The Entrepreneurial Revolution / EvolutionThe Entrepreneurial Revolution / Evolution

The World of the EntrepreneurThe 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 Pervasiveness of New Ventures in the Economyin the Economy

Entrepreneurial Activity: Growth in Small Entrepreneurial Activity: Growth in Small BusinessesBusinesses

– There are over 25 million small businesses; the number There are over 25 million small businesses; the number continues to grow 2% annually.continues to grow 2% annually.

– New business incorporations have averaged over New business incorporations have averaged over 600,000 per year over the past decade.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’ ImpactEntrepreneurial 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 Entrepreneurial Activity Across the GlobeGlobe

1.4%

1.6%

1.8%

2.0%

2.2%

3.3%

3.4%

5.4%

6.8%

8.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Percent

Finland

J apan

France

Denmark

Germany

Great Britain

Italy

Israel

Canada

United States

Co

un

try

Percentage of Adult Population Working to Start a New Business

The Age of GazellesThe 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 - InnovationGazelles - Innovation

Gazelles are leaders in innovation. Gazelles produce twice as many product

innovations per employee as do larger firms.

New Businesses - GrowthNew 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 - SurvivalNew 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 Entrepreneurial OpportunitiesOpportunities

Self-Employment, 1967-2007Self-Employment, 1967-2007

ThousandsThousands

2,0002,000

4,0004,000

6,0006,000

8,0008,000

10,00010,000

12,00012,000

14,00014,000

AgricultureAgriculture

Non-agricultureNon-agriculture

2,1362,136

5,9915,991

8,1278,127

1,6461,646

5,7835,783

7,4287,428

1,4471,447

7,8817,881

9,3279,327 1,5181,518

8,9718,971

10,49010,4901,5191,519

10,09610,096

11,61511,615

What is an Entrepreneur?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 EntrepreneursCharacteristics of Entrepreneurs

Desire for responsibilityPreference for moderate riskConfidence in their ability to succeedDesire for immediate feedbackHigh level of energyFuture orientationSkilled at organizingValue achievement over money

Rewards of Being an EntrepreneurRewards of Being an Entrepreneur

High degree of independence—freedom from constraints

Get to use a variety of skills and talents

Freedom to make decisions

Accountable to only yourself

Opportunity to tackle challenges

Feeling of achievement and pride

Potential for greater financial rewards

Feeding the Entrepreneurial FireFeeding 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 BeingChallenges of Beingan Entrepreneuran Entrepreneur

Must be comfortable with change and uncertainty

Must make a bewildering number of decisions

Need many different skills and talents

May face tough economic choices

Must be comfortable with taking risks

Must be comfortable with the potential for failure

The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

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

(Sometimes) Fatal Errors of (Sometimes) Fatal Errors of EntrepreneurshipEntrepreneurship

1. Management incompetence

2. Lack of experience

3. Poor financial control

4. Failure to develop a strategic plan

5. Uncontrolled growth

(Sometimes) Fatal Errors of (Sometimes) Fatal Errors of EntrepreneurshipEntrepreneurship

6. Poor location

7. Improper inventory control

8. Incorrect pricing

9. Inability to make the “entrepreneurial transition”

Entrepreneurs vs. Entrepreneurs vs. Small Business Owners: A DistinctionSmall Business Owners: A Distinction

EntrepreneursEntrepreneurs– Focus their efforts on start-up, innovation, Focus their efforts on start-up, innovation,

profitability and rapid growthprofitability and rapid growth

Small Businesses OwnersSmall Businesses Owners– Manage their businesses by expecting stable Manage their businesses by expecting stable

sales, profits, and growthsales, profits, and growth

Small Business by Industry

Services39.2%

Retail20.5%

Wholesale7.4%

Manufacturing5.8%

Construction11.8%

Financial8.0%

Other7.3%

Benefits of Small Business OwnershipBenefits 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 Drawbacks of Small Business OwnershipOwnership

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 RecordThe Small Business Failure Record

24% of new businesses fail after two years.

51% fail within four years.63% fail within six years.

0%

20%

40%

60%

80%

100%

% o

f Sm

all F

irm

s S

urv

ivin

g

New 2 4 6 8 10

# of Years in Business

Small Business Survival Rate

To Avoid Small Business To Avoid Small Business Failure: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

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 BusinessesSmall Businesses

Small BusinessesSmall 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 Entrepreneurial

Concepts

Evolving Entrepreneurial

Concepts

The Evolution of EntrepreneurshipThe Evolution of Entrepreneurship

Entrepreneur is derived from the French entreprendre, meaning “to undertake”.

Although no single definition of entrepreneur exists and no one profile can represent today’s entrepreneur, research is providing an increasingly sharper focus on the subject.

A Summary Description A Summary Description of Entrepreneurshipof Entrepreneurship

Entrepreneurship:Entrepreneurship:

The dynamic process of creating The dynamic process of creating incremental wealth.incremental wealth.

– This wealth is created by individuals who assume major This wealth is created by individuals who assume major risks in terms of equity, time, and/or career commitment of risks in terms of equity, time, and/or career commitment of providing value for a product or service. providing value for a product or service.

