Entrepreneurship 21st century business entrepreneurship 2nd edition

Entrepreneurship
SECOND EDITION

Cynthia L. Greene

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States


21st Century Business
Entrepreneurship, 2nd Edition
Cynthia L. Greene
Editorial Director: Jack W. Calhoun
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HOW TO USE THIS BOOK

The 21st Century Business Series is an innovative instructional program providing
instructors with the greatest flexibility to deliver business content using a modular
format. Instructors can create their own business courses by combining several
Learner Guides in the Series to form one-semester or two-semester courses. The
individual Learner Guides can also be used as enhancements to more traditional
business courses or to tailor new courses to meet emerging needs.
The design and content of each Learner Guide in the 21st Century Business
Series are engaging yet easy for students to use. The content focuses on providing
opportunities for applying 21st Century business skills while enabling innovative
learning methods that integrate the use of supportive technology and creative
problem-solving approaches in today’s business world.
The Entrepreneurship Learner Guide covers today’s most relevant business
topics including the role of entrepreneurship in the global economic recovery.

Topical data on how to conduct research and the important value of research as a
entrepreneurship
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included.
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ORGANIZED FOR SUCCESS
Each chapter opens with a Project
that incorporates information from
each lesson within the chapter. These
Projects pull all of the information
from the chapter together so students

get a hands-on experience applying what
they learned, making for a great group
activity.

PROJECT

Identify a Business Opportunity

• Identify your strengths and
weaknesses
• Determine a business
opportunity that matches your
strengths and weaknesses
• Use the problem-solving model to
make decisions

Photodisc/Getty Images

Project Objectives

Getting Started
Read the Project Process below. Make a list of any materials you will need.
• Think about your interests, strengths, and weaknesses.
• Think of business opportunities that relate to your interests.

Project Process
1.1 Write a short paragraph describing how an individual became a
successful entrepreneur.
1.2 List all your interests. List business ideas that relate to each
interest. List your strengths and weaknesses. Compare them with your

list of business ideas. Cross out ideas that do not suit your strengths and
weaknesses.

Jump Start provides a scenario that
introduces and entices the student about
the lesson ahead.

1.3 Choose one of the remaining business ideas that most interests
you. Set financial goals for a five-year period based on the business idea
you chose. Demonstrate that your goals are SMART (Specific, Measurable,
Attainable, Realistic, and Timely). Next, set nonfinancial goals you hope to
achieve with this business. Be sure to include specific activities for each goal.
1.4 Consider a problem that could occur in the business that you have
chosen. Use the six-step problem-solving model to deal with it now.

Chapter Review
Project Wrap-up Working with your chosen business idea, answer the six
questions listed under “Compare Different Opportunities” on pages 19–20.

?
Creatas/Jupiter Images

HIP RIGHT FOR YOU

IS ENTREPRENEURS

1.2

GOALS

JUMP START

Identify the
characteristics of
urs
successful entreprene
Identify the
characteristics of good
team members
have
Assess whether you ed
what it takes to succe
in your own business

3

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KEY TERMS
self-assessment, p.
aptitude, p. 14

13

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re
business, but befo
t starting their own
are excited abou
think through the
Gloria and Delia
to slow down and
a realizes they need
to start our own
proceeding, Glori
, it’s not really easy
Delia
,
there
know
that
“You
Riviera said
process carefully.
this in class, Mr.
we talked about
First, we need
business. When
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we have to
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are good at. Then
are many things
ing
to do and what we

like
we
what
e
be successful.” Think
to decid
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plann
and
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entrepreneur thing
do a lot of rese
Delia sighs. “This
,
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is it
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we should do?” Why
about what Mr. Rivie
think
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of work. Wha
sounds like a lot
down and really exam
a and Delia to slow

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, 2009/
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Net Bookmark gives chapter-related
activities for students to complete using
information found on the Internet.
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Meyer beg
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an a graph
all aspect
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it
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financing
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a business
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obtain a bu
financial sec
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PLAN

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iv

HOW TO USE THIS BOOK


REAL-WORLD FOCUS
Cross-Cultural
Relationships highlights the

ips

l Relationsh

Cross-Cultura

L

CT CULTURA

ENEURS RESPE
U.S. ENTREPR
DIVERSITY

This means
marketplace.
rich and diverse
cultures.
es represents a
ts of different
needs and wan
The United Stat
the
ion speaks
tify
ulat
iden
pop
need to

erican
entrepreneurs
ents of the Am
nishest-growing segm
er to watch Spa
pref
ers
sum
One of the fast
con
g
ers. To reach
Spanish-speakin
guage newspap
Spanish. Many
to understand
read Spanish-lan
and
need
n
will
visio
rs
entrepreneu
speaking tele
mote their
p of consumers,
g media to pro
this growing grou traditional English-speakin
oted to

use
le channels dev
that they cannot
e are many cab
ers also
ice. Today ther
Many newspap
serv
ing.
or
t
ertis
duc
adv
pro
nt and
g entertainme
Spanish-speakin
version.
ge
gua
-lan
have a Spanish
lly
consumers.
nish-speaking
Think Critica
can reach Spa
entrepreneurs
List ways that

importance of understanding
and respecting everyone’s point
of view and thinking about the
perspectives of others.

Teamwork provides
an activity that requires
students to work
together as a team.

1.1 All

3 AM
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Tech Literacy

PREPARING THE BUSINESS PLAN
There are many software programs available for entrepreneurs to use when
preparing a business plan. A recent Internet search showed more than 345,000
matches for “business plan software.” Many entrepreneurs use these programs
because they provide an easy-to-use template. By plugging your specific
information into the template, you get a professional-looking finished report.

If you decide to use a software program to create your business plan, be sure
it includes all of the essential elements. It is a good idea to evaluate several
different programs before deciding which one to use. Your choice should best
match the information you want to include and your desired style. And, of
course, it should be one that you can use without difficulty.

