The Entrepreneurial The Entrepreneurial Revolution // Evolution Revolution Evolution

The World of the Entrepreneur

A

new business is born every 11 seconds in the United States Entrepreneurship will be the defining economic issue of the 21st Century One in 12 Americans is actively involved in trying to launch a new business.

Pervasiveness of New Ventures in the Economy

Entrepreneurial Activity: Growth in Small

Businesses
There are over 25 million small businesses; the number continues to grow 2% annually. New business incorporations have averaged over 600,000 per year over the past decade. Small business (< 500 employees) employ 53% of the private work force and account for 47% of sales and 51% of private sector gross domestic product (GDP)

Entrepreneurial Firms Impact

Entrepreneurial

firms make two indispensable contributions to the U.S. economy: First, they are an integral part of the renewal process that pervades and defines market economies. Second, they are the essential mechanism by which millions enter the economic and social mainstream of American society.

Entrepreneurial Activity Across the Globe

Pe rcentage of Adult Population Working to Start a Ne w Business
United States Canada Israel 5.4% 3.4% 3.3% 2.2% 2.0% 1.8% 1.6% 1.4% 6.8% 8.5%

Country

Italy Great Britain Germany Denmark France J apan Finland

0.0%

2.0%

4.0% Percent

6.0%

8.0%

10.0%

The Age of Gazelles

A

gazelle is a business establishment with at least 20% sales growth every year (for five years), starting with a base of at least $100,000.

Gazelles - Innovation
Gazelles

are leaders in innovation. Gazelles produce twice as many product innovations per employee as do larger firms.

New Businesses - Growth

By

the year 2010, demographers estimate, 30 million firms will exist in the United States, up significantly from the 22.5 million firms existing in 2000.

New Businesses - Survival

The

common myth is that 85% of all firms fail in the first year. The more accurate statement is that about half of all start-ups last between 5 and 7 years.

Entrepreneurial Opportunities

Self-Employment, 1967-2007
Thousands 14,000 Agriculture 12,000 Non-agriculture 10,000 8,000 6,000 4,000 2,000 8,127 2,136 7,428 1,646 7,881 5,991 5,783 8,971 10,096 9,327 1,447 10,490 1,518 11,615 1,519

What is an Entrepreneur?
One

who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

Characteristics of Entrepreneurs
Desire

for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation Skilled at organizing Value achievement over money

Rewards of Being an Entrepreneur

t High degree of independencefreedom from constraints t Get to use a variety of skills and talents t Freedom to make decisions t Accountable to only yourself t Opportunity to tackle challenges t Feeling of achievement and pride t Potential for greater financial rewards

Feeding the Entrepreneurial Fire

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web International opportunities

Challenges of Being an Entrepreneur

t Must be comfortable with change and uncertainty t Must make a bewildering number of decisions t Need many different skills and talents t May face tough economic choices t Must be comfortable with taking risks t Must be comfortable with the potential for failure

The Cultural Diversity of Entrepreneurship

Young entrepreneurs Women Minority-owned enterprises Immigrant entrepreneurs Family businesses Corporate castoffs Corporate dropouts Part-time entrepreneurs Home-based businesses

(Sometimes) Fatal Errors of Entrepreneurship

1. 2. 3. 4. 5.

Management incompetence Lack of experience Poor financial control Failure to develop a strategic plan Uncontrolled growth

(Sometimes) Fatal Errors of Entrepreneurship

6. 7. 8. 9.

Poor location Improper inventory control Incorrect pricing Inability to make the entrepreneurial transition

Entrepreneurs vs. Small Business Owners: A Distinction

Entrepreneurs

Focus their efforts on start-up, innovation, profitability and rapid growth

Small Businesses Owners

Manage their businesses by expecting stable sales, profits, and growth

Sm Business by Industry all

Financial 8.0% Construction 11.8% Manufacturing 5.8% Wholesale 7.4%

Other 7.3%

Services 39.2%

Retail 20.5%

Benefits of Small Business Ownership

The opportunity to: create your own destiny make a difference reach your full potential reap unlimited profits contribute to society and be recognized for your efforts do what you enjoy and have fun at it

Drawbacks of Small Business Ownership

Uncertainty

of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement

The Small Business Failure Record

24%

of new businesses fail after two years. 51% fail within four years. 63% fail within six years.

Small Business Survival Rate

100%

% of Small Firms Surviving

80% 60% 40% 20% 0% New 2 4 6 8 10

# of Years in Business

To Avoid Small Business Failure:

Know

your business in depth Develop a solid business plan Manage financial resources Understand financial statements Learn to manage people effectively Like what you do

Small Businesses

Produce

51% of the nation's private GDP. Account for 47% of business sales. Create 4X more innovations per R & D dollar spent than medium-size firms and 24X as many as large companies.

