “desirable and acquirable
attitudes and behaviors” uncovered six descriptions:
• Commitment and determination
• Leadership
• Opportunity obsession
• Tolerance of risk, ambiguity, and uncertainty
• Creativity, self-reliance, and adaptability
• Motivation to excel
Attitudes and behaviors to avoid:
• Overestimate what you can do
, • Lack an understanding of the market
• Hire mediocre people
• Fail to be a team player
• Be a domineering manager
• Fail to share ownership in the business in an equitable way
a) Founders and Second-Stage Entrepreneurs
i) Founders are “pure” entrepreneurs who bring new or improved products or services
to market
b) Franchisees
i) Franchisees differ due to having less independence
ii) Franchises- Differ from other business owners in the degree of their independence.
Because of the guidance and constraints provided by contractual arrangements with
franchising organizations, franchisees function as limited entrepreneurs. (Chapter 5
present more information on franchisees.)
c) Entrepreneurial Teams
i) Two or more people who work together as entrepreneurs on one endeavor
ii) Able to use talents, skills and resources of team
d) Social Entrepreneurs
i) Entrepreneurial activity with an embedded social purpose. In other words, one who
comes up with innovative solutions to society’s most pressing needs, problems, and
opportunities.
e) Women Entrepreneurs
i) An increasing number of women are starting and growing profitable businesses.
f) Be a Small Business Owner Who Thinks and Acts Like an Entrepreneur
i) What type of opportunity do you want to pursue? Think and act entrepreneurially.
4) Your Motivations for Owning a Business
LO4: Describe the importance of understanding your motivations and perceptions related
to owning a small business.
i) Before you choose to enter the small business game, you need to think carefully
about whom you want to be and how owning a business will help make you that
person.
ii) Understanding clearly why you want to own a small business and what motivates you
are vital to eventually achieving fulfillment through your business.
(1) Starting a business may provide an escape from a bad situation.
(a) Reluctant entrepreneur- a person who becomes an entrepreneur as a result of
severe hardship.
(2) Corporate Refugees – a person who becomes an entrepreneur to escape an
undesirable situation
a) Types of Entrepreneurial Motivations
i) Personal fulfillment
(1) Making a difference in others’ lives, particularly customers, employees, and in
the community
(2) Having a sense of belonging and working with others in a common cause.
ii) Personal satisfaction-
, (1) Working with an enterprise that is intellectually challenging.
(2) Having a passion for the company’s products or services
(3) Receiving recognition and respect.
iii) Independence
(1) Being my own boss where I can make things happen.
(2) Controlling my own future.
iv) Financial rewards
(1) Creating personal financial wealth based on sound decisions and hard work.
When businesses are profitable, everyone benefits.
b) Understanding Your Paradigm
i) Knowing your motivation is important but it’s not enough. You also need to
understand if your perceptions of what it takes to be successful in business are
accurate.
ii) According to Stephen Covey having a positive attitude or working harder is not
enough. Instead, we have to change how we fundamentally see a situation, or what he
calls a paradigm shift.
(1) Michael Gerber describes three paradigms (personalities)
(a) The Technician Personality- a steady worker, experiences at doing what he
or she knows best.
(b) The Manager Personality- pragmatic, assuming responsibility for the
planning, order, and predictability of the business.
(c) The Entrepreneur Personality- This personality does not look at the work that
a business does, but instead the entrepreneur examines how the business does
what it is intended to do.
5) The Entrepreneur’s Competitive Edge
LO5: Describe five potential competitive advantages of small entrepreneurial companies
compared to large firms.
a) Integrity and Responsibility- In order to maintain a strong competitive advantage, it is
essential that you add to good customer service and excellent product quality a solid
reputation for honesty and dependability.
b) Customer Focus- Business opportunities exist for those who can produce products and
services desired by customers. Having a small number of customers and a close
relationship with them makes customer service a powerful tool for entrepreneurial
businesses.
c) Quality Performance- Quality is mostly independent of firm size, but it there is an
advantage, it most often goes to the smaller business.
d) Innovation- Innovation, both in products or services and in competitive strategies, is
within the reach of the small business in ways that were not thought possible a few years
ago. Thomas Friedman (The World Is Flat) indicates that “anything can now be done
from anywhere in the world”. Large businesses tend to emphasize the improvement of
existing products sidetracking creative ideas that don’t meet that criteria. Bhide indicates
that small businesses are more capable of taking inventions or innovations developed
elsewhere and putting them into use. Smaller firms have less bureaucracy to deal with
than small businesses.
