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What is Entrepreneurship?
The quest for implicit personality traits and factors (Chell et al, 1991) is over. We can now recognize that entrepreneurship is a dynamic form of social and economic behavior in which people respond to environmental signals about the availability of opportunities and the resources with which they can be exploited.
Rae and Carswell
What is Entrepreneurship?
An entrepreneur is a person who sees opportunity, sizes up its value, and finds the resources to make the most of it.
Jim NelsonUniversity of Idaho
Characteristics of Entrepreneurs Entrepreneurs have:
A passion for what they do The creativity and ability to innovate A sense of independence and self-
reliance (Usually) a high level of self
confidence A willingness and capability (though
not necessarily capacity or preference) for taking risks
Characteristics of Entrepreneurs Entrepreneurs do not (usually) have:
A tolerance for organizational bureaucracies
A penchant for following rules A structured approach to developing
and implementing ideas The foresight to plan a course of action
once the idea is implemented and established
Specific entrepreneurship areas Business ideas and development Products or services Enterprises Marketing Operations Management Financial management
Marketing example Custom slaughterhouse
Specialty slaughter and butcher to Hispanic, Muslim, and BBQ markets
Reproductive tracts to animal science departments
Beef eyes to medical schools Goat hides to specialty leather curer Consignment sales of ostrich and bison
Entrepreneurs vs. managers Management skills include:
Technical production skills Knowledge of marketing skills Organizational and human resource
skills Financial skills Ability to develop simple tasks to solve
complicated problems Ability to find complete and efficient
solutions to problems
What can we do? Are we able to pick out true
entrepreneurs? Our models don’t allow us to predict the
success of these persons They typically get marked off as not being in
touch with reality Our job as federal and state agencies may
be better suited to providing educational programs on management skills
Where is the learner?Are they at a teachable moment?
Unawareto Aware
EarlyStage
Pre-launch& Launch
OperatingStart-up
GrowthHarvestor Exit
•Where is the learner along this timeline?•Where do you want the learner to be?•Where should the learner be?
Examples
Unawareto Aware
EarlyStage
Pre-launch& Launch
OperatingStart-up Growth
Harvestor Exit
BusinessStudents
Engineers
PracticingEntrepreneurs
FamilyBusinesses
Provide exposure andraise awareness
Unawareto Aware
EarlyStage
Pre-launch& Launch
OperatingStart-up
GrowthHarvestor Exit
•Potential methods•Seminar series•Large “sage on stage” courses•Weekend courses•Short distance learning courses•Mentoring•Simulations
Provide exposure andraise awareness
Unawareto Aware
EarlyStage
Pre-launch& Launch
OperatingStart-up
GrowthHarvestor Exit
•Additional Potential methods•Lectures with materials, texts, videos•Guest speakers
•Face-to-face•Teleconferencing•Virtual guest speaker
•Additional readings, outside experiences
Provide exposure andraise awareness
Unawareto Aware
EarlyStage
Pre-launch& Launch
OperatingStart-up
GrowthHarvestor Exit
•Develop building block course•management, marketing, finance, accounting, operations
•Customize these courses to the audience•Develop self-paced learning modules
Provide exposure andraise awareness
Unawareto Aware
EarlyStage
Pre-launch& Launch
OperatingStart-up
GrowthHarvestor Exit
•Develop required sequential courses•Utilize an experiential learning environment
•Mentoring•Business consulting•Business plan project•Incubators
What do these curricula have in common?
They teach business management skills!
And try to instill a senseof discipline and order intobusiness planning!
What should be taught? Business plan development
Organizational plan Management plan Marketing plan Operations and production plan Financial plan Overall growth plan
What should be taught? Market development
What is marketing? Marketing versus advertising Marketing on a shoestring Merchandising, display, and storefront
layout Mass media marketing including radio,
TV, newspaper, flyers, etc.
What should be taught? Financial management
Types of financial statements (income statement, balance sheet, cash flow, budget) and their relationship to the firm’s health
Financial record keeping strategies Financial performance evaluation Financial health improvement
strategies
What should be taught? Organizational plan
Who is the management team and what is their experience?
