Chapter 1
“INTRODUCTION
to
ENTREPRENEURSHIP”
GEENT01X_THE ENTREPRENEURIAL MIND
WEEK 1
I. ENTREPRENEUR:
What It Means to BE ONE
and How to Get Started
Entrepreneur KEY TAKEAWAYS:
• it comes from the French verb • A person who undertakes the risk of starting
“entreprende” meaning ’to undertake’. new business venture is called an entrepreneur.
•An individual who creates a new business, • An entrepreneur creates a firm to realize their
bearing most of the risks and enjoying idea, known as entrepreneurship, which
most of the rewards. aggregates capital and labor in order to
produce goods or services for profit.
• Entrepreneurship is highly risky but also can be
• They are commonly seen as an innovator, highly rewarding, as it serves to generate
a source of new ideas, goods, services, and economic wealth, growth, and innovation.
business/procedures. • Ensuring funding is key for entrepreneurs:
financing resources include SBA loans and
•They play a key role in any economy, using crowdfunding.
the skills and initiative necessary to • The ways entrepreneurs file and pay taxes will
anticipate needs and bring good new ideas depend on how the business is set up in terms
to market. of structure.
Introduction to Entrepreneurship
Entrepreneur KEY TAKEAWAYS:
What is Entrepreneurship? • A person who undertakes the risk of starting
new business venture is called an entrepreneur.
• It is the process of setting up a • An entrepreneur creates a firm to realize their
business idea, known as entrepreneurship, which
• That proves to be successful in aggregates capital and labor in order to
produce goods or services for profit.
taking on the risks of creating a • Entrepreneurship is highly risky but also can be
startup is rewarded with profits, highly rewarding, as it serves to generate
fame and continued growth economic wealth, growth, and innovation.
opportunities. • Ensuring funding is key for entrepreneurs:
• That proves to fails results in losses financing resources include SBA loans and
and less prevalence in the markets crowdfunding.
• The ways entrepreneurs file and pay taxes will
for those involved. depend on how the business is set up in terms
of structure.
Introduction to Entrepreneurship
Entrepreneur
How Entrepreneurship Works?
Business Plan
• Entrepreneurship is one of the - Created by the Entrepreneur
resources economists categorize as
integral to production, the other • Hire labor
three: • Acquire resources and financing
1. land/natural resources • Provide leadership and
2. labor management for the business.
3. capital
An entrepreneur combines the three
to manufacture goods or provide
services.
Introduction to Entrepreneurship
Entrepreneur
Entrepreneurs
Three thinkers were central to the inclusion of entrepreneurs: commonly face many
obstacles when
• Joseph Schumpeter – suggested that entrepreneurs-not building their
just companies-were responsible for the creation of new companies. The most
things in the search for profit. challenging are:
• Frank Knight – focuses on entrepreneurs as the bearer of
uncertainty and believed they were responsible for risk • Overcoming
premiums in financial markets. bureaucracy
• Israel Kirzner - thought of entrepreneurship as a process • Hiring talent
that led to the discovery of opportunities. • Obtaining financing
Introduction to Entrepreneurship
Entrepreneur
7 Characteristics of Entrepreneurs
a. Versatile
b. Flexible
c. Money Savvy
d. Resilient
e. Focused
f. Business Smart
g. Communicator
Introduction to Entrepreneurship
Entrepreneur
Types of Entrepreneur:
a. Builder
– seek to create scalable businesses within a short time frame.
- typically pass $5 million in revenue in first two to four years and continue
to build up until $100 million or beyond.
- they seek to build out a strong infrastructure by hiring the best talent and
seeking the best investors.
- they have temperamental personalities that are suited to the fast growth
they desire but can make personal and business relationships difficult.
Introduction to Entrepreneurship
Entrepreneur
Types of Entrepreneur:
b. Opportunist
– they are optimistic individuals with the ability to pick out financial
opportunities, get in at the right time, stay on board during the time of
growth, and exit when a business hits its peak.
- they are concerned with profits and the wealth they will build, so they are
attracted to ideas where they can create residual or renewal income.
