Outline



Entrepreneurship
± Myths ± Defined ± Opportunity, Risk and Reward ± What the social sciences tell us 

Entrepreneurs and the community
± Entrepreneurs vs. small business owners & others ± Role of entrepreneurs in the local economy ± Building an entrepreneurial community 

 

Entrepreneurial examples Special entrepreneurial situations Final thoughts

Personal Passion
The freedom to pursue personal passion leads many to start businesses.

³Nothing great in the world has been accomplished without passion.´
George Wilhelm Friedrich Hegel German Philosopher (1770-1831) (1770-

Questions often asked but aren¶t the most important
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What can I do? What business should I start? Can I get a grant? What business will earn lots of money? What about e-commerce? e-

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. 3. Am I an entrepreneur? Is there a market? Can I profitably tap that market? How do I get to market? .Questions often not asked but should be!! 1. 4.E-commerce is just a means to market 2.

The Myths of Entrepreneurship .

. ± It's about what you want to do with your life. ± Success rarely happens overnight.Myth #1  Get Rich Quick!  Truth is ± Life as an entrepreneur is not about money.

Myth # 2  You must be born an entrepreneur (trait theory)  Truth is: ± some of the most successful entrepreneurs are the most unlikely. ± It is a lifestyle choice. not an accident. .

Myth # 3  You must be at the right place at the right time (environment theory) Truth is: ± successful entrepreneurs operate whatever the macroeconomic and structural factors are  .

Myth # 4  "I'll have all this free time«" is entrepreneurs work many  Truth hours ± advantages are:  control of time  variety of tasks .

smarter & longer ± must enjoy the battle .Myth # 5  It get easier. is it gets more challenging  Truth ± must work faster.

. Next is the real work: ± planning ± timing ± strategizing and more.  Truth is building your business is just the start. they will come.Myth # 6  If you build it.

 Truth is that the bottom line is necessary but not sufficient ± purpose and meaning to the business ± inspire customers and employees .Myth # 7  It's all about the bottom line.

Myth # 8  Entrepreneurs are risk takers  Truth ± Entrepreneurs are calculators ± Studies show entrepreneurs are only moderate risk takers .

Myth # 9  You have to have a great idea  Truth ± Your ± Your ± Your ± Your idea idea idea idea must must must must be be be be good doable wanted or needed priced right .

Myth # 10  It takes a lot of money  Truth ± Over 50% start for under $10.000 ± Also look for  Certain business types  Turn-around situations Turn Possibility of using other people¶s money .

1996 . Incubating New Enterprises: A Guide to Successful Practice.Entrepreneur¶s goal is ³to create or capitalize on new economic opportunities through innovation   By finding new solutions to existing problems Or by connecting existing solutions to unmet needs or new opportunities´ SOURCE: Lichtenstein & Lyons.

2. Organizing a business venture assuming a certain amount of risk to make a profit (Burns and Bolton) . Creation of an innovative economic organization for the purpose of gain or growth under conditions of risk and uncertainty SelfSelf-employment through business ownership that includes significant elements of risk. and reward (Coleman Foundation) 3.Entrepreneurship Definitions: 1. control.

More Definitions:  Profits from bearing uncertainty and risk  Purposeful activity to initiate and develop a profit-oriented business profit Moderate risk taking  Creation of new organizations  The pursuit of opportunity without regard to resources currently controlled .

. Opportunity recognition Creation and/or innovation Resource gathering and the founding of an economic organization Desiring the chance for gain while accepting risk and uncertainty 4. 3. 2.Entrepreneurship: Basic Elements 1.

Other Entrepreneurial Motivators .

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?? Tell a time when you were entrepreneurial ?? Were you successful?? .

Opportunity Recognition .

political. social.An Entrepreneurial Opportunity defined: A situation in which changes in which changes in technology. and demographic conditions generate the potential to create something new or to remarket something existing. . or economic.

Entrepreneurial Opportunity Grid Product/Service Existing Market Penetration Market Development Market Existing New New Offering Development New Diversification .

What are opportunities?    Small steps Little jumps Huge leaps .

you can't cross a chasm in two small jumps."Don't be afraid to take a big step if one is indicated." David Lloyd George .

Technical or scientific  Political and regulatory  Process or production method  Organizing  New market and marketing  Personnel  Social & demographic changes  New raw material  Product obsolescence  Corporate stagnation  One-product Onevulnerability  Chance  ..Opportunities can be..

Think like a«.  Manager ± Problem solving  Entrepreneur ± Opportunity Exploitation ..

