FSU ENT 3003 - Chapter 2: Preparing for the Entrepreneurial journey

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Myth 1: Entrepreneurs Start Businesses Solely to Make MoneyNumber one reason is their need for independence and to create something newEntrepreneurs are motivated byDesire for independenceNeed to control one’s destinyBeing responsible for the success or failure of the ventureMyth 2: It takes a lot of money to start a businessNot 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 IdeaMost 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.Walt Disney, Sony, MerckMyth 4: The Bigger the risk, the Bigger the RewardsInvestors 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 SuccessMany entrepreneurs have started highly successful business without a formal business planSome believe it takes time away from more valuable activitiesOthers argue that a plan helps facilitate resources acquisition and management, making goals more achievableIf you are going to borrow money you need a business planMyth 6: Entrepreneurship is for the young and recklessResearch discovered being older can be an asset when starting a businessWomen and men age 45-98 were responsible for 36 of all entrepreneurial activity in the United StatesAverage age in a recent study was 39Myth 7: Entrepreneurship cannot be taughtEntrepreneurship is a discipline and like any discipline it can be learned.You can teach certain skills and behaviorsEntrepreneurs are about 40 percent born and 60 percent madeThe born part is what cannot be taught. The passion to persist and achieve as well as the willingness to take risk.Paths to EntrepreneurshipStart one of two ways: opportunity or necessityHome-Based EntrepreneurRepresents 52% of all small businessesMany 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 beforeSerial or Portfolio EntrepreneurSerial: An entrepreneur who starts one business and then moves on to start anotherPortfolio: 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 new opportunitiesNonprofit EntrepreneurNonprofit business owners can make a profit it. It just has to stay within the company and cannot be distributed to ownersTax exemptCorporate EntrepreneurOccurs inside an existing organizationRiskier 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 competenciesintrapreneur (corporate venturer): someone who intends to start entrepreneurial ventures inside a large corporationFor entrepreneurial mindset to succeed inside a large corporation, the following is required:Senior management commitmentNeed support to accomplish goalSpirit of entrepreneurshipCompany most not penalize entrepreneurs for failure, but must support them as they take what they have learned to a new projectA superior teamOnly the best people should be in corporate entrepreneurship positions because these ventures are even riskierPreparing to Become an Entrepreneur1. Find a mentor2. Build professional networki. 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 credibilityiv. Got to have a CPA, a tax specialist3. Learn about entrepreneurs.Entrepreneurship: the process by which individuals- either on there own or inside organizations- pursues opportunities without regard to the resources they currently control.Job creationSmall business that’s has fewer than 500 employees99.7% of all small business employers pay more than 45% of the US private payrollSmall businesses generated 65% of net new jobs over past 15 yearsImportant to note that 5% of those small firms account for 3 of 4 new jobsFactor-driven economies: businesses created out of necessity. Rely on unskilled labor and the extraction of natural resources. Ex: UgandaEfficiency-driven economies: that are growing and in need of improving their production processes and quality of goods produced. Ex: Russia, South AfricaInnovation-driven Economies: are the most advanced, are where businesses compete based on innovation and entrepreneurship. Ex: United States, DenmarkEntrepreneurial ventures and small businesses are related, but not the same. However, even entrepreneurial ventures start small.EntrepreneursIntroduce a new products and processes that change the way we do things3 primary characteristics: innovative, value creating, growth-oriented.Small business ownerOperate a business to make a livingSmall shops, restaurants, professional services form what we call the “economic core”Slow growing and often replicate similar businesses already in the market (replicative entrepreneurship).New business formationProcess starts where one or more people decide to participate in the formation of a new business and devote their time and resources to founding itFuzzy 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 failure.Push: drives an individual to become an entrepreneur because he has no other choice.Pull: attracts an individual to opportunity and creates “burning desire” to launch businessBusiness failureHigh number of entrepreneurs give up before new business makes transition to an established firm7/10 new employer businesses survive at least 2 yearssurvival rate at 5 years is 51%numbers similar across all industriesKey is not avoiding failure but minimizing the cost of a possible failure and recovering quicklyDo so by testing business model in the marketplace prior to starting the businessDecades of


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FSU ENT 3003 - Chapter 2: Preparing for the Entrepreneurial journey

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