CHAPTER OUTLINE
Spotlight: Table Occasions, Inc.
(http://www. tableoccasions.com)
1) Small Size, Great Significance
LO1: Explain the importance of small business and entrepreneurship in our society.
a) U.S. Small Business Administration reports the following:
i) As of 2012, there are 27.8 million businesses in the United States with fewer than
500 employees. Small companies account for 99.7% of all business; 90% have fewer
than 20 employees.
ii) The companies with fewer than 500 employees hired almost 50% of all employees
and accounted for 42% of all the salaries paid to employees.
iii) Small enterprises hire 43% of all high-tech employees (scientists, engineers,
computer programmers, and others).
iv) Many small companies have been going global, representing 97% of all exporters.
v) Fifty percent of business owners had college degrees, a increase of 32% from 2000 to
2010.
vi) About one-fourth of the 23.5 million military veterans in the United States are
interested in starting or buying their own business.
b) Many people talk about owning a business but never make it happen.
2) Small Business and Entrepreneurial Opportunity: Is There a Difference?
LO2: Distinguish between the terms small business and entrepreneurial opportunity.
a) What Is a Small Business?
i) High Potential Ventures or Gazelles- the few businesses that have phenomenal
prospects for growth.
ii) Attractive Small Firms- these businesses offer substantial financial rewards for their
owners.
iii) Microbusiness or Lifestyle Business- the least profitable types of small businesses
and provide modest returns to the owners. These types of businesses permit an
owner to follow a desired lifestyle.
(1) For the purposes of this textbook a small business meets the following criteria, at
least in spirit:
(a) Compared to the largest firms in the industry, the business is small; in most
instances, the business has fewer than 100 employees.
(b) Except for its marketing function, operations are geographically localized
(c) Financing for the business is provided by no more than a few individuals
(d) The business may begin with a single individual, but it has the potential to
become more than a “one-person-show” and may eventually grow to be a
mid-sized company or even a large firm.
, b) What Is an Entrepreneurial Opportunity?
i) Entrepreneurial Opportunity- an economically attractive and timely opportunity that
creates value both for prospective customers and for the firm’s owners.
ii) Entrepreneur- a person who relentlessly pursues an opportunity, in either a new or an
existing enterprise, to create value while assuming both the risk and the reward for
her or his efforts.
iii) Bootstrapping- entrepreneurs who work to do more with less.
c) Entrepreneurial Opportunities: Three Success Stories
i) Kelly’s Delight (Hewitt, Tx)
(1) Patrick Linstrom founder
(2) All natural liquid cane sugar
(3) Changed his strategy to reach more customers
(4) Persistent business owner who stayed prepared for the opportunity when it
arrived.
ii) Blank Label (Boston, MA)
(1) Fan Bi, owner
(2) Came up with the idea for affordable custom shirts during his study abroad
program at Babson College.
(3) Despite obstacles, Fan Bi partnered with Danny Wong and brought the business
online where overhead expenses were lower and potential market was larger.
(4) Since going online in 2010 they’ve gone from generating $345,000 in their first
year to over $1.1milling in 2011.
iii) Hughes Group (Tacoma, WA)
(1) Patrick L. Hughes, owner
(2) Logistics company serving both government and commercial markets
(3) Opened in 2004 and in 2011 had 213 employees in 11 locations across the
nation..
(4) Revenue in 2011 were just over $8 million.
3) Entrepreneurial Qualities: No Big Ego Required
LO3: Explain the basic characteristics of entrepreneurs and describe several different
kinds of entrepreneurship.