Tech Literacy
highlights how
evolving technology
plays a huge role
in how business is
conducted.

TEAMWORK
Working in a
small group, suggest
ten possible jobs for
each item on the job
attributes checklist.
Choose one person to
write the suggestions
from your group on the
board or on paper.

THINK CRITICALLY
What are some of the advantages and disadvantages of using business plan
software?

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You will find the
following features
throughout each
chapter:
DID YOU KNOW ?

siness
Enter a Family Bu inated by family businesses. According to

According to the
ern
University of South
for
Maine’s Institute
ess,
Family-Owned Busin
ne
35 percent of Fortu
500 companies are
Family
family-controlled.
nt for
businesses accou
gross
50 percent of U.S.
They
domestic product.
nt of

generate 60 perce
and
U.S. employment
new
78 percent of all
job creation.

s economy is dom
, including the vast
The United State
nt of all businesses
many as 90 perce
ed by families. Even
some estimates, as
companies, are own
and operated
and medium-sized
inue to be owned
cont
majority of smalll-A,
k-fi
Chic
anies, such as
der.
foun
any
many large comp
comp
the
who are related to

le
peop
by
ly
large

ily Business

a Fam
the pride and
ly businesses enjoy
work for their fami
prise. They also
Entrepreneurs who
part of a family enter
at least one more
that comes with being
for
ly
fami
the
in
sense of mission
in
knowing that
their businesses rema
like
that
also
fact

the
enjoy
relatives. They
enjoy working with
t.
generation. Some
m they care abou
fiting others who
their efforts are bene

Advantages of

Disadvantages

iness

of a Family Bus

©Lisa F. Young, 2009/
Shutterstock.com

Used under license

from

have several
Family businesses
r management
drawbacks. Senio
held by family

positions are often
of their
members, regardless
tion sometimes
situa
This
ty.
abili
business
means that poor
It
e. also
decisions are mad
to retain
makes it difficult
who are
s
oyee
empl
good
family.
not members of the
enter into
Family politics often
making. Plus,
business decision
een business
the distinction betw
it be
member, why might

is blurred in
If you are not a family
life and private life
ess?
a family-owned busin
esses. As a
difficult to work in
family-owned busin
lems end up
result, business prob
e
as well.
be prepared to mak
affecting family life
ly business must
le
do join their fami
companies, peop
Entrepreneurs who
or buy their own
iduals who start
themselves.
indiv
ions
e
decis
Unlik
all
e
ses.

compromi
the freedom to mak
lack
like.
ld
lies
wou
fami
they
es as
who work for their
ies and procedur
unable to set polic
They may also be

CheckPOINT
What are some of
business?

ing a family

vantages of enter

disad
the advantages and

ing Business

3.1 Run an Exist

65

40639_01_CH01_002-031 PP3.indd 14

• Did You Know?
always focuses
on valuable and
interesting data
relevant to today’s
business world.
• CheckPOINT
where students can
jot down answers to
important questions
as they go through
the lessons in the
chapter.
• Think Critically
is part of the lesson
assessment where
students answer
questions with
information that
was provided in the
preceding lesson.

Think Critically
1. Why do you think the quality of the business plan is so critical to an
entrepreneur’s success?

2. Melinda Rosati wants to purchase her uncle’s barbershop. Because it is an
ongoing business, Melinda doesn’t think she needs to write a business plan.
Do you agree or disagree with Melinda’s opinion? Why or why not?

3. Putting your business plan in writing helps you communicate your ideas to
others. Do you think discussing your business plan out loud in a meeting can
also help you get your ideas across? Why or why not?

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DEVELOPMENT FOR THE FUTURE
CHAPTER 4

Market
Your

Business

Careers for
Entrepreneurs

Each chapter starts out with a

“Careers for Entrepreneurs”
feature that focuses on a real
business and reflects one of the
16 Career Clusters.

LRMR
LeBron James is not content with just being a
star on the basketball court. He also wants to
become a leader in the global business world.
He formed a sports marketing agency, LRMR
Innovative Marketing and Branding, with
three of his high school friends. In addition
to turning James into a global icon, LRMR

4.1

The Value of Marketing

4.2

Create the Marketing Plan

corporate infusion partnerships.”

James wants to build a new financial
model for the 21st-century athlete. He also

4.3

Identify Your Competition

formed King James, Inc., a holding company,
to contract with endorsement partners and

wants to “change the sports marketing prism
through leveraging of sports, celebrity, and

4.4

4.5

The Marketing Mix—Product
and Price

The Marketing Mix—
Distribution and Promotion

Throughout the book, you will find
Business Math Connection. This feature
highlights how basic math concepts are an
important part of the business world.

reduce tax liability.
Guiding principles that James has used in

starting his business include
• Don’t be afraid to ask for business advice
• Focus on unity rather than the individual
• Surround yourself with the best people
• Diversify income streams
• Remember that the brand is bigger than
the man

Think Critically
1. What do you think contributes to the
success of LRMR?
2. Identify trends that you think could
influence the success of LRMR.

Price a Produ

ct

Once pricing
objectives hav
e been determi
the possible pric
ned, the next
es for products.
step is to dete
There will usu
can be charged
rmine
ally be more than
for a product.