Opportunities  External ± Unexpected event ± Technology changes and convergence ± Change in methods ± Demographics/market ± size. ± Changes in competition  Internal  Other methods .

The Opportunity Myth An Idea does not equal an Opportunity .

reation & Innovation .

Creativity reativity ³ Imagination is more important than knowledge´ .Einstein .

demonstration & customer support ± focus on building the product RIGHT .The Creative Process  Planning & definition ± focus on building the RIGHT product  Design.

Customer requirement Product solution NOT Technology Product Find a consumer .

Basic questions  What is the customer¶s need? ± How large is the opportunity? ± How likely is it to happen? ± What is the market timing? ± Is it aligned with our organizational strengths? .

Time is money! Delays give others time to develop the same product. .

.Reduce product development time by 1/3 & you will triple profits & growth.

think of 3 things 3you have observed externally lately that would be a potential business opportunity.Exercise  In groups of 3-4. .

Resource Gathering ResourcedResourced-based Theory of Entrepreneurship .

Dimensions of Entrepreneurship Individual Characteristics Environment New Venture Creation Organization Constraints in the Environment .

others cannot easily get them .Resource  any thing or quality that is useful  used to develop sustainable competitive advantage  heterogeneous & immobile ± you have them.

Strategic Resources ± Exploit an environmental opportunity  Rare ± Not enough for all competitors  Imperfectly imitable ± Cannot be merely copied  Non-substitutable Non Valuable .

Competitive Advantage No Advantage Common Readily available & cheap Ordinary Many & easy Resource Dimension Valuable Advantage Exploits opportunities Unique & expensive Complex & ambiguous Difficult Rare Imitable Substitutable .

Types of Resources  Financial  Physical  Human  Technology  Reputation  Organizational .

. if it fails. one takes the loss.If the business succeeds. the entrepreneur reaps the reward of profits.

Business Failure Rate 80 60 40 20 0 0 2yrs 5yrs 6yrs 8yrs Number of business failures per 100 start-ups .

Statistics 10% of small businesses fail each year  40 .80% of small businesses do not survive for 5 years  Most small businesses closures do not result in uncovered liabilities  Majority of small business owners who fail will start another business  .

Why do businesses fail? ± 2 general categories Financial Nonfinancial .

Financial Reasons UnderUnder-capitalized  Poor cash flow planning  Lack of record keeping  Inadequate financial forecasting and review  Lack of accounting training  Excessive debt  .

Nonfinancial Reasons Loneliness  Lack of management skills and training  Little passion  Impact of regulations  Inefficiency  Inexperience  Lack of planning  .

Edison . It just happened to be a 200l-step process." Thomas A."I never failed once.

in the real world all rests on perseverance." Johann Wolfgang von Goethe .rewards "In the realm of ideas everything depends on enthusiasm.

The Social Sciences on ³What Makes an Entrepreneur´ .

Trait Theory     Energy/motivation Business orientation Business attitude People skills .

Personality Characteristics  Need for achievement Locus of control RiskRisk-taking propensity   .

Career Anchors  Motivate vocational choices      Technical Managerial Security Creativity Autonomy .

Sociological Characteristics     Negative displacement Between things Positive pull Positive push .

Situational Characteristics  Perceptions of desirability Perceptions of feasibility Entrepreneurial event   .

Desires Change: ± Your life ± A product or service ± The environment .

Entrepreneurs and the Community .

1% Retention & Expansion ± 44% Creation ± 55% .CARE Model (Dr. Mike Woods. & Stan Ralstin) Creation Attraction Retention Expansion % of New Jobs Created Attraction . Jack Frye.

We all want to find the next gazelle!! .

& Carland argue they are different . other criteria . Boulton.need for achievement/power - Entrepreneurs use strategic management practices . Hoy. Small Business Owners Carland.Entrepreneurs vs.Entrepreneurs goal-orientation is different goal.financial success vs.Entrepreneurs and entrepreneurial businesses involve innovation & growth .

Small Business Independently owned and operated. . intricately bound with family needs and desires. and does not engage in any new marketing or innovative practices Owner ± Establishes and manages for purpose of furthering personal goals. not dominant in its field. Business is primary source of income & consumes majority of time & resources. Owner perceived business as extension of personality.

Entrepreneurial Venture Engages in growth and profitability and innovation by introducing new products. . or reorganizes the industry Entrepreneur ± Establishes and manages the business for growth and profit. opening new markets. new processes. Is innovative and employees strategic management practices.

??QUESTION?? Are entrepreneurs and small business owners the same thing? Why?? Why not?? Does rural make a difference?? .

