CHAPTER 1

The Foundations of Entrepreneurship

Suraj Shrestha

MGTS402
ENTREPRENEURSHIP DEVELOPMENT
Chapter Objective
Describe the entrepreneurial profile.
Describe the benefits of entrepreneurship.
Describe the drawbacks of entrepreneurship.
Explain the forces that are driving the growth of
entrepreneurship.
Explain the cultural diversity of entrepreneurship.
Describe the important role that small businesses play in our nation’s economy.
Put failure into the proper perspective.
Explain how an entrepreneur can avoid becoming another failure statistic.

©Suraj Shrestha
The World of Entrepreneur- The Entrepreneur
Entreprende, which means – ‘to undertake’

Webster dictionary – one who organizes, manages and assumes the risks of a business
or an enterprise

Richard Cantillion – an entrepreneur is someone who takes the risk of running an

enterprise by paying a certain price for securing and using resources to make a product
and reselling the product for an uncertain price.

Joseph Schumpeter - an innovator playing the role of a dynamic businessman adding

material growth to economic development

©Suraj Shrestha
The World of Entrepreneur- The Entrepreneur
Timmons - Entrepreneurship is the process of creating or seizing an opportunity and
pursuing it regardless of the resources currently controlled

An entrepreneur is an individual who creates a new business, bearing most of the risks
and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator,
a source of new ideas, goods, services, and business/or procedures.

"Entrepreneurship is a pursuit of a solution, a relentless focus on solving a problem or

doing something drastically different from the way it is done today. [It's] aiming to do
something better than it's ever been done before and constantly chasing
improvement."

©Suraj Shrestha
The World of Entrepreneur- The Entrepreneur
Entrepreneurs are the dreamers and the visionaries. Without them, the world
stagnates and progress stops. Society needs entrepreneurs the same way the body
needs air.

An entrepreneur must be able to accept failure. Everyone thinks they can accept failure
until they come face-to-face with failing at a major thing they have put their everything
into. To be a successful entrepreneur, you have to be someone who is able to risk
failure at the deepest personal levels.

A person who sets up a business or businesses, taking on financial risks in the hope of
profit.

Entrepreneurs see potential in the scarcity that are prevalent in the market
©Suraj Shrestha
The World of Entrepreneur- The Entrepreneurship Journey
The road to entrepreneurship is often a treacherous one filled with unexpected
detours, roadblocks and dead ends.

There are lots of sleepless nights, plans that don't work out, funding that doesn't come
through and customers that never materialize.

It can be so challenging to launch a business that it may make you wonder why anyone
willingly sets out on such a path.

Yet despite all these hardships, every year, thousands of entrepreneurs embark on this
journey determined to bring their vision to fruition and fill a need that they see in the
society. (They open brick-and-mortar businesses, launch tech startups, or bring a new
product or service into the marketplace.)
©Suraj Shrestha
The World of Entrepreneur- The Entrepreneurship Journey
So what motivates entrepreneurs to venture forth when so many others would run in
the other direction?

Though each person's motivation is nuanced and unique, most entrepreneurs are
spurred on by one or more of the following motivators:

©Suraj Shrestha
The Benefit of Entrepreneurship
1. Opportunity to Create Your Own Destiny:
Owning a business provides entrepreneurs the independence and the opportunity to
achieve what is important to them.

Entrepreneurs want to “call the shots” in their lives, and they use their businesses to
make that desire a reality.

Owning your own business means you have some say in deciding what your destiny is
going to be.

You can follow and realize your dreams, to seek opportunities that match who you are,
what you want to be, and how and where you want to live. To me entrepreneurship is
your road to freedom.
©Suraj Shrestha
The Benefit of Entrepreneurship
2. Opportunity to Reap Impressive Profits:
Although money is not the primary force driving most entrepreneurs, the profits their
businesses can earn are an important motivating factor in their decisions to launch
companies.

Entrepreneurs are not constrained by the boundaries that corporate hierarchies

impose on their employees; they are free to create value by making the best use of
their experience, skills, abilities, and ideas and, as a result, reap the financial benefits
of their creative efforts.