Pricing may be
one price that
amount of com
based on dem
petition.
and, cost, or the

86

40639_04_CH04_086-125.indd 86

Demand-Based
Pric

ing Pricing that
are willing to
is determined
pay for a prod
by how much
uct or service
Potential custome
customers
is called demand
rs are surveyed
-based pricing.
to find out wha
The highest pric
t they would be
e identified is
the maximum

willing to pay.
price that can
Cost-Based Pric
be charged.
ing Pricing that
of an item as
is determined
the basis for the
by using the who
price charged
markup price
lesale cost
is called cost-bas
is the retail pric
ed pricing. A
e determined
the wholesale
by adding a perc
cost of an item
entage amount
.
Sometimes bus
to
iness owners pur
want to sell mor
chase too muc
h of a particul
e of it quickly.
ar item and
To do so, they

product. A mar
mark down the
kdown price is
retail price of
a price determi
amount from
the
ned by subtrac
the retail pric
ting a percenta
e of an item. You
down an item
ge
should be care
below its cost
ful not to mar
. You do not wan
k
t to lose money.
Competition-B
ased Pricing
Pricing that is
what competi
tors charge for
determined by
considering
the same good
based pricing.
or service is calle
Once you find

d competition
out what your
you must deci
competition char
de whether to
ges for an item
charge the sam
,
e price, slightly
more, or sligh
tly less.

1/5/10 8:48:38 AM

COMMUNICATE
Call your local Chamber
of Commerce and ask
them for information
that would help the
owner of a new dogwalking business that
is opening in your
town or city. Do not
forget information on
demographics and
psychographics. Also,
ask for statistics on dog
ownership in your area.
Write a report on your
findings and present it
to your class.

Business Ma

th Connectio

110

n

If Luisa Ramirez
, a gourmet food
$1.77 a can and
store owner, buy
s artichoke hea
wants to add
40 percent to
rts for
would the reta
the wholesale
il (markup) pric
cost, what
e be? If Luisa
$10.50 a bott
usually sells oliv
le and wants to
e oil for
mark down the
sell more oliv
price 20 percent
e oil, what wou

to try to
ld the markdo
wn price be?
SOLUTION
Use the followin
g formulas to
calculate retail
Wholesale cost
pric
e.
3 Percentage
markup 5 Ma
$1.77
rkup amount
3
0.40
5
Wholesale cost
$0.71
1 Markup amo
unt 5 Retail pric
$1.77
e
1
$0.71
5
$2.48
Use the followin
g formulas to
calculate mar

Retail price 3
kdown price.
Percentage mar
kdo
wn 5 Markdown
$10.50 3
amount
0.20
5
Retail price 2
$2.10
Markdown amo
unt 5 Markd
$10.50 2
own price
$2.10
5
$8.40
Chapter 4 • MAR
KET YOU

R BUSINESS

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Communicate is an activity
4.2 Create the Marketing Plan

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to reinforce, review, and practice
communication skills.


HANDS-ON LEARNING

Chapter Summa

ry

of customers.
and satisfy the needs t is.
used to determine
A. Marketing is
who their target marke want.
must determine
and

customers need
B. New businesses
identifies what your
rch
resea
t
C. Marke

eting
The Value of Mark

4.1

Each chapter ends with a
comprehensive yet concise
Assessment.
The Chapter Summary
provides a quick review of each
lesson covered in the chapter.

ASSESSMENT

CHAPTER 4

t research involves

six steps.

ed.

Primary data marke
goals will be achiev
eting Plan A. The marketing strategy identifies howdocument for the business.
Create the Mark
B.
plan is a guiding

4.2

ting
C. A written marke

petition

Identify Your Com

4.3

4.4

The Marketing Mix—
Product and Price

4.5

The Marketing Mix—
Distribution and
Promotion

direct and indirect.

.
types of competition—
and weaknesses
A. There are two
titors’ strengths
analysis finds compe
for customer
loyalty by asking
B. A competitive
maintain customer
ives.
C. Businesses can
e, and offering incent
servic
ior
super
feedback, providing

The Apply What

You Learned
section contains openended questions that
students complete so
that they can apply
what they learned
with their own ideas
and thoughts.

a business sells.
cts and services

is the different produ
expenses.
A. A product mix
revenues exceed
be high enough that
B. Prices need to

Vocabulary Builder is

or indirect.
ution may be direct
selling, and
A. Channels of distrib e adver tising, publicity, personal
includ
B. Promotion can
sales promotions.

abulary Builder

a quick way for students
to match up definitions
with the key terms
that were highlighted
throughout the chapter.

a. advertising
b. channels of
distribution

er in

letter of the answ
nition. Write the
that best fits the defi
Choose the term
not be used.
Some terms may
about
zing information
the space provided.
n
c. direct competitio
recording, and analy
ting,
collec
for
1. A system
services
n
etitors, goods and
d. indirect competitio
ular
customers, comp
interested in a partic
are
that
anies
or comp
e. market research
to pay for it
2. The individuals

able
and
g
willin
e and are
product or servic
f. market share
money selling
its
of
most
s
a business that make
g. marketing
3. Competition from
r products
the same or simila
h. marketing mix
coverage
generated by media
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1/5/10 8:53:47
AM

The Ethical Dilemma section
of the Chapter Assessment
presents a situation where
students must use their critical
thinking skills to answer how
they would handle the situation
being presented. This is an
excellent chance for students
to have open discussion about

what they learned and how it
applies to the situation at hand.

AM
8:53:27
1/5/10

29. Research Use the Internet to find the names of four companies that
might be able to help you conduct market research. Record information
such as how long the company has been in business and what kinds of
market research the business does. Record your findings and compare them
with the findings of other students.
30. Research You are opening a home entertainment store. Locate distributors, wholesalers, and manufacturers for one of your products. Choose
three brands of one item and contact the distributor to obtain information
about pricing and delivery. What is the wholesale price of each product?
Find the same product in a local store. What is the retail price? Calculate
the markup percentage.
31. Communication You are opening a fitness center. Because you have
limited financial resources, you need to use your promotion budget carefully. Write a press release to send to the local newspapers and radio and
television stations. You are also buying time on a local radio station. Write
the commercial that will air on the radio. List some publicity activities that
could be used to promote your business.