- they are impulsive, as they are looking to find well-timed opportunities.
Introduction to Entrepreneurship
Entrepreneur
Types of Entrepreneur:
c. Innovator
– they are rare individuals that come up with a great idea or product that has no one
has thought of before.
- they worked on what they loved and found business opportunities through
that.
- rather than focusing on money, they care more about the impact that their
products and services have on society.
- these individuals are not the best at running a business as they are idea- generating
individuals, so often they leave the day-to-day operations to those more capable in that
respect.
Introduction to Entrepreneurship
Entrepreneur
Types of Entrepreneur:
d. Specialist
– these individuals are analytical and risk-averse.
- they have a strong skill set in a specific area obtained through
education or apprenticeship.
- they will build out their business through networking and
referrals, resulting in slower growth than a builder entrepreneur.
Introduction to Entrepreneurship
Entrepreneur
4 Types of Entrepreneurship:
1. Small-Business
– is the idea of opening a business without turning it into a large
conglomerate or opening many chains.
- these people usually invest their own money and succeed if
their business turn a profit, which they live off.
- they don’t have outside investors and will only take a loan if it
helps continue the business.
Introduction to Entrepreneurship
Entrepreneur
4 Types of Entrepreneurship:
2. Scalable Startup
– these are companies that start with a unique idea that can build
to a large scale; think Silicon Valley.
- the hopes are to innovate with a unique product or service and
continue growing the company, continuously scaling up as time moves
on.
- these types of companies often requires investors and large
amounts of capital to grow their idea and reach multiple markets.
Introduction to Entrepreneurship
Entrepreneur
4 Types of Entrepreneurship:
3. Large-Company
– it is a new business division created within an existing company.
- the existing company may be well placed to branch out into other
sectors or it may be well placed to become involved in new
technology.
- CEOs of these companies either foresee a new market for the
company or individuals within the company generate ideas that they
bring to senior management to start the process.
Introduction to Entrepreneurship
Entrepreneur
4 Types of Entrepreneurship:
4. Social Entrepreneurship
– its goal is to create a benefit to society and
humankind.
- they focus on helping communities or the environment
through their products and services.
- they are not driven by profits but rather by helping the
world around them.
Introduction to Entrepreneurship
II. How to Become an
Entrepreneur
Entrepreneur
Unlike traditional professions, where there is often a
defined path to follow, the road to entrepreneurship
is mystifying to most. What works for one
entrepreneur might not work for the next and vice
versa.
How to Become an Entrepreneur
Entrepreneur
7 General Steps most successful entrepreneurs followed:
1. Ensure Financial Stability
2. Build a Diverse Skill Set
3. Consume Content Across Multiple Channels
4. Identify a Problem to Solve
5. Solve that Problem
6. Network Like Crazy
7. Lead by Example
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
1. Ensure Financial Stability
This first step is not a strict requirement but is definitely recommended. While
entrepreneurs have built successful businesses while being less than financially
flush starting out with an adequate cash supply and stable on-going funding is a
great foundation.
This increases an entrepreneur’s personal financial runway and gives them more
time to work on building a successful business, rather than worrying about having
to keep raising money or paying back short-term loans.
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
2. Build a Diverse Skill Set
Once a person has strong finances, it is important to build a diverse set of skills and
then apply those skills in the real world. The beauty of step two is it can be done
concurrently with step one.
Building a skill set can be achieved through learning and trying new tasks in real-
world settings. Once a diverse skill set is built, it gives an entrepreneur a toolkit
that they can rely on when they are faced with inevitability of tough situations.
Though going to college isn’t necessary to build a successful business but it can
teach individuals a lot about the world in many other ways.
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
3. Consume Content Across Multiple Channels
As important as building a diverse skill set is, the need to consume a
diverse array of content is equally so. This content can be in the form of
podcasts, books, articles or lectures. The important thing is that the
content, no matter the channel, should be varied in what it covers. An
aspiring entrepreneur should always familiarize themselves with the
world around them so they can look at industries with a fresh
perspective, giving them the ability to build a business around a
specific sector.