©Suraj Shrestha
The Benefit of Entrepreneurship
3. Opportunity to Make a Difference:
Entrepreneurs are starting businesses because they see an opportunity to make a
difference in a cause that is important to them.
Known as social entrepreneurs, these business builders seek innovative solutions to
some of society’s most vexing problems.
The skills are utilized not only to create profitable business ventures but also to achieve
social and environmental goals for society as a whole.
Their businesses often have a triple bottom line that encompasses economic, social,
and environmental objectives.

Social Entrepreneurs
entrepreneurs who use their skills not only to create profitable businesses but also
to achieve economic, social, and environmental goals for the common good. ©Suraj Shrestha
The Benefit of Entrepreneurship
4. Opportunity to Contribute to Society and Be Recognized for Your Efforts:
Playing a vital role in their local business systems and knowing that their work has a
significant impact on the nation’s economy is yet another reward for small business
managers.

These owners enjoy the trust and recognition they receive from the customers and the
communities they have served faithfully over the years.

Business deals based on trust and mutual respect are the hallmark of many established
small companies.

©Suraj Shrestha
The Benefit of Entrepreneurship
5. Opportunity to Do What You Enjoy and Have Fun at It:
A common sentiment among small business owners is that their work really isn’t work.

Most successful entrepreneurs choose to enter their particular business fields because
they have an interest in them and enjoy those lines of work. They have made their
avocations (hobbies) their vocations (work) and are glad they did!

You actually love your work. For an entrepreneur, work is not a means to an end. The
process is as rewarding to him/her as is the end product. Because an entrepreneur is
consumed by his/her passion, s/he gets to do what he loves.

©Suraj Shrestha
The Benefit of Entrepreneurship
Entrepreneurs want to be their own bosses, set their own goals, control their own
progress and run their businesses how they see fit.

They recognize that their business's success or failure rests with them, yet they don't
view this responsibility as a burden but, instead, as a marker of their freedom.

Flexibility – Not everyone fits into the rigidity of a traditional corporate culture.
Entrepreneurs are often looking to free themselves from these constraints, find a
better work-life balance, or work at times and in ways that may be unconventional.
Financial success –Some may want to establish a financial safety net for themselves
and their families, while others are looking to make a huge profit by creating the next
big thing.
Legacy – Entrepreneurs are often guided by a desire to create something that outlasts
them. ©Suraj Shrestha
The Drawbacks of Entrepreneurship
1. Uncertainty of Income:
Opening and running a business provides no guarantee that an entrepreneur will earn
enough money to survive.

In other words, some entrepreneurs earn far more through their companies than they
could working for someone else, but other entrepreneurs’ businesses barely earn
enough to provide them with an adequate income.

The steady income that comes with working for someone else is absent because
the owner is always the last one to be paid.

©Suraj Shrestha
The Drawbacks of Entrepreneurship
2. Risk of Losing Your Entire Investment:
According to the Bureau of Labor Statistics, 34 % of new businesses fail within two
years, and 51 % shut down within five years. Within 10 years, 66 % of new businesses
will have folded.

Business failure can lead to financial ruin for an entrepreneur, and the small business
failure rate is relatively high.
THUS, an entrepreneurs should ask themselves if they can cope psychologically with
the consequences of failure:
● What is the worst that could happen if I open my business and if it fails?
● How likely is the worst to happen? (Am I truly prepared to launch my business?)
● What can I do to lower the risk of my business failing?
● If my business were to fail, what is my contingency plan for coping with failure?
©Suraj Shrestha
The Drawbacks of Entrepreneurship
3. Long Hours and Hard Work:
In the starting time period, Business start-ups usually demand long hours and hard
work from their owners.

The average small business owner works 51 hours a week, compared to the 40.2 hours
per week the typical employee working hour.

In the initial starting period, the demands of owning a business make achieving a
balance between work and life difficult for entrepreneurs.

Many entrepreneurs find that they must work 60 to 80 hours a week as they build their
businesses and must push their personal lives aside until their companies are
established. ©Suraj Shrestha
The Drawbacks of Entrepreneurship
4. Lower Quality of Life Until the Business Gets Established:
In the starting time period, Business owners often find that their roles as husbands or
wives and fathers or mothers or son and daughters as well as friends take a backseat to
their roles as company founders.