Comparing Entrepreneurs to Managers and Leaders Entrepreneur Innovates Creates Sees opportunities Manager Administers Maintains See problems Leader Innovates Develops Sees the future Asks what and why Uses influence Asks how and Asks how and when when Makes it happen Does things right Builds the team Relies on control Inspires trust .

Entrepreneurship is a style and a general method of operating. Jerry Gustafson Beloit College . not just a set of business skills.

Entrepreneurs People who create and grow enterprises  Aspiring entrepreneurs  Survival entrepreneurs  Lifestyle entrepreneurs  Growth entrepreneurs  Serial entrepreneurs  Social entrepreneurs SOURCE: WK Kellogg Foundation .

Entrepreneurs and the Community What they bring .

Multiplier .Does it matter what they are called? Both:  Add income to the household and jobs and wealth to the community  Add economic strength to a community  Add stability to a community  Provide the owner with the ability to achieve his or her goals  Create new opportunities within the community .

Who entrepreneurs are?  Classified as: ± Small business ± Micro business ± Home-based business Home± Family business  Also: ± Underground economy ± Informal economy ± Formal economy .

Metro. Micro. Retail Retail FIRE & Service 62% 66% 48% 74% 63% 46% 78% 70% 65% . Family bus. HomeHome-based Spouse in bus. Service Ag/For/Fish Ag/For/Fish Construction Service Construction. Rural Comparison 20% of OK households own & run a business Metro (n=146) Micro (n=54) Rural (n=46) Primary bus.

589 $35. Rural Comparison Metro (n=146) Micro (n=54) Rural (n=46) Avg # empl Gross inc.190 $40. .04 $333. Micro.891 $49.000 2.83 $241.000 .Median 1.Metro.Mean .11 $162.000 2.

000 farm/ranch operations .000 ± 94%  + 84.000 (employer & nonemployer)  50% of private workforce ± OK ± 54% Create 2/3 of all new jobs  52% of all nonfarm output  Micro businesses ± ???  ± OK ± 270.The numbers  Small businesses ± 16 million nonfarm ± OK ± 290.

$109 billion transferred ± U.000 ± 176. ± 9.000 .7% of households ± OK ± 185.2 billion/year .S.7 million .$6.5 billion inc transferred to family ± South ± 3.$1 .$348 billion transferred  HomeHome-based businesses ± 5% .The numbers  Family businesses ± 12.3 million .000 .$6.18% of hh ± OK ± 67.

Creating Entrepreneurial Communities

People

Formal Institutions

Informal Organizations

Entrepreneurial Communities
4 types
1. 2. 3. 4. Those Those Those Those that that that that develop entrepreneurs act entrepreneurially do both do neither

Entrepreneurship development
the infrastructure of public and private supports that facilitate entrepreneurship

Entrepreneurial communities
those where significant economic and social entrepreneurial activity exists and where there is an effective system of entrepreneurship development
SOURCE: WK Kellogg Foundation

. unities Has critical mass of entrepreneurs actively engaged in capturing new market opportunities Group of entrepreneurs recognizable within the community Community as a whole is entrepreneurial Soci l c pit l (Flor s) Human capital-diversity (Florida) Clusters (Porter) Public-Private Partnerships (Tupelo-Grishom) Innovative Infrastructure (Feldman) 2.Entr r neuri l C Entrepreneuri 1. 3.

and flexible (not in the group at all times)  Human capital ± Education Beyond high school  Continuous and life-life long life Include specific and general  Inclusive ± pre-K ± older citizen pre Just-in-time Just-in ± Knowledgeable and involved citizens . networks. reciprocity.Theory Expansion  Social capital ± Trust. vertical. and collective action ± Horizontal.

day care. technology transfer & availability of human capital (Eric Scorsone. & technology . Industrial clusters: Enhancing rural economies through business linkages.Theory Expansion  Clusters ± Why? ± Based on economies of scale. SRDC 21st Century Series)  Innovative infrastructure ± Basics plus items such as a visionary government.

A continuous pipeline of entrepreneurs Supportive public policies Balances regulations with business needs Education ± early & on-going. 5. angels Access to quality workers Recognize entrepreneurial efforts . formal and nonformal on- 3. c.Creating an Entrepreneurial Climate 1. 2. Access to capital ± banks. 4. Entrepreneurship must be an explicit economic development strategy Community must embrace and nurture entrepreneurs ± a. b. investment. Goal .

growth. public service providers youth entrepreneurship programs micro enterprise programs business incubators manufacturing network small business development centers angel capital networks revolving loan funds technology transfer programs .Enterprise evelopment ³Assistance to entrepreneurs in support of the creation. private. and survival of their businesses´ Koven & Lyons (2003) nonprofit.