Ethical Dilemma
32. You offer a math tutoring service for students at the elementary and middle
schools in your neighborhood. You usually charge $15 per hour. You
recently received a message from the mother of a fifth grader inquiring
about your services and pricing. She was referred by the mother of another
student you tutor. You would like to charge her more than $15 per hour
because you know that her family is wealthy. What would you do? Is it fair

for you to raise your price because you know the family has more money?
What problems do you think you might experience if you charge customers
different prices? What circumstances, if any, would justify charging your
customers different prices?

Assessment

40639_04_CH04_086-125.indd 125

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125

1/5/10 8:52:44 AM

HOW TO USE THIS BOOK

vii


ABOUT THE AUTHOR
Cynthia L. Greene taught business education at the high school level for
25 years in the Fulton County School System in Atlanta, Georgia. She
served as the program specialist for Business and Information Technology
for the Georgia Department of Education for six years. Ms. Greene is an
active member of the National Business Education Association, serving as
President and member of the Entrepreneurship Standards Committee.
She is the business manager of the Georgia Association of Career and
Technical Education.

Reviewers
Betty A. Banks-Burke
Business Education and Computer Science Teacher
Hudson High School
Hudson, Ohio

Katherine Jones Nance
Career and Technical Education Teacher
Parkland High School
El Paso, Texas

Scott Christy
Business and Information Technology Instructor
Green Bay East High School
Green Bay, Wisconsin

Jenifer Clary Richards
Business Education Teacher
Spartanburg High School
Spartanburg, South Carolina

Jan Goddard
Business and Computer Science Teacher
Norcross High School
Norcross, Georgia

Vickie Banks Reed
Entrepreneur and Business Owner
Coppell, Texas

Vernon W. King, Jr.
Marketing Education Coordinator
Landstown High School
Virginia Beach, Virginia
Dennis R. Krejci

Business Teacher
Tri County High School
DeWitt, Nebraska

viii

ABOUT THE AUTHOR

Clay N. Stiles
Business Education Teacher
El Modena High School
Orange, California


CONTENTS
CHAPTER 1
Should You Become an
Entrepreneur? 2

CHAPTER 2
Develop a Business Plan 32
CAREERS FOR ENTREPRENEURS
UPS

32

CAREERS FOR ENTREPRENEURS
J. K. Rowling

2

PROJECT
Identify a Business Opportunity

3

2.1 Why a Business Plan Is Important

34

1.1 All about Entrepreneurship

4

2.2 What Goes into a Business Plan?

39
50

PROJECT
Get Started on Your Business Plan 33

1.2 Is Entrepreneurship Right for You?

11

1.3 Explore Ideas and Opportunities

17

2.3 How to Create an Effective
Business Plan

1.4 Problem Solving for Entrepreneurs

23

ASSESSMENT AND REVIEW
Checkpoint

ASSESSMENT AND REVIEW
Checkpoint

6, 9, 12 ,13, 15, 18, 20, 21, 25, 26

Think Critically
Make Academic Connections
Chapter Assessment

10, 16, 22, 27
10, 16, 22, 27, 31
28–31

Jump Start
Communicate
Did You Know?
Tech Literacy
Teamwork
Cross-Cultural Relationships

Think Critically
Make Academic Connections
Chapter Assessment

4, 11, 17, 23
19
6
19
5, 14, 20, 26
7

Net Bookmark

13

Business Math Connection

21

38, 49, 55
38, 49, 55, 59
56–59

SPECIAL FEATURES
Jump Start

SPECIAL FEATURES

36, 37, 44, 48, 53, 54

34, 39, 50

Communicate

46

Did You Know?

51

Tech Literacy

41

Teamwork

35, 43, 52

Cross-Cultural Relationships

54

Net Bookmark

36

Business Math Connection

37

CONTENTS

ix


CHAPTER 3
Select a Type of Ownership 60

CHAPTER 4
Market Your Business 86

CAREERS FOR ENTREPRENEURS
Google

60

CAREERS FOR ENTREPRENEURS
LRMR

86

PROJECT
Choose a Form of Ownership

61

PROJECT
Marketing Your Business

87

3.1 Run an Existing Business

62

4.1 The Value of Marketing

88

3.2 Own a Franchise or Start a Business

67

4.2 Create the Marketing Plan

95

3.3 Choose the Legal Form of Your Business 75

4.3 Identify Your Competition

101

ASSESSMENT AND REVIEW

4.4 The Marketing Mix—Product
and Price

107

Checkpoint

64, 65, 72, 73, 78, 80

Think Critically
Make Academic Connections
Chapter Assessment

66, 74, 81
66, 74, 81, 85
82–85

62, 67, 75

Communicate

64

Did You Know?

65

Tech Literacy

79

Teamwork

63, 73, 79

Cross-Cultural Relationships

69

Net Bookmark

76

Business Math Connection

68

89, 91, 93, 96, 98, 99, 102,
104, 105, 108, 112, 117, 120

Think Critically

94, 100, 106, 113, 121

Make Academic Connections
Chapter Assessment

Jump Start

122–125

88, 95, 101, 107, 114

Communicate

97

Did You Know?

92

Teamwork
Cross-Cultural Relationships

CONTENTS

94, 100, 106,
113, 121, 125

SPECIAL FEATURES

Tech Literacy

x

114

ASSESSMENT AND REVIEW
Checkpoint

SPECIAL FEATURES
Jump Start

4.5 The Marketing Mix—Distribution
and Promotion

103
89, 96, 104, 108, 115
93

Net Bookmark

105

Business Math Connection

110


CHAPTER 5
Human Resource
Management 126

CHAPTER 6
Finance, Protect, and Insure
Your Business 152

CAREERS FOR ENTREPRENEURS
Tremont Electric, LLC

126

CAREERS FOR ENTREPRENEURS
Life Is Good

152

PROJECT
Hiring for Your Business

127

PROJECT
Finance, Protect, and Insure
Your Business

153

5.1 Hire Employees

128

5.2 Create a Compensation Package

135

6.1 Make a Financial Plan

154

5.3 Manage Your Staff

140

6.2 Obtain Financing for Your

Business

161

6.3 Theft Proof and Insure Your Business

167

ASSESSMENT AND REVIEW
Checkpoint
Think Critically

130, 132, 133, 137,
138, 142, 144, 146
134, 139, 147

ASSESSMENT AND REVIEW
Checkpoint

155, 159, 162, 165, 169, 170

Make Academic Connections 134, 139, 147, 151

Think Critically

Chapter Assessment

Make Academic Connections 160, 166, 171, 175

148–151

Chapter Assessment

160, 166, 171
172–175

SPECIAL FEATURES
Jump Start

128, 135, 140

SPECIAL FEATURES

Communicate

132

Jump Start

Did You Know?