Small Businesses
Create

more jobs than big businesses. Are leaders in offering training and advancement opportunities to workers. Employ 53% of the nation's private sector workforce. Make up 99% of all businesses in the United States.

Evolving Evolving Entrepreneurial Entrepreneurial Concepts Concepts

The Evolution of Entrepreneurship

Entrepreneur

is derived from the French entreprendre, meaning to undertake. no single definition of entrepreneur exists and no one profile can represent todays entrepreneur, research is providing an increasingly sharper focus on the subject.

Although

A Summary Description of Entrepreneurship

Entrepreneurship:

The dynamic process of creating

incremental wealth.

This wealth is created by individuals who assume major risks in terms of equity, time, and/or career commitment of providing value for a product or service. The product or service itself may or may not be new or unique but the entrepreneur must somehow infuse value by securing and allocating the necessary skills and resources.

Definition of an Entrepreneur

An entrepreneur is an innovator or developer who recognizes and seizes opportunities; converts those opportunities into workable, marketable ideas; adds value through time, effort, money or skills; assumes the risks of the competitive marketplace to implement these ideas; and realizes the rewards from these efforts.

Who is the Entrepreneur?

High

Inventor Creativity & Innovation Promoter

Entrepreneur

Manager, administrator

High Low General management skills, business know-how, networks

In What Ways Do Entrepreneurs Think Differently Than Other People?

What Do Entrepreneurs Do Differently Than Other People?

They Positively Frame Business Challenges They Understand That the Success of their Business Starts With Themselves They Passionately Seek New Opportunities They Pursue Opportunities With Enormous Discipline

What Do Entrepreneurs Do Differently Than Other People?

Entrepreneurs Pursue Only the Very Best Opportunities and Avoid Exhausting Themselves By Chasing Every Option Entrepreneurs Focus On Execution Entrepreneurs Create and Sustain Networks of Relationships Rather Than Going It Alone Entrepreneurs Get People Excited and Keep People Excited About Their Businesses and Their Ideas

The Myths of Entrepreneurship

Myth 1:

Entrepreneurs Are Doers, Not Thinkers Entrepreneurs Are Born, Not Made Entrepreneurs Are Always Inventors Entrepreneurs Are Academic and Social Misfits Entrepreneurs Must Fit the Profile

Myth 2: Myth 3: Myth 4:

Myth 5:

The Myths of Entrepreneurship

Myth 6: Myth 7: Myth 8:

All Entrepreneurs Need Is Money All Entrepreneurs Need Is Luck

Entrepreneurship is Unstructured and Chaotic Myth 9: Most Entrepreneurial initiatives Fail Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)

EntrepreneursChallenging the Unknown

Entrepreneurs

Recognize opportunities where others see chaos or confusion Are aggressive catalysts for change within the marketplace Challenge the unknown and continuously create the future

An Integrated Definition
Entrepreneurship

A dynamic process of vision, change, and creation.

Requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions.

Essential ingredients include:

The willingness to take calculated risksin terms of time, equity, or career. The ability to formulate an effective venture team; the creative skill to marshal needed resources. The fundamental skills of building a solid business plan. The vision to recognize opportunity where others see chaos, contradiction, and confusion.

Macro View: External Locus of Control

The

Environmental School of Thought Financial/Capital School of Thought Displacement School of Thought

Considers the external factors that affect a potential entrepreneurs lifestyle.

The

Based on the capital-seeking processthe search for seed and growth capital.

The

(Alienation drives entrepreneurial pursuits) Political displacement (laws, policies, and regulations) Cultural displacement (preclusion of social groups) Economic displacement (economic variations)

Micro View: Internal Locus of Control (contd)

The Entrepreneurial Trait School of Thought

Focuses on identifying traits common to successful entrepreneurs.

Achievement, creativity, determination, and technical knowledge

The Venture Opportunity School of Thought

Focuses on the opportunity aspect of venture developmentthe search for idea sources, the development of concepts, and the implementation of venture opportunities.

Micro View (contd)

The Strategic Formulation School of Thought

Emphasizes the planning process in successful venture development.

Entrepreneurs in the United States

Reasons for the exceptional entrepreneurial

activity in the U.S. include:

A national culture that supports risk taking and seeking opportunities. Americans alertness to unexploited economic opportunity and a low fear of failure. U.S. leadership in entrepreneurship education at both the undergraduate and graduate level. A high percentage of individuals with professional, technological or business degrees who are likely to become entrepreneurs.