Nurturing of Entrepreneurs  Mentors and coaches  Business/management assistance & support ± Coordinated. programs. & groups . and local  Access to technology  Technical assistance  Inclusion of all into events. seamless.

Other Examples: How Communities Can Help  Purchase locally Help create new local businesses Develop human resources FreeFree-up potentially productive space     Initiate local investment strategies (endowments. micromicroloan programs) Mobilize external resources  . fundraising.

2.Challenges for Sustainable Rural Economic Development 1.taxpayers see return on investment Need to create good jobs .no silver bullet Implement strategy with tangible benefits .self-sustaining wages self- . Translating models to placeplacebased strategies . 3.

SOURCE: Emery. men. women. ethnicities Shortage of resources in most small towns.) 4. Need for strategies that build on all assets . Macke. old.Challenges for Sustainable Rural Economic Development (cont. Wall.young. 5. 2004 .

Kutzhanova. Lyons. 2004 .Shortcomings of Enterprise Development #1 Tool-Driven-Not Needs-Focused Tool-DrivenNeedsWorked one-place and one-time oneoneSolutions in search of a client base Voice of the customer-the entrepreneur-is customerentrepreneurmissing Entrepreneurial Needs Hard for entrepreneurs to articulate Entrepreneurs may not trust those asking the questions Entrepreneurs difficult to identify and reach SOURCE: Lichtenstein.

Lyons. successful practices SOURCE: Lichtenstein.Shortcomings of Enterprise Development (continued) #2 Fragmented and Categorical ³Creaming´ ± we need more than a quarterback #3 Too Little Focus on Execution Various gurus crisscross the country ± then go home Gap between ideas and education #4 The Broken Learning Cycle Best practices vs. 2004 . Kutzhanova.

2004 . Drive the Program #8 Impact is not Scalable CommunityCommunity-wide impact SOURCE: Lichtenstein. Kutzhanova. Lyons.Shortcomings of Enterprise Development (continued) #5 Focus on the Business. not the Entrepreneur #6 Missing Function: Responsibility for the Community¶s Supply of Entrepreneurs #7 Funders. not Clients.

3. 7.Successful Entrepreneurial(?) Communities 1. 8. 6. 4. Acceptance of Controversy Ability to Depersonalize Politics Surplus Income to Invest Willingness to Take Risks Ability to Define Community More Broadly Networking Ability Emphasis on Academics Flexible. 5. 2. Dispersed Leadership SOURCE: Flora and Flora .

2004 . Emery. Lyons. Kutzhanova ³Building Entrepreneurial Communities: The Appropriate Role of Enterprise Development Activities´ Journal of the Community Development Society. Macke ³From Theory to Action: Energizing Entrepreneurship (E2).SOURCES FOR THIS PRESENTATION Lichtenstein. Wall. 2004 Society. Society. Strategies to Aid Distressed Communities Grow Their Own´ Journal of the Community Society.

Entrepreneurs We Know .

John Pemberton & Asa Chandler .Do you know who they are? Stan Clark Frank Epperson Fred Smith Bill Bowerman & Philip Knight Dr.

Do you know who they are? Jeff Bezos Cohen and Greenfield Ray Kroc Tom Monaghan Bill Gates Howard Schultz .

nor do they want to be!! .Entrepreneurs All are not equal.

Entrepreneurs People who create and grow enterprises       Aspiring entrepreneurs Survival entrepreneurs Lifestyle entrepreneurs Growth entrepreneurs Serial entrepreneurs Social entrepreneurs SOURCE: WK Kellogg Foundation .

Family Business Names WalWal-Mart Ford Weyerhaeuser Michelin Gap AnheuserAnheuser-Busch Tyson Foods Dillards Cargill Koch Industries Ikea Cox Communication Enterprise Rent-A-Car RentHallmark Levi Strauss Kohler .

wholesale. 11% overall .8 trillion in 1996 ± Even greater impact in midwest economy Dominate form in agriculture.$16.8% of workforce ± 69. and distribution sectors  Employ 54.Family Businesses  Generate 62% of nonfarm business receipts .5 million  Provide higher than average household income and net worth  ± Only 1% of households are poor vs. retail.

