Chapter 1 Every0ne lives by selling something. -Robert Luis Stevenson, Scottish author Key Objectives Describe the difference between employees and entrepreneurs. Discuss how entrepreneurs create value from “scarce” resources. Explain why entrepreneurs like change. Evaluate the pros and cons of owning your own business. Vocabulary Business Entrepreneur Capital Free enterprise system Capitalism Profit Economy Res0urce Employee Voluntary exchange Differences between Employees and Entrepreneurs Most Americans make money working in a business. A business is buying and selling of products and services in order to make a profit. An employee who works in another person’s business. Entrepreneurs are people who work in their own business. The success of the business belongs to the entrepreneur. Think Like an Entrepreneur Entrepreneur is a risk taker, a can-do person. Always looking for opportunity to learn new skills and take on new responsibilities. Show your employer that you understand business and working to improve the profitability of the company. “Entrepreneurship is a way of thinking, reasoning, and acting that is opportunityobsessed, holistic in approach, and leadership balanced.”—Jeffery Timmons Entrepreneurs do three important things: 1. They listen. 2.They observe. 3. They think a) Problem solvers, for profit! Skills Means Success #1 pg. 4 Seeing yourself as an entrepreneur. “The best way to get good ideas is to have lots of them.” –Linus Pauling, Nobel Peace Prize winning scientist. Develop an Idea Journal Carry a small pocket-size notebook all the time. Listen, observing, and thinking skill to see opportunities to meet consumer needs. Describe briefly every you have with a business. Big and Small Business Big Business is defined as follows: A company with over 100 employees. Selling more than million dollars of good or services annually. Small business are business that are smaller. “America’s small business owners and their employees represent more than half of the private workforce. These entrepreneurs who create more than 75% of new jobs nationwide and generate more than 50% of the nation’s GDP, and employees who work in small businesses, deserve our thanks. We salute them.” –George W. Bush, President A Business Must Make a Profit To Stay in Business Rule of thumb: It is realistic to expect to lose money for at least three months. Intial start-up costs and loans. Change in customers behavior. New customers come from other business. 20% Repeat customers. Important people. 60% of all new business close operations before 5 years. Lack of capitalization Lack of sales, lack of repeat customers. Can’ beat the competition! Profit Is the Sign that the Entrepreneur is Adding Value When business is making a profit, something is going right. Profit is adding value to scarce resources. Scarce resources are something with value that is limited, such as oil, and wood. What are other examples of Scarce Resources? Mrs. Fields Original Cookies takes scarce resources flour, sugar, chocolate, and etc. and make cookies. Saless are greater than the total amount of the scarce resources. The Economic Question What should be produced? How will it be produced? Who gets to have what is produced? Economy- The study of how different groups answer the above questions. Free enterprise system- A system that distributes wealth. Anyone can start a business (within the laws). To sell goods and/or services to the public for profit. Capital-Is the money to start a business. Voluntary Exchange “Free-trade system” Transactions between two parties who agree to trade money for goods or services. No one is forced to trade. Both parties benefits in the transactions. Business receives profit. Consumer receives utility of the product or services (benefits). Benefits of Free Enterprise Entrepreneurs are discourage to waste scarce resources. Control costs. Entrepreneurs must effectively provide goods and services to satisfy consumers. Encourages competition Entrepreneurs view changes as opportunity. Skills Means Business #2 pg. 8 Reading for Information and Understanding Gathering and Interpreting Information. Look for articles about the following people on the Internet. Read the articles and tell me what business or opportunity by taking advantage of a change, trend, or consumer need. Use MS Word to write the document. Russell Simmons Lane Bryant Julie Algner-Clark John H. Johnson Sarah Breedlove Walker Why be an Entrepreneur? Advantages Control over time Disadvantages Creative, full filling life Business failure Opportunity to create great wealth Obstacles Control over compensation Salary, wage, dividend, commission Loneliness Control over working conditions. Self-Evaluation Participation in an International community. Opportunity to help one’s community. Financial Insecurity Long hours/hard work Skills Mean Success #3 pg.10 Reading for Information and Understanding Interpreting, and analyzing information See page 10 of the textbook to see why people start businesses. Owner is the Key to Wealth Entrepreneurs make great wealth through their business’s profits. Entrepreneurs take that profits and do the following. Take the profits for themselves as a reward for taking the risks. Reinvest the profits back to the company to make it larger and more profitable. Start another business. Living a Life You Will Love 1. Wealth 2.Influence 3. Control Profit is the reward for satisfying a customer need.