What is Entrepreneurship?

1. What is Entrepreneurship? Chapter 1

2. Entrepreneurship and the Economy • Entrepreneur • An individual who undertakes the creation, organization, and ownership of a business • He/she accepts the risks and responsibilities to gain profits and personal satisfaction • Venture • A business undertaking involving risk • Requires a variety of skills and knowledge

3. Entrepreneurship and the Economy • Entrepreneurship Today: • Small businesses make up: • 99.7% of U.S. employer firms • 64% of net new private-sector jobs • 49.2% of private-sector employment • 42.9% of private-sector payroll • 46% of private-sector output • 43%of high-tech employment • 98% of firms exporting goods • 33% of exporting value

4. Entrepreneurship and the Economy • Entrepreneurship today: • In 2010 there were: • 27.9 million small businesses • 18,500 firms with 500 employees or more • Over ¾ of small businesses were nonemployers (businesses without employees)

5. Entrepreneurship and the Economy • Free Enterprise System • The right to make economic choices • People can choose what products to buy • People can choose to own private property • People can choose to start a business and compete with other businesses • Also called Capitalism or Market Economy

6. Entrepreneurship and the Economy • Profit Motive • Money left over after all expenses are paid • Primary incentive of free enterprise • One way of measuring success • Risk of failure • Positive • Encourages production of quality products that truly meet consumer needs

7. Entrepreneurship and the Economy • Competition • Forces companies to be more efficient • Keeps prices down and quality up • Based on price and non-price factors: • Lower prices • Service • Quality • Reputation

8. Entrepreneurship and the Economy • Making Choices • Making products • Distributing products • Consuming products • Goods and Services • Satisfy wants in society

9. Entrepreneurship and the Economy • Factors of Production: • Land—all of the natural resources upon and beneath the earth’s surface • Examples: trees, water, minerals, oil, natural gas • Labor—human resources, both full-time and part-time • Capital—equipment, factories, tools, other goods needed to produce a product or service—also includes money • Entrepreneurship—ideas and decisions of the business owner • Creates value in the economy

10. Entrepreneurship and the Economy • Scarcity • When wants are greater than resources • Land, labor, and capital are all scarce • Opportunity Cost--Giving up one thing to get another • Examples:

11. Entrepreneurship and the Economy • Laws of Supply and Demand • Demand • Amount of quantity of goods or services that consumers are willing to buy • Law of Demand • As price goes up, demand goes down • Elastic—a small change in price causes a significant change in quantity demanded • Example: fresh fruits and vegetables out of season • Inelastic—change in price has little or no effect on the quantity demanded • Examples: no acceptable substitutes are available, price change is small relative to buyer income, product is a necessity—milk, eggs

12. Entrepreneurship and the Economy • Laws of Supply and Demand • Diminishing Marginal Utility • Price alone does not determine demand • Just because a product’s price is low, that does not mean that people will keep buying it indefinitely • Factors such as income, taste, amount already owned play a role in what we buy

13. Entrepreneurship and the Economy • Supply • Amount of a good or service that producers are willing to provide • Producers are willing to supply products in greater amounts when prices are high • Surplus • More on hand than people are willing to buy • Shortage • Purchasing all of a product or service at the high initial price and still ask for more • Equilibrium • Point at which consumers buy all of a product that is supplies, leaving neither a surplus or a shortage

14. Entrepreneurship and the Economy • What Entrepreneurs Contribute • Mechanism by which our economy turns demand into supply • Principal source of venture capital • Provide jobs • Change society

15. Entrepreneurs and the Economy • Small Business • Owners who start what are referred to as “mom and pop” businesses • Create jobs and lifestyles that are satisfying • Examples: Hair salon, lawyer, accountant, local toy store • Entrepreneurial Ventures • Goals are to innovate, grow the venture, and create value when they leave • Examples: Domino’s Pizza, Microsoft, Apple, Amazon, Google, Facebook

16. The Entrepreneurial Process • Start-Up • Entrepreneur • Driving force that recognizes opportunity • Pulls together the resources • Creates a company to satisfy consumer needs and want

17. The Entrepreneurial Process • Start-Up • Environment • Variables that affect a new business that are not controlled by the entrepreneur • Nature of the environment—uncertain, fast changing, stable, highly competitive, etc. • Availability of resources: land, labor, capital • Value realization—favorable taxes, good markets, supportive government policies • Incentives—enterprise zones • Tax benefits • grants

18. The Entrepreneurial Process • Start-Up • Opportunity • An idea that has commercial value • A new product only has value if there are customers ready and willing to buy it • A market • People willing to buy your product or service

19. The Entrepreneurial Process • Start-Up • Resources • Land • Labor • Capital • Management expertise • Legal and financial advice • A facility • Equipment • Customers

20. The Entrepreneurial Process • Start-Up • New venture organization • How the business is put together to create a company • Creates value for entrepreneur, employees, customers, and economy

21. The Entrepreneurial Process • How Businesses Succeed • Effective planning • Creating a team of experts • Financial • management • Adjusting to customer needs and wants • Watching trends in the market • Finding a niche