Entrepreneurship is the process of planning, organizing, operating, and assuming the risk of a business venture. An entrepreneur is someone who engages in entrepreneurship. In general, entrepreneurs start small businesses. Small businesses are an important source of innovation, create numerous jobs, and contribute to the success of large businesses.

In choosing strategies, entrepreneurs have to consider the characteristics of the industry in which they are going to conduct business. Entrepreneurs can use Porter's five forces framework to choose their industry. A small business must also emphasize its distinctive competencies. Small businesses generally have several distinctive competencies that they should exploit in choosing their strategy. Small businesses are usually skilled at identifying niches in established markets, identifying new markets, and acting quickly to obtain first-mover advantages. Small businesses are usually not skilled at exploiting economies of scale. Once an entrepreneur has chosen a strategy, the strategy is normally written down in a business plan. Writing a business plan forces an entrepreneur to plan thoroughly and to anticipate problems that might occur.

With a strategy and business plan in place, entrepreneurs must choose a structure to implement them. All of the structural issues summarized in the next five chapters of this book are relevant to the entrepreneur. In addition, the entrepreneur has some unique structural choices to make. In determining ownership and financial structure, the entrepreneur can choose between a sole proprietorship, a partnership, a corporation, a master limited partnership, a sub-chapter S corporation, and a cooperative. In determining financial structure, an entrepreneur has to decide how much personal capital to invest in an organization, how much bank and government support to obtain, and whether to encourage venture capital firms to invest. Finally, entrepreneurs have to choose among the options of buying an existing business, starting a new business from scratch, or entering into a franchising agreement.

Most small businesses pass through a three-phase life cycle: acceptance, breakthrough, and maturity. There are several reasons why successful small businesses are able to move through all three of these stages of development: hard work, drive, and dedication; market demand for products or services provided; managerial competence; luck; strong control systems; and sufficient capitalization.