Entrepreneurship – The Basics
_______________________ - an individual who organizes and operates a
business or businesses, taking on financial risk to do so.
________________________ is 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.
When entrepreneurs succeed they ________________________, but when they
fail they may lose everything.
The difference between being an employee or an entrepreneur:
Employees
vs.
Entrepreneurs
________________________
________________________________
________________________
________________________________
________________________
________________________________
Characteristics of successful entrepreneurs:
1. _________________________
2. _________________________
3. ____________________________________________________
4. ____________________________________________________
5. ____________________________________________________
6. ____________________________________________________
7. ____________________________________________________
Entrepreneurs really need to have great ____________________________ skills.
Problem Solving Skills Needed
Time for Fun
1. There are three switches downstairs. Each corresponds to one of the
three light bulbs in the attic. You can turn the switches on and off and
leave them in any position.
How would you identify which switch corresponds to which light
bulb, if you are only allowed one trip upstairs?
2. A man needs to cross a river in a canoe. With him, he has a bag of grain,
a chicken, and a fox. He can only carry one of the three at a time. If he
leaves the grain and the chicken, the chicken will eat the grain. If he takes
the grain, the fox will eat the chicken. How does he successfully cross
the river with his load?
3. Rearrange three golf balls so that the triangular pattern points down
instead of up.
4. Using six contiguous straight lines, connect all of the sixteen circles
shown below.
Entrepreneurs are constantly problem solving. Many times new products and services are
devised to solve problems. These new products and services are the cornerstones of new
businesses.
The man who invented bulletproof vests wanted to solved a problem…he
didn’t want to get shot and die. You might imagine the inventor being someone
from the Army or a policeman, but the true creator was a pizza delivery man! On
July 21st, 1969, Richard Davis was delivering pizzas in Detroit when he was held up
at gunpoint! Luckily for the former marine, Davis had a gun of his own and shot two
of the attackers but was hit twice himself. This incident gave him an idea for people
like cops to avoid injury by wearing padding of some kind. The first prototype for
the bulletproof vest was created by Davis out of a roll of nylon and the straps from
his car’s seatbelt! He went around to police stations shooting himself in the chest to
demonstrate its power. Later, Davis created a second vest design using Kevlar,
which is 230% stronger than nylon! Davis made a lot of money by solving a problem
for people who sometimes get shot at.
Not too long ago women were stuck at home all by themselves while husbands went
to work. This was a problem for David H. McConnell who founded Avon, because
how could he expect to sell his beauty products to women if they couldn’t come to
his store. This was a problem. He decided to recruit female sales representatives
who sold his products door to door. He took the products to his customers instead
of having them come to him.
Entrepreneurs must also solve problems almost every day. For example, they
need to decide what to do if an employee quits, a piece of equipment breaks down,
the power is out, or a valued customer is very angry about something.
Problem-Solving Process
6 Steps in Problem-Solving
1. ____________________________________________________
2. ____________________________________________________
3. ____________________________________________________
4. ____________________________________________________
5. ____________________________________________________
6. ____________________________________________________
You can address all problems by following the above steps. For example,
Your problem is…what to do this Friday night?
1. Define the Problem – What to do this Friday night from 8:00 to
11:00?
2. Gather Information – Gather background information such as
how much money do you have, do you have transportation, or
what is your curfew time.
3. Identify Various solutions – Make a list of things you may do
such as go to movies, attend football game, stay home and study,
go over to friend’s house.
4. Evaluate Alternatives and Select Best Option – Decide which
option is the best choice.
5. Take action – Go to the movies.
6. Evaluate the Action – Determine if that was a good choice &
would you do it again?
_________________________ is a creative group problem-solving technique
that involves generating a large number of fresh ideas. Many times if
you include all of your employees and even a couple of your customers
in your brainstorming sessions you will come up with many fresh ideas.
A number of people are asked to join a group in order to come up with
possible solutions to a problem. Everyone is encouraged to volunteer
anything that pops into their heads. One person writes down all of the
ideas, but the ideas are not analyzed until later. The goal of
brainstorming is to generate many possible ideas and solutions. Even if
they sound ridiculous.
A ______________________ is agreement among a group of people.
Who are some famous entrepreneurs? What business did these people found?
Walt Disney
Bill Gates
Coco Chanel
Steve Jobs
Henry Ford
Debbi Fields
Estee Lauder
Hugh Hefner
Mary Kay Ash
Michael Dell
Ray Kroc
Mark Cuban
John Rockefeller
Milton Hershey
Ben Cohen And Jerry Greenfield
Sam Walton
Richard W Sears
Joyce Hall
Dave Thomas
Andrew Carnegie
http://www.topbusinessentrepreneurs.com/walt-disney.html
Assume you can’t decide if you have the skills to become an
entrepreneur or you are not sure if you even want to become an
entrepreneur. Once you decide you want to be an entrepreneur, you
need to decide what product or service to sell? What do you do to
answer all of these questions?
To determine if entrepreneurship is for you? Take
the following steps…
1st Step – Complete a ________________________. A self assessment is an
evaluation of your strengths and weaknesses. A self-assessment will
allow you to see if you have the strengths needed to become a successful
entrepreneur…it will also point out weaknesses that might need to be
address and corrected if you do choose to go into business for yourself.
2nd Step – Assess you __________________________. This will allow you to
consider a business where you use your love of a certain hobby or
interest to create the products or services you will sell. Also, analyze
your past experiences…if you worked indoors at a desk and it drove you
crazy, you might want to consider a business where you will be allow to
be outside and not tied to a desk job.
3rd Step - Assess your ______________________. An aptitude is the ability to
learn a particular kind of job. If you want to open an auto repair shop
you should have the aptitude to solve mechanical problems.
4th Step – Assess the advantages and disadvantages of being an
entrepreneur. Some of the advantages of being an entrepreneur
include:
1. ____________________________________________________
2. ____________________________________________________
3. ____________________________________________________
4. ____________________________________________________
Some of the disadvantages of being an entrepreneur include:
1. ____________________________________________________
2. ____________________________________________________
3. ____________________________________________________
4. ____________________________________________________
There may be many other advantages and disadvantages for you if you
became an entrepreneur.
So now let’s assume you have decided to become an entrepreneur and
let’s assume you also know what products and services you are going to
sell. You need to now determine if you can make enough money if you
do open a business selling the products and services you chose. To
determine how much profit you may earn, you need to know how
much it costs to produce your goods or services.
You need to understand the concept of cost. You will have
two types of costs:
1. _________________ costs must be paid regardless of how much of a good
or service is produced. Also known as sunk cost…fixed costs must be
paid even if there are no sales.
Examples of fixed costs (assume a pizza shop)…