Spinelli and Adams research on entrepreneurial characteristics on “desirable and acquirable
attitudes and behaviors” uncovered six descriptions:
• Commitment and determination
• Leadership
• Opportunity obsession
• Tolerance of risk, ambiguity, and uncertainty
• Creativity, self-reliance, and adaptability
• Motivation to excel
Attitudes and behaviors to avoid:
• Overestimate what you can do
, • Lack an understanding of the market
• Hire mediocre people
• Fail to be a team player
• Be a domineering manager
• Fail to share ownership in the business in an equitable way
a) Founders and Second-Stage Entrepreneurs
i) Founders are “pure” entrepreneurs who bring new or improved products or services
to market
b) Franchisees
i) Franchisees differ due to having less independence
ii) Franchises- Differ from other business owners in the degree of their independence.
Because of the guidance and constraints provided by contractual arrangements with
franchising organizations, franchisees function as limited entrepreneurs. (Chapter 5
present more information on franchisees.)
c) Entrepreneurial Teams
i) Two or more people who work together as entrepreneurs on one endeavor
ii) Able to use talents, skills and resources of team
d) Social Entrepreneurs
i) Entrepreneurial activity with an embedded social purpose. In other words, one who
comes up with innovative solutions to society’s most pressing needs, problems, and
opportunities.
e) Women Entrepreneurs
i) An increasing number of women are starting and growing profitable businesses.
f) Be a Small Business Owner Who Thinks and Acts Like an Entrepreneur
i) What type of opportunity do you want to pursue? Think and act entrepreneurially.
4) Your Motivations for Owning a Business
LO4: Describe the importance of understanding your motivations and perceptions related
to owning a small business.
i) Before you choose to enter the small business game, you need to think carefully
about whom you want to be and how owning a business will help make you that
person.
ii) Understanding clearly why you want to own a small business and what motivates you
are vital to eventually achieving fulfillment through your business.
(1) Starting a business may provide an escape from a bad situation.
(a) Reluctant entrepreneur- a person who becomes an entrepreneur as a result of
severe hardship.
(2) Corporate Refugees – a person who becomes an entrepreneur to escape an
undesirable situation
a) Types of Entrepreneurial Motivations
i) Personal fulfillment
(1) Making a difference in others’ lives, particularly customers, employees, and in
the community
(2) Having a sense of belonging and working with others in a common cause.
ii) Personal satisfaction-
, (1) Working with an enterprise that is intellectually challenging.
(2) Having a passion for the company’s products or services
(3) Receiving recognition and respect.
iii) Independence
(1) Being my own boss where I can make things happen.
(2) Controlling my own future.
iv) Financial rewards
(1) Creating personal financial wealth based on sound decisions and hard work.
When businesses are profitable, everyone benefits.
b) Understanding Your Paradigm
i) Knowing your motivation is important but it’s not enough. You also need to
understand if your perceptions of what it takes to be successful in business are
accurate.
ii) According to Stephen Covey having a positive attitude or working harder is not
enough. Instead, we have to change how we fundamentally see a situation, or what he
calls a paradigm shift.
(1) Michael Gerber describes three paradigms (personalities)
(a) The Technician Personality- a steady worker, experiences at doing what he
or she knows best.
(b) The Manager Personality- pragmatic, assuming responsibility for the
planning, order, and predictability of the business.
(c) The Entrepreneur Personality- This personality does not look at the work that
a business does, but instead the entrepreneur examines how the business does
what it is intended to do.
5) The Entrepreneur’s Competitive Edge
LO5: Describe five potential competitive advantages of small entrepreneurial companies
compared to large firms.
a) Integrity and Responsibility- In order to maintain a strong competitive advantage, it is
essential that you add to good customer service and excellent product quality a solid
reputation for honesty and dependability.
b) Customer Focus- Business opportunities exist for those who can produce products and
services desired by customers. Having a small number of customers and a close
relationship with them makes customer service a powerful tool for entrepreneurial
businesses.
c) Quality Performance- Quality is mostly independent of firm size, but it there is an
advantage, it most often goes to the smaller business.
d) Innovation- Innovation, both in products or services and in competitive strategies, is
within the reach of the small business in ways that were not thought possible a few years
ago. Thomas Friedman (The World Is Flat) indicates that “anything can now be done
from anywhere in the world”. Large businesses tend to emphasize the improvement of
existing products sidetracking creative ideas that don’t meet that criteria. Bhide indicates
that small businesses are more capable of taking inventions or innovations developed
elsewhere and putting them into use. Smaller firms have less bureaucracy to deal with
than small businesses.