Who will make the decisions in specific areas?
How will overall planning versus day-to-day operations be divided among the team?
What should be taught? Operations and production mgt
What will be produced and how will it be produced?
What types of quality control standards will be used?
How will products be packaged and shipped?
Labor
What should be taught? Labor
Who do you want to hire? What skills do they need? How is the compensation plan developed
and what are its components? Is there a promotion or performance
incentive plan? What is the disciplinary plan?
The Business Plan Many potential business people
focus too much on the numbers Focus on these factors:
The People The Opportunity The Context Risk and Reward
Why not numbers? Entrepreneurs are wildly optimistic Numbers are usually padded Investors know about this and
discount the numbers Leads to a cycle of inaccuracy Plan should contain some numbers
that demonstrate a business model such as manufacturing yield
The People Who are the “people?”
The men and women starting and running the business
Also includes outside parties who provide key services or resources• Accountants• Lawyers• Suppliers
Questions to answer Where are the founders from? Where have they been educated? Where have they worked – and for
whom? What have they accomplished? What is their reputation in business? What experience do they have that
is relevant to this business?
Questions to answer What skills, abilities, knowledge do
they have? How realistic are they about the
venture’s chance of success and failure?
Who else needs to be on the team and do they recognize this?
Can they recruit high-quality people?
Questions to answer How do they respond to adversity? Do they have the internal fortitude
to make the difficult choices that lie ahead?
How committed are they to the venture?
What are their motivations?
The Opportunity Is the market:
Large? Rapidly growing? Both?
Is the industry now, or can it become, structurally attractive?
It is easier to gain market share from a growing market than from a stagnant one
Questions to answer Who is the customer? How does the customer make
purchasing decisions? To what degree is the product a
compelling purchase? How will pricing be determined? How will the product or service reach
all targeted customer segments?
Questions to answer How much does it cost (in resources
and time) to acquire a customer? How much does it cost to support an
acquired customer? How easy is it to retain a customer? How much does it cost to produce
and deliver the product or service?
Questions to answer Who are the venture’s competitors? What resources do the competitors control?
Strengths and weaknesses? How will they respond to the venture
entering the business? How can the new venture respond to its
competitors’ response? Who else might be able to exploit the same
opportunity? Can you form alliances with potential or
actual competitors?
The Context What is the big picture in terms of
these trends? Regulatory environment Interest rates Demographic trends Inflation Other factors that change but cannot
be controlled by the entrepreneur
Addressing context Awareness of venture’s context and
how it affects the venture How the changing of context will
likely affect the business What will management do if the
context grows unfavorable? How can management affect context
in a positive way?
Risk and Reward All sane people want to avoid risk Entrepreneurs want to capture the
reward and give the risk to others Need to show people, opportunity,
and context from both good and bad perspectives
Talk about the end of the business process
Warning Signs for Pending Financial Difficulties Significant increase in the level of
accounts payable Significant increase in the frequency
and amount of impulse purchases Decrease in the level of available
working capital Record keeping practices become
less important
Warning Signs for Pending Financial Difficulties Hides a large portion of financial
activities from other family members and lenders
Diversion of sales proceeds Living expenses increase rapidly and
expenditures for capital assets increase
Works less and plays harder Domestic situation changes
Attributes of Success
Decisions are made on the bottom line
Gross revenue is not treated like manna from heaven
If a task can’t be accomplished in-house in a cost effective manner, outsource it
Attributes of Success
They are not timid about tooting their own horn about their products or services
Does not dwell on the challenges of the competition; realize that some have it and some don’t
References Clark D. Garland, U of Tennessee James R. Nelson, U of Idaho, Teaching
Entrepreneurship to an Extension Audience – What to teach and how to teach it, 2003 AAEA meetings, Montreal, Canada.
William A. Sahlman, Harvard U, How to Write a Great Business Plan, Harvard Business Review, July-August, 1997.
Deborah H. Streeter, Cornell U, Teaching Entrepreneurship in a Formal Academic Setting – What to teach and how to teach it, 2003 AAEA meetings, Montreal, Canada