Survey by American Express, 67 percent of entrepreneurs say that owning a business

requires them to make sacrifices, most often in the areas of family relationships and
friendships.

Because launching a business start ups consumes so much of an entrepreneur’s time,

energy, and focus, his or her family members often wonder whether the business
takes priority over family. As a result, marriages, families, and friendships are too often
casualties of small business ownership.
©Suraj Shrestha
The Drawbacks of Entrepreneurship
5. High Levels of Stress:
Starting and managing a business can be an incredibly rewarding experience, but it also
can be a highly stressful one.

Entrepreneurs often have made significant investments in their companies, have left
behind the safety and security of a steady paycheck and benefits, and have mortgaged
everything they own to get into business.

Failure may mean total financial ruin, and that results in intense levels of stress and
anxiety.

©Suraj Shrestha
The Drawbacks of Entrepreneurship
6. Complete Responsibility:
It’s great to be the boss, but many entrepreneurs find that they must make decisions
on issues about which they are not really knowledgeable.

When there is no one to ask, the pressure can build quickly.

Many business owners have difficulty finding advisers.

The realization that the decisions they make are the cause of their company’s success
or failure has a devastating effect on many individuals.

To kick someone, one needs to be kicked first to understand the intensity behind the
kick. ©Suraj Shrestha
The Drawbacks of Entrepreneurship
6. Discouragement:
Along the way to building a successful business, entrepreneurs will run headlong into
many different obstacles, some of which appear to be very challenging.

Its normal to be discouraged when one faces failures and late outcomes/ results.

Successful entrepreneurs know that every business start ups encounters rough spots
along the way, and they push their way through difficult times with hard work and
optimism.

©Suraj Shrestha
What’s Feeding the Entrepreneurial Fire
What forces are driving this entrepreneurial trend in our economy?
Which factors have led to this age of entrepreneurship?

• Entrepreneurs as heroes:
An intangible but compelling factor is the attitude that everyone have toward
entrepreneurs. As a nation, a hero status is given.

• Entrepreneurial education:
Colleges and universities have discovered that entrepreneurship is an extremely
popular course of study.
Due to the downsized job offerings and less promising career paths, a rapidly growing
number of students sees owning a business as their best career option.
©Suraj Shrestha
What’s Feeding the Entrepreneurial Fire
• Demographic and economic factors:
More than 75 percent of entrepreneurs start their businesses between the ages of 20
and 44.

• Shift to a service economy:

Because of their relatively low start-up costs, service businesses have become very
popular among entrepreneurs.

• Technological advancements:
With the help of technological advancement, every individual working from home can
look like a big business. “Wherever my laptop is, that’s my office.”

©Suraj Shrestha
What’s Feeding the Entrepreneurial Fire
• Independent lifestyles:
People want the freedom to choose where they live, what hours they work, and what
they do.

• The Internet, cloud computing, mobile marketing:

cloud computing is an internet-based subscription or pay-per-use software services
that allow business owners to use a variety of business applications, from database
management and inventory control to customer relationship management and
accounting.

• International opportunities:
No longer are small businesses limited to pursuing customers within their own borders.
The shift to a global market has opened the door to great business opportunities for
entrepreneurs willing to reach across the globe. ©Suraj Shrestha
The Cultural Diversity of Entrepreneurship
Young entrepreneurs:
Kauffman Foundation reports that 40 percent of young people between the ages of 8
and 24 have already started a business or would like to do so in the future.
The top five reasons these young people want to start their own businesses include the
opportunity to use their skills and abilities, build something for their future, be their
own bosses, earn lots of money, and see their ideas realized.

Women entrepreneurs:
Despite years of legislative effort, women still face discrimination in the workforce.
Increasing numbers of women are discovering that the best way to break the “glass
ceiling” that prevents them from rising to the top of many organizations is to start their
own companies.