133

Communicate

170

Tech Literacy

142

Did You Know?

163

Tech Literacy

169

Teamwork

130, 136, 144

154, 161, 167

Cross-Cultural Relationships

138

Teamwork

155, 162, 168

Net Bookmark

141

Cross-Cultural Relationships

165

Business Math Connection

136

Net Bookmark

168

Business Math Connection

159

GLOSSARY

176

INDEX

178

CONTENTS

xi


CHAPTER 1

Should You
Become an

Entrepreneur?

1.1

All about Entrepreneurship

1.2

Is Entrepreneurship Right
for You?

1.3

Explore Ideas and Opportunities

1.4

Problem Solving for
Entrepreneurs

Careers for
Entrepreneurs

J. K. ROWLING
Ask successful people how to succeed, and
they will always tell you to do what you love.
For a fortunate few, that formula works.
Such is the case with J. K. Rowling, creator of
Harry Potter and one of the most successful
writers in the world today.

Rowling always wanted to be a writer, but
before her success came a young adulthood
full of indecision. Rowling went to Exeter
University and studied French. She worked as a
secretary but discovered that she liked nothing
about it and spent time working on stories at
the computer. She was eventually fired and
went abroad to teach English in Portugal. With
her mornings free, she began work on her third
novel after giving up on two others.
When she left Portugal, her suitcase was
filled with stories about Harry Potter. She
decided to finish the novel and try to get it
published before starting work as a French
teacher. A publisher bought the book one year
after it was finished. The road to success for
J. K. Rowling had begun!

Think Critically
1. Why do many entrepreneurs have
unsuccessful experiences as an employee?
2. Why do you think the Harry Potter books
have been so successful?
2


PROJECT

Identify a Business Opportunity

• Identify your strengths and
weaknesses
• Determine a business
opportunity that matches your
strengths and weaknesses
• Use the problem-solving model to
make decisions

Photodisc/Getty Images

Project Objectives

Getting Started
Read the Project Process below. Make a list of any materials you will need.
• Think about your interests, strengths, and weaknesses.
• Think of business opportunities that relate to your interests.

Project Process
1.1 Write a short paragraph describing how an individual became a
successful entrepreneur.
1.2 List all your interests. List business ideas that relate to each
interest. List your strengths and weaknesses. Compare them with your
list of business ideas. Cross out ideas that do not suit your strengths and
weaknesses.
1.3 Choose one of the remaining business ideas that most interests
you. Set financial goals for a five-year period based on the business idea
you chose. Demonstrate that your goals are SMART (Specific, Measurable,
Attainable, Realistic, and Timely). Next, set nonfinancial goals you hope to
achieve with this business. Be sure to include specific activities for each goal.
1.4 Consider a problem that could occur in the business that you have

chosen. Use the six-step problem-solving model to deal with it now.

Chapter Review

Creatas/Jupiter Images

Project Wrap-up Working with your chosen business idea, answer the six
questions listed under “Compare Different Opportunities” on pages 19–20.

3


ALL ABOUT ENTREPRENEURSHIP

GOALS
Define entrepreneurship
Recognize
entrepreneurial
opportunities and factors
for success

KEY TERMS
entrepreneurs, p. 4
entrepreneurship, p. 4
employees, p. 5

JUMP START
John owns a house painting business. While he was shopping for painting
supplies at the hardware store, he noticed a new device that would make
painting around trim and other edges much easier. The design was so

simple that John wondered why he hadn’t thought of it. An entrepreneur
is someone who takes an idea, acts on it, and develops it to offer a new
product or service. Have you ever seen a new product or service and thought
to yourself, “I had the same idea. I wish I had started this business!”
Photodisc/Getty Images

1.1

What Is an Entrepreneur?
The U.S. economy includes thousands of small businesses. Many of these small
businesses are owned and operated by men and women who created their
own companies. What makes someone an entrepreneur? What impact have
entrepreneurs had in history? What impact do they have today?
People who own, operate, and take the risk of a business venture are called
entrepreneurs. They are engaged in entrepreneurship, the process of running
a business of one’s own. Entrepreneurs come from all types of backgrounds
and create all kinds of businesses. People of all ages choose to become
entrepreneurs. Some own tiny craft shops while others own huge construction
companies. Entrepreneurs try to identify unmet needs in the marketplace. Then
they provide a service or product to meet those needs. When they succeed,
their businesses flourish and profits are earned. But if their business idea is
unsuccessful, they may lose the money they invested.
4

Chapter 1 • SHOULD YOU BECOME AN ENTREPRENEUR?


Employees vs. Entrepreneurs
Entrepreneurs assume risk. This makes them different from employees, who
are people who work for someone else. Both may make decisions, but only the

entrepreneur is directly affected by the consequences of those decisions. Sam
Jones manages a record store owned by Felipe Santiago. Sam decides to keep
the store open until midnight during the week. If the additional hours bring in
customers and increase profits, Sam may be praised by Felipe. He may even get
a raise. However, Sam won’t directly receive any of the profits because he is an
employee. The additional earnings will flow to Felipe, the owner.