Sustainable Family Business Model PROCESSES Time of Stability Interpersonal Transactions Resource Constraints Times of Change Interpersonal Transactions Resource Transactions Available Resources and Constraints Achievements Objective Success Subjective Success Disruptions in Family/Business Transactions Responses to Disruptions in Family/Business Transactions Sustainability PROCESSES Time of Stability Interpersonal Transactions Resource Constraints Time of Change Interpersonal Transactions Resource Transactions Available Resources and Constraints Achievements Objective Success Subjective Success BUSINESS .

HomeHome-based Business Names  Hewlet-Packard Hewlet Nike  Coke  Mrs. Fields Cookies  Microsoft  Dell .

164  Mean net business income .263  ± Had medical insurance from some other source ± As # children increased.$53.$42. education. with children.HomeHome-based Business Facts NineNine-state study (1988) ± Typical home-based worker home44 year old male. 14 yrs. married. number of work hours decreased (1 day per child on average) ± Had greater longevity in the community .$15.628  Mean household income . & a homeowner  Mean gross business income .

and have fewer homeemployees ± Make significantly less business income and business profits (by factor of 5) & feel business is less successful ± Copreneurs more likely to view business as a way of life as opposed to a way to earn income . business manager earns less per year. rural location. more likely home-based.Copreneurs Defined ± Couples in business together ± 31% of family businesses ± Have more children. lower educational levels.

Copreneurs cont.
± More likely to intermingle money between business and family ± More often family to business 

Also use more ways of intermingling

± Approximately 20% of couples discontinued the copreneurial relationship (but stayed together as a couple) in a 3-year period 3

Made less money & saw the business as less successful.

± Another 20% started a copreneurial relationship 

Made most money of all 3 groups, run by older men with more education, had fewer dependents, and spouse worked fewer hours in business.

ValueValue-Added
Defined: Adding consumer-desired features consumerto raw materials Done by: 1. Additional processing 2. Marketing - change from the current method of distribution 3. Use existing resources to produce a new, more valued product/service 4. Some combination

Reap New Profits:
Marketing Strategies for Farmers & Ranchers

Farmers Markets .

They come because it·s fun and the berries are absolutely fresh. Persimmon Hill Berry Farm Pick Your Own .µ -.´People don·t come all the way out here to get cheap food.Earnie Bohner.

E N T E R T A I N M E N T F A R M I N G .

O T H E R Farm Stands Community supported agriculture (CSA) Cooperatives Restaurant sales Mail order/ Internet/ Direct marketing O P T I O N S .

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Minorities and Women

General Information 

Small business ownership rates for women and minorities are increasing faster than for white males ± Still men start new businesses at twice the rate of women
± Women ± 9.8% own businesses 

Translates to over 50% of all businesses

± Minorities ± Ranges from 5% (Blacks) to 10.4% (Asian)

Firm receipts average about 2/3 of all bus.  Proprietor income averages about 50% of all other businesses  Firms employee fewer people 

Special Issues 
Access

to capital  Acceptance by business community  Acceptance by family and friends  Networks are smaller and more familyfamily-focused  Most often in retail or service industries
± Industries with highest failure rates and lowest profits

Barriers to Entrepreneurship .

A lack of: 1. 8. 5. 2. accessible. 6. 3. 4. long-term longsupport network Coaches and mentors Capital Available human capital MultiMulti-faceted healthy community Supportive regulatory environment . 7. Steady stream of ³want-a-be¶s´ ³want³Can³Can-do´ attitude held by the entrepreneur and the community Coordinated.

American lawyer and diplomat (1822(18221900) "Nothing great was ever achieved without enthusiasm." Edward John Phelps." Ralph Waldo Emerson .The man who makes no mistakes does not usually make anything.

evergrowing trend  Entrepreneurs contribute to their household and to their community  Entrepreneurship is a learned talent  Entrepreneurs form our economic base  Entrepreneurship allows people to remain in a community  Communities can encourage entrepreneurship  .Highlights Entrepreneurship is an ever-continuing.

See opportunity .Are innovative in developing that opportunity through creativity and resource gathering .Seek gain while accepting risk and uncertainty .Entrepreneurs: .

One Last Myth The key to success is a great idea The keys are: Good idea Great plan Passion! .

How Extension can help? .

Comfort with subject matter One-onOne-on-one Mentoring Advocating Partnering Community support Awareness of other programs Education .1. Awareness of owner¶s priorities 2.

Resources cont. Entrepreneur . i.  Adult ± Cashing In On Business Opportunities ± NeXt Level/Fasttrac/other commercial ± OSU  Putting It All Together  Food Based Business: The Owner¶s Guide  An Exploration of Entrepreneurship  Visual Merchandising ± Educational program ± Demonstration program  Mapping Your Marketing Future ± Magazines.e.