Chapter 2 Preparing for the Entrepreneurial journey 09 01 2013 Myth 1 Entrepreneurs Start Businesses Solely to Make Money Number one reason is their need for independence and to create something new Entrepreneurs are motivated by o Desire for independence o Need to control one s destiny o Being responsible for the success or failure of the venture Myth 2 It takes a lot of money to start a business Not specifically amount of capital you possess at startup but rather how many resources network of contacts founding team etc Myth 3 It takes a Great Idea Most businesses in the last 50 years have been successful did not start with a great idea but a great team who wanted to create an enduring business o Walt Disney Sony Merck Myth 4 The Bigger the risk the Bigger the Rewards Investors expect entrepreneurs to do what it takes to reduce the risk for them such as testing the market acquiring the first customer and investing some of their own capital into the business Myth 5 A Business Plan is required for Success Many entrepreneurs have started highly successful business without a formal business plan Some believe it takes time away from more valuable activities Others argue that a plan helps facilitate resources acquisition and management making goals more achievable If you are going to borrow money you need a business plan Myth 6 Entrepreneurship is for the young and reckless Research discovered being older can be an asset when starting a business Women and men age 45 98 were responsible for 36 of all entrepreneurial activity in the United States Average age in a recent study was 39 Myth 7 Entrepreneurship cannot be taught Entrepreneurship is a discipline and like any discipline it can be learned You can teach certain skills and behaviors Entrepreneurs are about 40 percent born and 60 percent made The born part is what cannot be taught The passion to persist and achieve as well as the willingness to take risk Paths to Entrepreneurship Start one of two ways opportunity or necessity o Home Based Entrepreneur Represents 52 of all small businesses Many entrepreneurs with aspirations to grow their business start from home to save money on overhead costs and recue the risk of startup With technology today home based businesses owners can tap into more resources than ever before o Serial or Portfolio Entrepreneur Serial An entrepreneur who starts one business and then moves on to start another Portfolio owns a minority or majority stake in several ventures Seek out new business opportunities that link to their existing business Constantly on the hunt for Nonprofit business owners can make a profit it It just has to stay within the company and cannot be new opportunities o Nonprofit Entrepreneur distributed to owners Tax exempt o Corporate Entrepreneur Occurs inside an existing organization Riskier than normal start up Skunk works a group that is given the mandate to find and develop new products for the company usually external to the company s core competencies intrapreneur corporate venturer someone who intends to start entrepreneurial ventures inside a large corporation For entrepreneurial mindset to succeed inside a large corporation the following is required Senior management commitment o Need support to accomplish goal Spirit of entrepreneurship o Company most not penalize entrepreneurs for failure but must support them as they take what they have learned to a new project A superior team o Only the best people should be in corporate entrepreneurship positions because these ventures are even riskier Preparing to Become an Entrepreneur 1 Find a mentor 2 Build professional network i Weak ties are acquaintances and business contacts not socially involved with them They play an important role because they will give unbiased support not based on prior history like a family member would ii Strong ties are your family and people close to you iii Rather than trying to make each individual contact required it is more efficient to figure out who is a gateway to the community and cultivate that relationship Then you also gain automatic credibility iv Got to have a CPA a tax specialist 3 Learn about entrepreneurs Chapter 1 Understanding Entrepreneurship 09 01 2013 Entrepreneurship the process by which individuals either on there own or inside organizations pursues opportunities without regard to the resources they currently control Job creation o Small business that s has fewer than 500 employees o 99 7 of all small business employers pay more than 45 of the US private payroll o Small businesses generated 65 of net new jobs over past 15 years of 4 new jobs o Important to note that 5 of those small firms account for 3 o Factor driven economies businesses created out of necessity Rely on unskilled labor and the extraction of natural resources Ex Uganda o Efficiency driven economies that are growing and in need of improving their production processes and quality of goods produced Ex Russia South Africa o Innovation driven Economies are the most advanced are where businesses compete based on innovation and entrepreneurship Ex United States Denmark Entrepreneurial ventures and small businesses are related but not the same However even entrepreneurial ventures start small o Introduce a new products and processes that change the way o 3 primary characteristics innovative value creating growth Entrepreneurs we do things oriented Small business owner o Operate a business to make a living o Small shops restaurants professional services form what we call the economic core o Slow growing and often replicate similar businesses already in the market replicative entrepreneurship New business formation Process starts where one or more people decide to participate in the formation of a new business and devote their time and resources to founding it Fuzzy front end the amount of investment an individual is willing to make in a new product or new venture is a function of the probability of its success the value of success and the cost of Push drives an individual to become an entrepreneur because he failure has no other choice Pull attracts an individual to opportunity and creates burning desire to launch business Business failure High number of entrepreneurs give up before new business makes transition to an established firm survival rate at 5 years is 51 7 10 new employer businesses survive at least 2 years numbers similar across all industries Key is not avoiding failure but minimizing the cost of a possible