©Suraj Shrestha
The Cultural Diversity of Entrepreneurship
Immigrant entrepreneurs:
Immigrant-owned businesses play an important role in many key industries.
In fact, immigrant entrepreneurs founded 24.3 percent of all the high technology
companies started in the United States between 2006 and 2012.
Immigrants or children of immigrants started 41 percent of Fortune 500 companies.

Part-time entrepreneurs:
Starting a part-time business is a popular gateway to entrepreneurship.
Part-time entrepreneurs have the best of both worlds: They can ease into business for
themselves without sacrificing the security of a steady paycheck and benefits.
A major advantage of going into business part-time is the lower risk in case the venture
flops.
©Suraj Shrestha
The Cultural Diversity of Entrepreneurship
Home Based Business:
Technology, which is transforming many ordinary homes into “electronic cottages,”
allows entrepreneurs to run a wide variety of businesses from their homes.
Many entrepreneurs use the Internet to operate e-commerce businesses from their
homes that literally span the globe.
Operating a business from home keeps start-up and operating costs to a minimum.

Family businesses:
A family-owned business is one that includes two or more members of a family with
financial control of the company.
The challenges of operating a family business is- “The best part is working with family.
The worst part is working with family.”
©Suraj Shrestha
The Cultural Diversity of Entrepreneurship
Copreneurs:
Entrepreneurial couples who work together as co-owners of their businesses.
Caterina Fake, who with her husband Sewart Butterfield launched Flickr, a photo-
sharing Web site.

Corporate castoffs:
"Corporate Castoffs" are those individuals who are unemployed and are highly
educated and skilled and had corporate executive jobs.
Marty Bauer and three friends started RidePost, a Web site that allows travelers to
meet and find safe rides from one destination to another.

©Suraj Shrestha
The Cultural Diversity of Entrepreneurship
Corporate dropouts:
"Corporate Dropouts,", are these executives who leave the corporate rat race to pursue
their own dreams and aspirations by starting their own businesses. They become
entrepreneurs.

Retiring Baby Boomers:

Because people are living longer and are remaining active as they grow older, the ranks
of older entrepreneurs are growing.
Kauffman Foundation, the level of entrepreneurial activity among people ages 55 to 64
actually exceeds that of people ages 20 to 34.
One advantage that older entrepreneurs have is wisdom that has been forged by
experience.
©Suraj Shrestha
The Cultural Diversity of Entrepreneurship

©Suraj Shrestha
The Power of “Small” Businesses
A small business is the one that employs fewer than 100 people.

They thrive in virtually every industry, although the majority of small companies are
concentrated in the service, construction, and retail industries.

Their contributions to the economy are anything but small.

Traditionally, small businesses have played a vital role in innovation, and they continue
to do so today.

Many important inventions trace their roots to an entrepreneur, including the zipper,
laser, brassiere, escalator, light bulb, personal computer, automatic transmission, air
conditioning, and FM radio. ©Suraj Shrestha
Ten Deadly Mistakes of Entrepreneurship
Management mistakes
Lack of experience
Poor financial control
Weak marketing efforts
Failure to develop a strategic plan
Uncontrolled growth
Poor location
Improper inventory control
Incorrect pricing
Inability to make the “entrepreneurial transition”

©Suraj Shrestha
Putting Failure into Perspective
Because of the limited resources, usually inexperienced founding team, and lack of
financial stability, small businesses start ups suffer relatively high mortality rates.

Two years after start-up, 34 percent of small companies have failed, and after five
years, 51 percent have failed (folded).

Because they are building businesses in an environment filled with uncertainty and
shaped by rapid change, entrepreneurs recognize that failure is likely to be part of their
lives.

“The excitement of building a new business from scratch is greater than the fear of
failure,”
©Suraj Shrestha
Putting Failure into Perspective
Entrepreneurs use their failures as a supporting point and as a means of progressing
their business ventures for success.

They see failure for what it really is: an opportunity to learn what does not work.

Successful entrepreneurs have the attitude that failures are simply steppingstones
along the path to success.

Failure is a natural part of the creative process.

The only people who never fail are those who never do anything or never attempt
anything new
©Suraj Shrestha
Putting Failure into Perspective
Successful entrepreneurs know that hitting an entrepreneurial home run requires a few
business strikeouts along the way, and they are willing to accept them.