____________________________________________________

____________________________________________________

____________________________________________________
2. _____________ costs are costs that go up or down depending on the
quantity of the good or service produced. These expenses rise directly
with the number of items sold.
Examples of variable costs (assume a pizza shop)…

____________________________________________________

____________________________________________________

____________________________________________________

____________________________________________________
A business with many fixed costs is a ______________risk than a
business with mostly variable costs because fixed costs are
incurred regardless of sales. If sales are too low the business will
not have enough money to survive.
There is also the concept of Marginal Cost vs.
Marginal Benefit
_________________________ measure the advantages of producing one
additional unit of a good or service.
_________________________ measure the disadvantage of producing one
additional unit of a good or service.
Example of Marginal Costs vs. Marginal Benefits
Assume you own a pizza shop what are the marginal costs and marginal
benefits of staying open an hour later each night?
The marginal costs would be the additional costs involved in staying open an
additional hour…including…
Employee wages – 2 workers at $8.00/hour
= $16.00
Extra utility expenses – gas + electricity/hour
$10.00
=
Extra Ingredients to make 3 pizzas, 2 cheese fries, & 1 cheese steak sandwich
$7.00
Total extra marginal costs involved in staying open I additional hour
= $33.00
The marginal benefits would be the additional revenues earned by staying
open one additional hour…including…
=
3 extra pizzas sold
=
$28.50
2 extra cheese fries sold
=$
8.00
1 extra cheese steak sandwich sold
=$
5.00
Total extra marginal benefits earned by staying open 1 additional hour
= $ 41.50
Using a marginal cost vs. marginal benefit analysis we should stay open an
additional hour because you would make an extra $8.50.
Finally there is the concept of Opportunity Cost
___________________ cost is the cost of choosing one opportunity or
investment over another. For example, if you decide to spend $300 on a
newspaper advertisement then the opportunity cost could be the new
uniforms you never bought for $300. If you buy a new $4000 oven, the
opportunity cost might be a new computerized cash register and new
menus which you could have bought for the same $4000.
If you decide to become an entrepreneur your opportunity cost would
be the salary you gave up working for a large corporation.
Government in a Market Economy
Government affects business activities in the U.S. economy in three ways:
1. ____________________________________________________
2. ____________________________________________________
3. ____________________________________________________
The government ________________________ huge amounts of goods and services
Example: the aerospace industry is almost entirely dependent on
government purchases. Why, what products do they sell to the government?
Private companies sell everything from pens to cars to clothes to office
cleaning supplies to the government.
If your business received big orders from the government you could make a
lot of money…imagine if your business, which makes office supplies, got an
order from the US Army to supply office supplies to all of their military
bases.
The government charge ______________ certain goods and services. This effects
how much of that product might be purchased by consumers. The taxes on
tobacco are extremely high which cause more people to quit smoking…hence
tobacco shops or convenience stores sell less tobacco products when the prices
go up.
Most states charge sales tax on certain items
– Gasoline (why is gasoline a very effective product for the government
to tax)
(The Federal gasoline tax is 18.4 cents per gallon and the
average State tax + highway tax + superfund tax is 33.72
cents per gallon)
– Cigarettes/alcoholic beverages (why do many people agree with this)
These taxes should theoretically reduce consumption of these items. They are
also called sin taxes because the consumption of alcohol and cigarettes is seen by
some as sins.
The government ______________________________ (payments) to producers of certain
kinds of goods:
– __________________________________________
– __________________________________________________
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Inner City or High unemployment areas