Entrepreneurship old Ch 5 new Ch 6 What is an entrepreneur? Why do it? What does it take, personally? What business? Causes of success and failure? Common challenges? Increasing chance of success? How to foster e’ship in a large company?

What is an Entrepreneur? Entrepreneur – an individual who establishes a new organization without the benefit of corporate sponsorship.

Textbook’s view Small business: < 100 employees, independent, not dominant, not innovative. Entrepreneurial venture: A new business having growth and high profitability as primary objectives Pruett’s view Entrepreneurship = Freedom + Creativity + Risk

Myths about Entrepreneurship Anyone can start a business. (growing/prospering is hard) Gamblers. (careful calculators) Want whole show to themselves. (growth takes teamwork) Own bosses and independent. (many stakeholders) Work longer and harder. (some do, some don’t) Stress and sacrifice. (satisfied, less likely to retire) Motivated by money. (creation, control, autonomy) Seek power (seek accomplishment) Talent means quick success (usually takes 7-8 years) Good ideas bring venture capital (1-3% of good ideas) Money helps (too much leads to spending) Lone wolves (team-builders, cooperators) Brain power (many personal factors matter)

Why become an entrepreneur? Challenge Profit potential Satisfaction Quality of life Independence Creative outlet—building something from nothing

What does it take to succeed? Innovation and creativity skills General management skills Business know-how Social networks

Ingredients for starting a business A great idea Spot, create and exploit opportunities – Technological discoveries – Demographic changes – Lifestyle and taste changes – Economic dislocations – Calamities – Government initiatives and rule changes

Franchises Franchisor – an innovator who has created at least one successful store and seeks partners to operate the same concept in other local markets. Franchisee – the operator of one or more stores according to the terms of a contract.

E-commerce Business Models Transaction fee – selling goods or services. Advertising support – website operator is paid by advertisers who seek access to the demographic group that visits the site. Intermediary – website brings buyers and sellers together, charges a commission on sales. Affiliate – sites pay commissions to other sites to drive business to their own sites. Subscription – charge a monthly or annual fee for site visits or access to site content.

Characteristics of an Entrepreneur Commitment/determination Leadership Opportunity obsession Tolerance of risk, ambiguity, and uncertainty Creativity, self-reliance, and ability to adapt Motivation to excel

Improving the odds of success Anticipate risk, create cushions. Planning and research of environment. Business incubators – protected environments for new, small businesses.

Common Management Challenges 1.You might not enjoy it 2.Survival is difficult 3.Growth creates new challenges 4.It’s hard to delegate 5.Misuse of funds 6.Poor controls 7.Mortality/failure 8.Going public

Anybody involved in a family business? Some tips Family members must contribute like other employees. An non-family member in at least one key job Use outside advice to help plan succession.

What is an Initial Public Offering? Sale to the public, for the first time, of federally registered and underwritten shares of stock in the company.

Business Plans determine the idea’s viability help plan and organize help convince yourself and others -- whom??

Key Business Plan Issues The PeopleWho? The OpportunityWhat? The CompetitionWhere/How? The ContextWhere/How? Risk and rewardWhy? DOES THE MATH WORK?!

Nonfinancial Resources Legitimacy – acceptance and desirability; goals and methods consistent with societal values. Social capital – the strength derived from relationships and the image other people have of you. Top-management team Advisory boards Partners

Creating Intrapreneurship Skunkworks – project team designated to create new products. Bootlegging – informal work on projects, other than those officially assigned, of employees’ own choosing and initiative.

Bootlegging: How to build support for your ideas Get others involved or supportive Clear it with your immediate boss Find cheerleaders – who will support your project before formal approval from higher levels? Horse trading – what can you offer peers and others from the project in return for their support, time, money, etc. and other resources? Get the blessing of relevant higher-level officials