Why Do People Become Entrepreneurs?

TEAMWORK
Work in teams to
compile a list of
advantages and
disadvantages of
being an employee.
List advantages and
disadvantages of being
an entrepreneur. As
a class, compare and
contrast the lists.

People go into business for themselves for many reasons. Some want to leave
the fast-paced corporate environment and set their own schedules. Others want
to be at home but still earn an income. Still others want to pursue a personal
dream. You might choose to become an entrepreneur for completely different
reasons.

Types of Entrepreneurial Businesses
There are generally four types of businesses, and there are opportunities for
entrepreneurs in each type. See the chart on the next page. Manufacturing

businesses actually produce the products they sell. Using resources and supplies,
they create everything from automobiles to paper. Wholesaling businesses sell
products to other businesses rather than the final consumer. For example,
a wholesaler supplies your local greeting card store with items such as cards
and wrapping paper. Retailing businesses, such as a greeting card store, sell
products directly to those who use or consume them. Service businesses sell
services rather than products. They include hotels, hairdressers, and repair
shops.

Other Business Areas Two other categories of businesses are
(1) agricultural and (2) mining and extracting businesses. Agricultural
businesses generate fresh produce and other farm products, such as wheat.
Mining and extracting businesses take resources like coal out of the ground
so they can be consumed.

Green Entrepreneurship In today’s economy, there are many opportunities
for entrepreneurs who have ideas for new products or services that are
considered green or organic. Because of the growing movement toward
environmentally friendly products, entrepreneurs who have a passion toward
being green have an advantage when introducing their product or service on
the market. It is important for green entrepreneurs to educate their customers
about how their products or services benefit the earth or conserve resources.
In addition to offering green products, entrepreneurs who use green business
practices, such as recycling and working with other green-minded companies,
are often favored by customers.

1.1 All about Entrepreneurship

5

DID YOU KNOW ?
A study by the Organic
Trade Association shows
that nonfood organic
product sales reached
$744 million in U.S.
consumer sales in 2005.

TYPES OF ENTREPRENEURIAL BUSINESSES
Manufacturing

Wholesaling

Retailing

Service

Apparel and other
textile products

Apparel

Appliance repair

Electrical goods

Auto and home
supply stores

Groceries and
related products

Building materials
and supply stores

Electronics and
other electrical
equipment

Hardware,
plumbing, heating
equipment

Clothing stores

Bookkeeping

Florists

Consulting

Furniture stores

Fabricated
metal products

Dance instruction

Gift, novelty, and

souvenir stores

Exterminators

Food products

Lumber,
construction
materials

Industrial
machinery and
equipment

Machinery,
equipment,
supplies

Chemicals and
related products

Printing and
publishing
Rubber and
miscellaneous
plastic products
Stone, clay, and
glass products

Motor vehicles,

automotive
equipment
Paper, paper
products

Automotive
repair
Babysitting

Grocery stores

Electrical
service

Hardware stores

Flower decorating

Jewelry stores

House cleaning

Retail bakeries

Lawn care

Shoe stores

Painting

Sporting goods
and bicycle stores

Plumbing

Petroleum,
petroleum
products

Translating
Travel agency
Tutoring
Web design and
maintenance

CheckPOINT
Describe different types of entrepreneurial businesses.

Recognizing Opportunity
Many of America’s most successful companies started with one person who
recognized an opportunity and came up with an idea for a business in response
to that opportunity. Entrepreneurs have played an important role in the history
of America’s economy and will continue to shape our economy in the future.
According to estimates from the U.S. Small Business Administration’s Office of
Advocacy, there were approximately 29.6 million businesses in the United States in
2008. Small firms with fewer than 500 employees represent 99.9 percent of these
U.S. businesses. Only 18,000 U.S. businesses are considered large. According to the
National Small Business Association, small businesses created 21.9 million jobs in
the last 15 years compared with 1.8 million jobs for large businesses.
6

Chapter 1 • SHOULD YOU BECOME AN ENTREPRENEUR?


Entrepreneurs Who Changed America
Entrepreneurs change American business decade after decade. They establish
new companies and fill unmet needs. They continuously change how things are
done and contribute to the overall economic good of the nation.
Coffee Company was founded in 1971,
opening its first location in Seattle’s Pike Place
Market. Starbucks is named after the first
mate in Herman Melville’s novel Moby Dick.
It is the world’s leading brand of specialty
coffee. Its stores receive more than 40 million
customer visits per week at coffeehouses in
North America, Europe, the Middle East, Latin
America, and the Pacific Rim. When Howard
Schultz first joined the company in the early
1980s, Starbucks was already a highly respected
Why has Starbucks been so successful?
local roaster and retailer of whole bean and
ground coffees. A business trip to Italy, where
he was impressed with the popularity of espresso bars, helped Schultz
recognize an opportunity to develop a similar coffeehouse culture in Seattle.
Espresso drinks became an essential element of Schultz’s vision. He purchased
Starbucks with the support of local investors in 1987. In addition to its
well-situated coffeehouses, Starbucks markets its coffee and tea products
through its website and through many national retail supermarkets.

© Brendan Howard, 2009/ Used under

license from Shutterstock.com

Starbucks Coffee Company Starbucks

Cross-Cultural Relationships
U.S. ENTREPRENEURS RESPECT CULTURAL
DIVERSITY
The United States represents a rich and diverse marketplace. This means
entrepreneurs need to identify the needs and wants of different cultures.
One of the fastest-growing segments of the American population speaks
Spanish. Many Spanish-speaking consumers prefer to watch Spanishspeaking television and read Spanish-language newspapers. To reach
this growing group of consumers, entrepreneurs will need to understand
that they cannot use traditional English-speaking media to promote their
product or service. Today there are many cable channels devoted to
Spanish-speaking entertainment and advertising. Many newspapers also
have a Spanish-language version.

