ENT3003 Test 1 Study Guide Job Creation page 9 Chapter 1 The Small Business Administration SBA defines a small business as one with fewer than 500 employees This SBA definition represents 99 7 of employers and pay more than 45 of the total U S private payroll Small businesses generate on average 60 to 80 of net new jobs annually in the United States Data from 2004 indicates that small businesses created 1 9 million net new jobs as compared to 994 667 for large firms The SBA estimates that in 2005 there were 25 8 million businesses of all forms in the U S Small business s share of employment generally remains about 50 Business Failure page 12 The SBA Office of Advocacy reports that 2 3 of new businesses survive at least two years o The survival rate at four years is 44 Survival has been attributed to sufficient capital having employees and the entrepreneur s intention in starting the business A Brief History of the Entrepreneurial Revolution page 13 The term entrepreneur has existed for more than 250 years The U S was founded on the principle of free enterprise and helped make the economy strong It was not until the 1980s that the word entrepreneur came into popular use in the U S Marc Anderson is a young entrepreneur and the co founder of Netscape Communications Howard Schultz is the chairman and CEO of Starbucks The Decades of Entrepreneurship page 14 The 1970s saw three significant trends that would change business macroeconomic turmoil international competition and the technological revolution The Vietnam War economy brought inflation the dollar was devalued food prices skyrocketed due to agricultural disasters and the formation of OPEC sent gas prices up 50 By the late 1970s the Federal Reserve FED let interest rates rise by 20 o This led to no borrowing no spending a 1980s recession and 10 unemployment The Decades of Entrepreneurship CONT D page 14 The 1980s has been called the true Decade of Entrepreneurship In order for big companies to compete with smaller firms they had to restructure and reorganize the way they did business o GOOD Resulted in improved performance increased profits and higher stock prices o BAD Resulted in many jobs no longer existing employees receiving less benefits and the secure jobs being found in civil service Ventures that were internationalizing and leader behavior in the 1990s moved the U S to a period that required the vision the resources and the motivation of the entrepreneur to seek new opportunities and create new jobs The 1990s characterized the Information Age o The Internet made global competition and resources more readily available and a reality Women and Minority Owned Businesses page 17 The smaller size of women owned businesses is explained by the different motivations of women to start businesses by how they define success and the industries that women choose to enter o They redefine how business is done rather than impact the economy o More than 55 of women owned businesses are in services Social Responsibility page 18 Social responsibility is about a company s accountability to society o Range from proactive social programs to rewarding employee community In the past social responsibility took the form of checkbook philanthropy which was responding to a solicitation for donations with money o Now it includes the notion of devoting time and effort to a nonprofit service cause Chapter 2 Saying Goodbye to Stereotypes pages 26 27 Entrepreneurship Myths o It Takes A Lot of Money to Start a Business o It Takes A Great Idea o The Bigger The Risk The Bigger The Reward o Entrepreneurship Cannot Be Taught Myth 5 A Business Plan is required for Success Conceptual Question page 27 Lenders and investors want to see a business plan before agreeing to deal with an entrepreneur However research has not placed a value on business planning or even on what components of a business plan are correlated with success In the earliest stages of a start up spending time and resources testing the market for feasibility of the concept may be more important than creating a business plan A business plan helps the entrepreneur work through the building of a company Myth 6 Entrepreneurship is for the Young and Reckless Conceptual Question page 27 People think they are too unsuitable to start a business if they are older than 30 o They think that the energy drive resources and risk involved are only Research supports the conclusion that being older can be an asset when suitable for the young starting a business Entrepreneurship is for everyone regardless of age o Men and women in the 45 64 age bracket are responsible for 36 entrepreneurial activity in the U S 22 of global activity o Men and women in the 25 44 age bracket are responsible for 50 entrepreneurial activity in the U S The Serial or Portfolio Entrepreneur page 29 Serial Entrepreneur an entrepreneur who starts one business and then moves on to start another o These entrepreneurs start another business that builds on the experience from the first venture or a specific expertise that the entrepreneur posses or has acquired through a previous venture Portfolio Entrepreneur an entrepreneur who owns a minority or majority stake in several ventures o Tend to create a lot of churn in their portfolios as they seek out new business opportunities that link to their existing businesses o Constantly on the hunt for new opportunities The Corporate Venturer page 31 Corporate Venturer those entrepreneurial like venturers inside large companies o Involve activities that are typically new to the company so the risk of failure is high o There is also a high degree of uncertainty around such projects so they are often managed separately from the core business activites Companies have chosen from several options to stimulate the entrepreneurial environment and innovation o The skunk works intrapreneurship and acquisition Build A Network pages 35 36 Networking the exchange of information and resources among individuals groups or organizations whose common goals are to mutually benefit and create value for the members Effective networks have the following characteristics o Consistent network growth o Large network size o Network cultivation interaction and exchange o Network balance in terms of resources o Legitimacy provided by credible network partners Improve Or Acquire Critical Skills page 40 Since entrepreneurs operate in a world of uncertainty they have the following skills o Ability to analyze a situation o Extract