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
4. Identify a Problem to Solve
Through the consumption of content across multiple channels, an aspiring
entrepreneur is able to identify various problems to solve. One business
adage dictates that a company’s product or service needs to solve a specific
pain point; either for another business or for a consumer group. Through the
identification of a problem, an aspiring entrepreneur is able to build a
business around solving that problem.
It is important to combine steps 3 and 4, so it is possible to identify a problem
to solve by looking at various industries as an outsider. This often provides an
aspiring entrepreneur with the ability to see a problem others might not.
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
5. Solve That Problem
Successful startups solve a specific pain point for other
companies or for the public.
-“Adding value within the problem”
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
6. Network Like Crazy
Most entrepreneurs can’t do it alone. The business world is cutthroat
one and getting any help you can will always help and reduce the time
it takes to achieve a successful business.
Networking – it is critical for new entrepreneur.
- attending conferences, emailing and calling people, will
help in the business
How to Become an Entrepreneur
7 General Steps most successful entrepreneurs followed
7. Lead by Example
Every entrepreneur needs to be a leader within their company:
• Simply doing the day-to-day requirements will not lead to success
• The need to work hard, motivate and inspire their employees to
reach their best potential.
• Studying and reading books to see how to be a great leader
How to Become an Entrepreneur
III. Entrepreneurship
Financing
2 Types of Business Players
1. Bootstrappers
• Financing a business using their own money, providing ‘sweat equity’ to
reduce labor costs, minimizing inventory, and factoring receivables.
2. Lone Players
• They are the ones struggling to get small business off the ground on a
‘shoestring’, others take on partners armed with greater access to
capital and other resources.
• They require financing thru:
a. venture capitalists d. crowdfunding
b. angel investors e. traditional sources: bank loans
c. hedge funds
Entrepreneurship Financing
Resources for Entrepreneurs
a. Small Business Administration (SBA)
• SBA can help to get the business off the ground with affordable loans.
b. Crowdfunding
• Has also become a popular way for entrepreneurs to raise capital, particularly through ’kickstarter’.
• Where an entrepreneur creates a page for their product and a monetary goal to reach while promising certain
givebacks to those who donate, such as products or experiences.
c. Angel Investors & Venture Capitalists
• Where entrepreneurs are willing to give up a piece of equity in their business.
• These types of investors also provides guidance, mentorship, and connections in addition to just capital.
d. Bootstrapping
• Refers to building a company solely from own savings.
• This is a difficult process as all the financial risk is placed on the entrepreneur and there is little room for error.
• The advantage on this is that an entrepreneur can run the business with their own vision and no outside
interference or investors demanding quick profits.
Entrepreneurship Financing
Small Business vs Entrepreneurship
Small Business
• Is a company, usually, a ‘sole proprietorship’ or partnership, that is
not a medium-sized or large-sized business, operates locally, and
does not have access to a vast amount of resources or capital.
Entrepreneurship
• Is when an individual that has an idea acts on that idea, usually to
disrupt the current market with a new product or service.
• Usually starts as a small business but the long-term vision is much
greater, to seek high profits and capture market share with an
innovative new idea.
Entrepreneurship Financing
How Entrepreneurs Make Money
• Entrepreneurs seek to generate revenues that are greater than
costs.
• Increasing revenues is the goal and that can be achieved through
marketing, word-of-mouth, and networking.
• Keeping costs low is also critical as it results in higher ‘profit
margin’, which can be achieved through efficient operations and
eventually ‘economies of scale’.
Entrepreneurship Financing
How Entrepreneurs Make Money
Taxes for Entrepreneurs
• The taxes will depend on how the business is set up in terms of
structure
Sole Proprietorship
• A business set up this way is an extension of the individual, and are
taxed at individual tax rate.
Partnership
• Same functions as a sole proprietorship with the only difference
being that income and expenses are split amongst the partners.