Think Critically
List ways that entrepreneurs can reach Spanish-speaking consumers.

1.1 All about Entrepreneurship

7


The Home Depot In 1979, Bernie Marcus and Arthur Blank opened the
first The Home Depot stores in Atlanta, Georgia, forever changing the home
improvement industry. They envisioned a home improvement store that
offered one-stop shopping for the do-it-yourselfers. The original stores stocked
around 25,000 products. An average store today offers 40,000 products in

approximately 105,000 square feet. Marcus and Blank’s vision was of warehouse
stores filled from floor to ceiling with a wide assortment of home improvement
products at the lowest possible prices and with the best possible service. Within
five years, The Home Depot expanded from Georgia to Florida, Louisiana, Texas,
and Alabama. Today, it has more than 2,200 stores throughout the world.

Harpo Productions, Inc. Oprah Winfrey’s love of acting and her desire
to produce quality entertainment projects prompted her to form her own
production company, HARPO Productions, Inc., in 1986. Today, HARPO is a
formidable force in film and television production. Based in Chicago, HARPO
Entertainment Group includes HARPO Productions, Inc., HARPO Films, and
HARPO Video, Inc. In October 1988, HARPO Productions, Inc., acquired
ownership and all production responsibilities for The Oprah Winfrey Show
from Capital Cities/ABC, making Oprah Winfrey the first woman in history to
own and produce her own talk show. Oprah has also produced and appeared
in several television miniseries and movies.

Entrepreneurial Opportunities in Economic Recovery
Even during downturns in the economy, entrepreneurial opportunities still
exist. While big businesses tend to be more conservative in their approach to
economic slowdowns by scaling back production, conserving cash, and laying
off workers, small businesses that have less to lose are more willing and able
to make changes quickly. They can be more creative and take more risks than
large companies. Their experimentation and innovation lead to technological
change and increased productivity. This makes small businesses a significant
part of the economic recovery process.
The American Recovery and Reinvestment Act of 2009 was passed to
stimulate the American economy after the 2008 economic slowdown. It has
a number of provisions to help small businesses, including $30 billion in tax
relief for small businesses and $13 billion in loans, lines of credit, and equity

capital. Other provisions include
• Increasing the Small Business Administration (SBA) guarantee on loans up
to 95% of loan value
• Improving the liquidity of small business lending markets
• Allowing the SBA to refinance existing loans, including those with both the
SBA and other lenders
• Increasing equity capital for high-growth businesses
• Providing lending assistance for borrowers locked out of traditional financing markets
• Offering tax relief in several forms
8

Chapter 1 • SHOULD YOU BECOME AN ENTREPRENEUR?


The stimulus package also contains significant new support to increase
green businesses, including incentives to drive the growth of renewable energy,
stimulate energy efficiency efforts, and update the national electrical grid.

Although there are many opportunities for entrepreneurial success, there
is also a risk of failure. According to a recent study by the Small Business
Administration’s Office of Advocacy, two-thirds of new businesses survive at
least two years, and 44 percent survive at least four years. This means that
more than half of all new businesses do not survive beyond four years. These
results are similar for different industries. Many people think that there is a
higher failure rate for restaurants than other types of businesses. However,
leisure and hospitality establishments, which include restaurants, survive at
rates only slightly below the average. Major factors in a firm’s success include
having adequate capital, providing a product or service that meets customer
needs, the owner’s education level, and the owner’s reason for starting the
firm in the first place, such as freedom for family life or wanting to be one’s

own boss. The reason must sufficiently motivate the entrepreneur to have the
perseverance to succeed.
The owner’s business experience is a
factor that contributes to the likelihood
of success. Experienced businesspeople
have an understanding of how to
purchase products and services. They
know how to plan, negotiate with
suppliers, raise money, negotiate leases,
sell and market their product or service,
and manage finances. Many businesses
fail because the owner lacks business
knowledge. Someone may have an
idea for a product or service but lack
the necessary business skills he or she
needs to run a successful business.
There is a major difference between
How does an owner’s business experience play a role in the business’s
having expertise regarding a product
success?
or service and running a business with
that product or service. So when opportunity presents itself, entrepreneurs must
have what it takes to succeed.

Photodisc/Getty Images

Business Success or Failure

CheckPOINT
What role do small businesses play in the U.S. economy?

1.1 All about Entrepreneurship

9


1.1 ASSESSMENT

Think Critically
1. What are your reasons for wanting to become an entrepreneur? Do you
think they are common to all entrepreneurs, or are they unique?

2. Why do you think entrepreneurship is important to the U.S. economy?
Provide specific examples of how entrepreneurs affect the economy.

3. What do you think is the most important thing an entrepreneur should do
before starting a business to help ensure its success?

Make Academic Connections
4. Math Suppose there are exactly 5,812,000 small businesses in the economy
today. Approximately 27 percent of those businesses are service businesses.
What is the number of service businesses in the economy? Suppose 14 percent
of those service businesses close after two years. How many service
businesses remain open?

5. Social Studies Before Starbucks grew nationwide, there were few places
that people could go to have coffee and meet with friends and business
associates. Use word processing software to compose at least one paragraph
about how Starbucks and other coffee shops have changed the way people
view coffee and its role in society.

6. Communication Entrepreneurs can be of any age. Research a teen entrepreneur. Use word processing software to write a one-page paper about his
or her business. Discuss whether or not you think the business idea is a good
one. Make recommendations for expanding the business.

10

Chapter 1 • SHOULD YOU BECOME AN ENTREPRENEUR?


