Creating and Leading Entrepreneurial
Ventures Module
How many of your students dream of starting a new business someday? When
you ask this question in class, you may be surprised and impressed by the
number of your students who are interested in the possibility of becoming an
entrepreneur. Appendix A presents information to provide students with a
foundational knowledge of major entrepreneurial issues in today’s dynamic
business environment.
In their study of Chapter 9A: Creating and Leading Entrepreneurial Ventures
Module, students learn about the differences between an entrepreneurial
venture and a small business. The four key steps of the entrepreneurial process
CHAPTER OUTLINE
1. THE CONTEXT OF ENTREPRENEURSHIP
Entrepreneurs engage in a variety of activities through their performance
of the four managerial functions of planning, organizing, leading, and
controlling. Appendix A examines the importance of entrepreneurship and
the activities and tasks that contribute to a successful entrepreneurial
venture.
A. What is Entrepreneurship? Entrepreneurship is important to
every industry sector in the United States and in most advanced
countries throughout the world.
B. Why is Entrepreneurship Important? The importance of
entrepreneurship can be found in four areas:
1. Innovation
a. Entrepreneurial firms act as “agents of change.”
b. New small organizations generate 24 times more
innovations per research and development dollar
spent than do Fortune 500 organizations.
2. Number of new start-ups
a. The number of new start-ups in the United States
3. Job creation
a. Job creation is important to overall long-term
4. Global entrepreneurship
a. Highest levels of entrepreneurial activity tend to be
C. The Entrepreneurial Process
Entrepreneurs must address four key steps as they begin and
manage their entrepreneurial ventures:
2. Identify opportunities and possible competitive
advantages.
4. Manage the venture.
D. What Do Entrepreneurs Do?
it, and exploit it.
E. Social Responsibility and Ethics Issues Facing Entrepreneurs
1. In a study of small companies, 95 percent of respondents
2. In a survey of employees from businesses of various sizes,
2. START-UP AND PLANNING ISSUES
Entrepreneurs must first identify opportunities and possible competitive
advantages. Next, they should research the feasibility of the venture and
carefully plan for its launch.
A. Entrepreneurs must see opportunities quickly, before those
opportunities disappear or are exploited by other individuals.
B. Peter Drucker identified the following seven potential sources of
opportunity that entrepreneurs might seek to identify in the
external context:
1. The unexpected
2. The incongruous
3. The process need
5. Demographics
7. New knowledge
C. Researching the Venture’s Feasibility—Generating and
Evaluating Ideas
Sources for an entrepreneurial venture include working in the
same industry, personal interests or hobbies, examining existing
products and services, and opportunities in external environmental
sectors.
1. Possible questions entrepreneurs might consider in
researching their potential competitors include the
following items:
a. What types of products or services are competitors
offering?
b. What are the major characteristics of these
products or services?
e. What do they attempt to do differently from other
competitors?
f. Do they appear to be successful at it? Why or why
not?
g. What are they good at?
h. What competitive advantage(s) do they appear to
have?
i. What are they not so good at?
2. The entrepreneur should next consider how his/her
proposed venture will “fit” into its competitive arena.
E. Researching the Venture’s Feasibility—Researching
Financing
1. The entrepreneur must devote time and effort to carefully
researching a number of varied financing options.
F. Planning the Venture—Developing a Business Plan
1. The entrepreneur must put serious thought and
consideration into the writing of a business plan.
2. A good business plan covers six major areas:
a. Executive summary
b. Analysis of opportunity
c. Analysis of the context
d. Description of the business
e. Financial data and projections
f. Supporting documentation
3. ORGANIZING ISSUES
When the start-up and planning issues for the entrepreneurial venture
have been addressed, the entrepreneur begins to consider the
organization of the proposed business.
A. Legal Forms of Organization
1. In organizing a new business, the entrepreneur must first
2. An entrepreneurial venture may be organized in one of
3. These three basic ways, together with variations of these
alternatives, offer the six possible choices listed below (see
Exhibit EV-4):
a. Sole proprietorship: the form of legal organization in
which the owner maintains sole and complete
control over the business and is personally liable
for business debts.
b. General partnership: a form of legal organization in
which two or more business owners share the
d. C corporation: a legal business entity that is
separate from its owners and managers.
than an S corporation.