Failure is an inevitable part of being an entrepreneur, and true entrepreneurs don’t

quit when they fail.

“If you’re an entrepreneur, you don’t give up when times get tough.”

One hallmark of successful entrepreneurs is the ability to fail intelligently, learning why
they failed so that they can avoid making the same mistake again.

©Suraj Shrestha
Putting Failure into Perspective
“Failure can teach not only what one is doing wrong but also how to do it right the next
time,”

Thomas Edison, who earned 1,093 patents (a record that still stands), discovered about
1,800 ways not to build a light bulb before hitting on a design that worked. “Results!”
Edison once exclaimed. “I have gotten a lot of results. I know several thousand things
that won’t work.”

Walt Disney was fired from a newspaper job because, according to his boss, he “lacked
imagination and had no good ideas.” Disney also went bankrupt several times before
he created Disneyland.

©Suraj Shrestha
Avoiding the Pitfalls of Small Business Failure
Know your business in depth:
Gain the right type of experience in the business you plan to start.
Get the best education in your business area you possibly can before you set out on
your own.
Become a serious student of your industry

Develop a Viable Business Model—and Test It:

Before launching a business start ups, an entrepreneur should define the business
model on which s/he plans to build a company and test it, preferably with actual
customers or potential customers, to verify that it can be successful.
Creating a successful business model requires entrepreneurs to identify all of the
model’s vital components

©Suraj Shrestha
Avoiding the Pitfalls of Small Business Failure
Develop a Solid Business Plan:
If an entrepreneur’s business model passes the feasibility test, the next step is to
prepare a business plan.
For any entrepreneur, a well-written business plan is a crucial ingredient in preparing
for business success.
A business plan allows entrepreneurs to make a plans for the real market.

Understanding financial statements

Every business owner must depend on records and financial statements to know the
condition of his or her business.
To truly understand what is going on in the business, an owner must have at least a
basic understanding of accounting and finance.
©Suraj Shrestha
Avoiding the Pitfalls of Small Business Failure
Manage financial resources:
“Estimate how much capital you need to get the business going and then double that
figure”.
Have adequate start-up capital when one starts the business start ups.

Learn to manage people effectively:

No business owner can do everything alone.
No matter what kind of business you launch, you must learn to manage people.
Every business depends on a foundation of well-trained, motivated employees.
Attracting and retaining a group of quality employees is no easy task, however. It
remains a challenge for every small business owner.
“In the end, your most dominant sustainable resource is the quality of the people you
have,” ©Suraj Shrestha
Avoiding the Pitfalls of Small Business Failure
Maintain a Positive Attitude:
Achieving business success requires an entrepreneur to maintain a positive mental
attitude toward business and the discipline to stick with it.

"To be a successful entrepreneur, you must have a passion for learning – from
customers, employees and even competitors."

©Suraj Shrestha
Entrepreneurship
"Entrepreneurship is a pursuit of a solution, a single relentless focus on solving a
problem or doing something drastically different from the way it is done today.
[It's] aiming to do something better than it's ever been done before and constantly
chasing improvement.“

"Entrepreneurship is … the constant hunger for making things better and the idea that
you are never satisfied with how things are."

"Entrepreneurship is the mindset that allows you to see opportunity everywhere.”

Entrepreneurship is the process of designing, launching and running a new business,

which is often initially a small business

©Suraj Shrestha
Entrepreneurship
The capacity and willingness to develop, organize and manage a business venture along
with any of its risks in order to make a profit. The most obvious example of
entrepreneurship is the starting of new businesses.

An entrepreneur is an individual who creates a new business, bearing most of the risks
and enjoying most of the rewards.

Entrepreneurship is the process of discovering new ways of combining resources.

The entrepreneur is commonly seen as an innovator, a source of new ideas, goods,

services, and business/or procedures. Entrepreneurial spirit is characterized by
innovation and risk-taking, and is an essential part of a nation's ability to succeed in an
ever changing and increasingly competitive global marketplace
©Suraj Shrestha
 Thank You

Any Questions??

©Suraj Shrestha