1.2

IS ENTREPRENEURSHIP RIGHT FOR YOU?
JUMP START

GOALS

©Anton Gvozdikov,, 2009/
/ Used under license from Shutterstock.com

Gloria and Delia are excited about starting their own business, but before
proceeding, Gloria realizes they need to slow down and think through the
process carefully. “You know, Delia, it’s not really easy to start our own
business. When we talked about this in class, Mr. Riviera said that there
are many things to consider before starting a business. First, we need
to decide what we like to do and what we are good at. Then we have to
do a lot of research and planning if we want to be successful.” Thinking
about what Mr. Riviera said in class, Delia sighs. “This entrepreneur thing
sounds like a lot of work. What do you think we should do?” Why is it
a good idea for Gloria and Delia to slow down and really examine their
interests before starting a business?

Identify the
characteristics of
successful entrepreneurs
Identify the
characteristics of good
team members
Assess whether you have
what it takes to succeed
in your own business

KEY TERMS
self-assessment, p. 13
aptitude, p. 14

Characteristics of Successful
Entrepreneurs
Many people dream of running their own businesses. They would like to
become entrepreneurs. Entrepreneurship can be exciting, but many go into
it not realizing how difficult it is to run their own business. In fact, statistics
show that most new businesses will fail within a few years. Startup businesses
fail because of the owner’s poor planning, lack of business knowledge, lack
of entrepreneurial characteristics, inability to work with others, or failure to
choose the right business.
1.2 Is Entrepreneurship Right for You?

11


Researchers have identified several

characteristics that distinguish successful
entrepreneurs from those that fail.

2. Successful entrepreneurs are selfconfident. Entrepreneurs make
all the decisions. They must
have the confidence to make
choices alone and bounce back
from a poorly made decision.
3. Successful entrepreneurs
have determination and
perseverance. Entrepreneurs
persist through hard times
until goals are met.
4. Successful entrepreneurs are
goal-oriented. They know what
they want, and they are able to
focus on achieving it.
5. Successful entrepreneurs have a
need to achieve and to set high
standards for themselves. They
Why should entrepreneurs be goal-oriented?
are motivated by setting and
achieving challenging goals.
6. Successful entrepreneurs are creative. They think of new ways to market
their businesses and always look for new solutions to problems.
7. Successful entrepreneurs are able to act quickly. They are not afraid to make
quick decisions when necessary, which helps them beat their competitors.
8. Successful entrepreneurs keep up to date with technology. New technologies
emerge that can help with many business activities. In order to run their
business efficiently, entrepreneurs should always be on the lookout for new

technology they can apply to their business.

CheckPOINT
Name three important characteristics of entrepreneurs.

12

Chapter 1 • SHOULD YOU BECOME AN ENTREPRENEUR?

©Jason Stitt, 2009/ Used under license from Shutterstock.com

1. Successful entrepreneurs are independent.
They want to make their own decisions
and do something they enjoy.


Characteristics of Good Team Members
Entrepreneurs realize that there are other
stakeholders in their businesses—partners,
investors, employees, suppliers, customers,
creditors, and so forth. They must work with
others to get their business up and running. They
must have good team-building skills as well as
be effective team members. Good team members
display the following traits.
1. Commitment They are committed to team
goals and willing to work hard to achieve the
goals.
2. Competency They have the right skills needed
to get the job done and to help accomplish the

team’s goals.

Your textbook lists several characteristics of successful entrepreneurs.
Do you have what it takes to be an entrepreneur? Access www.
cengage.com/school/business/21biz and click on the link for Chapter 1.
Take this brief online quiz to find out. What are some personal
characteristics assessed by the test? Which do you think are the most
relevant? Based on your personal test results, do you think you would
be a successful entrepreneur?
www.cengage.com/school/business/21biz

3. Communication They have good communication skills and can share ideas with others in both
oral and written form.
4. Cooperation They must work well with others and know that they will not
always get their way. They are willing to accept the decision of the group for
the good of the group.
5. Creativity They are able to look at things from different perspectives and
suggest new ways of doing things.

CheckPOINT
Why is it important for entrepreneurs to be good team members?

Are You Right for Entrepreneurship?
Entrepreneurship is not for everyone. Some people lack the qualities needed
to become successful entrepreneurs. Others lack the aptitude needed to run a
business. To determine if entrepreneurship is right for you, you need to perform
a self-assessment. A self-assessment is an evaluation of your strengths and
weaknesses. You can do this in a number of ways. You can list what you believe
to be your strengths and weaknesses on a sheet of paper. You can ask others
what they believe your strengths are and where your weaknesses lie. There are

also professional tests you can take to assess your abilities.

1.2 Is Entrepreneurship Right for You?

13


Creatas/Jupiter Images

Why is it important to assess your strengths and weaknesses before starting
a business?

Assess Your Interests
Success as an entrepreneur requires a strong commitment to a business and
a lot of energy. To be able to commit yourself fully to a business, you should
choose a field that interests you and that will provide you with an experience
you will enjoy. Many entrepreneurs center a business on an interest or hobby.
Analyzing past experiences and jobs can also help. Building a business around
jobs or experiences that you found fulfilling could lead to success.

Assess Your Aptitude
Different jobs require different job aptitudes. Aptitude is the ability to
learn a particular kind of job. Auto mechanics must possess an aptitude for
solving mechanical problems and must be good with their hands. People
who sell insurance must have good interpersonal skills. Answering questions
like those in the Job Attributes Checklist can help you identify the kinds of
entrepreneurial opportunities that might match your aptitudes and interests.

TEAMWORK
Working in a

small group, suggest
ten possible jobs for
each item on the job
attributes checklist.
Choose one person to
write the suggestions
from your group on the
board or on paper.

14

JOB ATTRIBUTES CHECKLIST
h 1. I enjoy working with numbers.
h 2. I enjoy working outdoors.
h 3. I enjoy working with my hands.
h 4. I enjoy selling.
h 5. I like working with people.
h 6. I prefer to work alone.
h 7. I like supervising other people.
h 8. I like knowing exactly what it is I am supposed to do.

Chapter 1 • SHOULD YOU BECOME AN ENTREPRENEUR?