B. Organizational Design and Structure
1. As the business grows, the entrepreneur must hire
employees to help in the business. At this point, the
2. Organizational design choices are based on the six key
elements of organizational structure presented in Chapter
10:
a. Work specialization
b. Departmentalization
C. Human Resource Management Issues in Entrepreneurial
Ventures
2. Employee recruitment. An entrepreneur wants to ensure
3. Employee retention. Getting competent and qualified
people into the venture is just the first step in effectively
D. Simulating and Making Changes
1. If changes are needed in the entrepreneurial venture, often
it is the entrepreneur who first recognizes the need for
E. The Continuing Importance of Innovation
1. Organizations must continually innovate new products and
services if they want to compete successfully.
3. The entrepreneur must provide the supervisory support,
4. LEADING Issues
In an entrepreneurial venture, the management function of leading plays
an important role in the success of the business.
A. Personality Characteristics of Entrepreneurs
1. It has been difficult to identify specific personality traits that
all entrepreneurs share.
2. Evidence suggests an entrepreneur is likely to have a
3. Studies have shown that entrepreneurs have greater risk
propensity than managers do. However, this propensity is
moderated by the entrepreneur’s primary goal.
B. Motivating Employees Through Empowerment
1. Successful entrepreneurial ventures must be quick and
nimble, ready to pursue opportunities and go off in new
directions.
2. Empowered employees can provide that flexibility and
3. It’s hard for many entrepreneurs to empower employees
4. Entrepreneurs can begin by using participative decision-
making in which employees provide input into decisions.
C. The Entrepreneur as Leader
1. Leading the Venture: leadership combines the
unpredictability of the future with the gifts of individuals.
2. Leading Employee Work Teams: the three most common
entrepreneurial teams are: empowered teams (teams that
5. CONTROLLING Issues
Entrepreneurs must consider a number of issues relating to the control of
their venture’s operations in order to survive and prosper. These control
issues include the following:
A. Managing Growth
1. Planning for Growth: Entrepreneurs need to address
2. Organizing for Growth: The key challenges for an
3. Controlling for Growth: Maintaining good financial records
and financial controls over cash flow, inventory, customer
data, sales orders, receivables, payables, and costs should
be a priority of every entrepreneur.
B. Managing Downturns
1. Recognizing Crisis Situations: Some signals of potential
performance decline include inadequate or negative cash
flow, excess number of employees, unnecessary and
cumbersome administrative procedures, fear of conflict
and taking risks, tolerance of work incompetence, lack of a
clear mission or goals, and ineffective or poor
communication within the organization.
2. Dealing with Downturns, Declines, and Crises
a. It’s important to have an up–to-date plan for
covering crises.
C. Exiting the Venture
The issues involved with exiting the venture include choosing a
proper business valuation method and knowing what’s involved in
the process of selling a business.
1. Business Valuation Models
2. Other Important Considerations in Exiting a Venture: These
factors include being prepared, deciding who will sell the
D. Managing Personal Life Choices and Challenges
2. One of the most important things an entrepreneur can do is
become a manager of their time.
4. To achieve a balance between work and personal life it is
good to develop a network of trusted friends and peers.
5. It is vital to recognize when your stress levels are too high.
ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
Student answers to these questions will vary.
EV-1. What do you think would be the hardest thing about being an
entrepreneur? What do you think would be the most fun thing?
One of the interesting things about the advantages and disadvantages of being
an entrepreneur is that often what’s seen as an advantage for some can be a
disadvantage for others. Some individuals may find that the most difficult aspect
EV-2. How does the concept of social entrepreneurship (see Chapter 6) relate to
entrepreneurs and entrepreneurial ventures?
EV-3. Would a good manager be a good entrepreneur? Discuss.
EV-4. Why do you think many entrepreneurs find it hard to step aside and let
others manage their business?
EV-5. Do you think a person can be taught to be an entrepreneur? Why or why
not?
Some people have the ‘right stuff’ when it comes to starting their own business.
They have a proactive personality, they are comfortable with risk, they have a
good support group, and they have been put in the right situation at the right time
to seize an opportunity. Does this mean that if an aspiring entrepreneur doesn’t
have the right personality, or friends and family, that you won’t succeed?
EV-6. What do you think it means to be a successful entrepreneurial venture?
How about a successful entrepreneur?
For some people, success in business is measured by profitability. For