– The product or service itself may or may not be new or The product or service itself may or may not be new or unique but the entrepreneur must somehow infuse value by unique but the entrepreneur must somehow infuse value by securing and allocating the necessary skills and resources.securing and allocating the necessary skills and resources.

Definition of an EntrepreneurDefinition 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?

Inventor Entrepreneur

PromoterManager,

administrator

High

Low High

Creativity& Innovation

General management skills, business know-how, networks

In What Ways Do Entrepreneurs ThinkIn What Ways Do Entrepreneurs ThinkDifferently Than Other People?Differently Than Other People?

What Do Entrepreneurs Do What Do Entrepreneurs Do Differently Than Other People?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 What Do Entrepreneurs Do Differently Than Other People?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 EntrepreneurshipThe Myths of Entrepreneurship

Myth 1: Entrepreneurs Are Doers, Not Thinkers

Myth 2: Entrepreneurs Are Born, Not Made

Myth 3: Entrepreneurs Are Always Inventors

Myth 4: Entrepreneurs Are Academic and Social Misfits

Myth 5: Entrepreneurs Must Fit the “Profile”

The Myths of EntrepreneurshipThe Myths of Entrepreneurship

Myth 6: All Entrepreneurs Need Is Money

Myth 7: All Entrepreneurs Need Is Luck

Myth 8: Entrepreneurship is Unstructured and Chaotic

Myth 9: Most Entrepreneurial initiatives Fail

Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)

Entrepreneurs—Challenging the Entrepreneurs—Challenging the UnknownUnknown

EntrepreneursEntrepreneurs

– Recognize opportunities Recognize opportunities where others see chaos or where others see chaos or confusionconfusion

– Are aggressive catalysts for Are aggressive catalysts for change within the change within the marketplacemarketplace

– Challenge the unknown and Challenge the unknown and continuously create the continuously create the future future

An Integrated DefinitionAn Integrated Definition

EntrepreneurshipEntrepreneurship– A dynamic process of vision, change, and creation.A dynamic process of vision, change, and creation.

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

– Essential ingredients include:Essential ingredients include:• The willingness to take calculated risksThe willingness to take calculated risks——in terms of time, in terms of time,

equity, or career.equity, or career.

• The ability to formulate an effective venture team; the The ability to formulate an effective venture team; the creative skill to marshal needed resources.creative skill to marshal needed resources.

• The fundamental skills of building a solid business plan.The fundamental skills of building a solid business plan.

• The vision to recognize opportunity where others see chaos, The vision to recognize opportunity where others see chaos, contradiction, and confusion.contradiction, and confusion.

Macro View: External Locus of Macro View: External Locus of ControlControl

The Environmental School of ThoughtThe Environmental School of Thought– Considers the external factors that affect a potential Considers the external factors that affect a potential

entrepreneur’s lifestyle. entrepreneur’s lifestyle.

The Financial/Capital School of ThoughtThe Financial/Capital School of Thought– Based on the capital-seeking processBased on the capital-seeking process—t—the search for he search for

seed and growth capital. seed and growth capital.

The Displacement School of Thought The Displacement School of Thought (Alienation drives entrepreneurial pursuits)(Alienation drives entrepreneurial pursuits)

• Political displacement (laws, policies, and Political displacement (laws, policies, and regulations)regulations)

• Cultural displacement (preclusion of social groups)Cultural displacement (preclusion of social groups)

• Economic displacement (economic variations)Economic displacement (economic variations)

Micro View: Internal Locus of Micro View: Internal Locus of Control Control (cont’d)(cont’d)

The Entrepreneurial Trait School of ThoughtThe Entrepreneurial Trait School of Thought– Focuses on identifying traits common to Focuses on identifying traits common to

successful entrepreneurs.successful entrepreneurs.• Achievement, creativity, determination, and technical Achievement, creativity, determination, and technical

knowledge knowledge

The Venture Opportunity School of ThoughtThe Venture Opportunity School of Thought– Focuses on the opportunity aspect of venture Focuses on the opportunity aspect of venture

developmentdevelopment—t—the search for idea sources, the he search for idea sources, the development of concepts, and the implementation development of concepts, and the implementation of venture opportunities.of venture opportunities.

Micro View… Micro View… (cont’d)(cont’d)

The Strategic Formulation School of ThoughtThe Strategic Formulation School of Thought– Emphasizes the planning process in successful Emphasizes the planning process in successful

venture development.venture development.

EntrepreneursEntrepreneursin the United Statesin the United States

Reasons for the exceptional entrepreneurial Reasons for the exceptional entrepreneurial activity in the U.S. include:activity in the U.S. include:

– A national culture that supports risk taking and seeking A national culture that supports risk taking and seeking opportunities.opportunities.

– Americans’ alertness to unexploited economic Americans’ alertness to unexploited economic opportunity and a low fear of failure.opportunity and a low fear of failure.

– U.S. leadership in entrepreneurship education at both U.S. leadership in entrepreneurship education at both the undergraduate and graduate level.the undergraduate and graduate level.

– A high percentage of individuals with professional, A high percentage of individuals with professional, technological or business degrees who are likely to technological or business degrees who are likely to become entrepreneurs.become entrepreneurs.