Entrepreneurship Financing
How Entrepreneurs Make Money
Taxes for Entrepreneurs
• The taxes will depend on how the business is set up in terms of
structure
C-Corporation
• It is a separate legal entity and has separate taxes filed with the IRS
from the entrepreneur, as it is taxed at the corporate tax rate.
Limited Liability Company (LLC) or S-Corporation
• These two options are taxed in the same manner as C-Corporation
but usually at lower amounts.
Entrepreneurship Financing
ENTREPRENEURSHIP
in
ECONOMICS
Entrepreneurs acts as a Coordinating Agent
• An entrepreneur acts as a coordinating agent in a capitalist
economy. This coordination takes the form of resources being
diverted toward new potential profit opportunities.
• The entrepreneur moves various resources, both tangible and
intangible, promoting capital formation.
• The entrepreneur who can actually help clear up uncertainty, as
they make judgements or assume risks, driving efficient discovery
and consistently reveal knowledge.
Entrepreneurship in ECONOMICS
How Entrepreneurship Helps Economies
Nurturing entrepreneurship can have a positive impact on economy
and a society in several ways:
• Entrepreneurs can create new businesses
• Entrepreneurs add to the gross national income.
• Entrepreneurs create social change.
• Entrepreneurs invest in community projects and
help charities and other non-profit organizations,
supporting causes beyond their own
Entrepreneurship in ECONOMICS
Entrepreneurial Ecosystems
• Entrepreneurship, if not properly regulated, can lead to unfair
market practices and corruption, and too many entrepreneurs can
create income inequalities in society.
• It is a critical driver of innovation and economic growth, fostering
this is an important strategies of many local and national
government.
• Governments commonly assist in the development of
entrepreneurial ecosystems, including the entrepreneurs,
government sponsored assistance programs, venture capitalists,
non-government organizations, such as entrepreneurs’
associations, business incubators, and education programs.
Entrepreneurship in ECONOMICS
Questions
for
ENTREPRENEURS
A few Questions to Ask Yourselves
• Do I have the personality, temperament, and mindset of taking on
the world on my own terms?
• Do I have the required ambiance and resources to devote all my
time to my venture?
• Do I have an exit plan ready with a clearly defined timeline in case
my venture does not work?
• Do I have a concrete plan for the next ”X” number of months or will
I face challenges midway due to family, financial, or other
commitments? Do I have a mitigation plan for those challenges?
• Do I have the required network to seek help and advice as needed?
Questions for Entrepreneurs
A few Questions to Ask Yourselves
• Have I realistically assessed the potential of my offering and how it
will figure in the existing market?
• If my offering is going to replace an existing product in the market,
how will my competitors react?
• To keep my offering secure, will it make sense to get a patent? Do I
have the capacity to wait that long?
• Have I identified my target customer base for the initial phase? Do I
have scalability plans ready for larger markets?
• Have I identified sales and distribution channels?
Questions for Entrepreneurs
Questions that Delve into External Factors
• Does my entrepreneurial venture meet local regulations and laws?
If not feasible locally, can I and should I relocate to another region?
• How long does it take to get the necessary license or permissions
from concerned authorities? Can I survive that long?
• Do I have a plan for getting the necessary resources and skilled
employees, and have I made cost considerations for the same?
• What are the tentative timelines for bringing the first prototype to
market or for services to be operational?
• Who are my primary customers?
Questions for Entrepreneurs
Questions that Delve into External Factors
• Who are the funding sources I may need to approach to make this
big? Is my venture good enough to convince potential
stakeholders?
• What technical infrastructure do I need?
• Once the business is established, will I have sufficient funds to get
resources and take it to the next level? Will other big firms copy my
model and kill my operation?
Questions for Entrepreneurs
Questions & Answers
Questions & Answers
I. Define the key terms below.
a. Entrepreneur
b. Entrepreneurship
II. Enumerate the following:
a. the 4 Types of Entrepreneurs
b. the 7 Characteristics of Entrepreneurs
Written Tasks
Marketing knowledge check:
a. Explain a brief summary of ‘New Market &
Product Development’.
Thank you!!!
