Overview

 What is an entrepreneur?
 Characteristics of an entrepreneur
 Planning to be an entrepreneur
 Growth pressures, managing a family business, and
corporate intrapreneurship
What is Entrepreneurship?
(1 of 2)

 Origin of the Word “Entrepreneur”

 The word was originally used to describe people who “take
on the risk” between buyers and sellers or “undertake” a task
such as starting a new venture.
 The “undertake” interpretation of the word has been central
to its usage in English.
 Etymology: “Entrepreneur” is a loanword from French:
“Entreprende” (a verb in French) means “to undertake“
 In Sanskrit, “Antha Prerna” (which sounds close to
entrepreneur) means “Self motivated“

1-2
What is Entrepreneurship?
(2 of 2)

 Entrepreneurship Defined
 Entrepreneurship is the process by which individuals pursue
opportunities without regard to the resources they currently
control.
 The essence of entrepreneurial behavior is identifying
opportunities and putting useful ideas into practice.

1-3
Why Become an Entrepreneur?
There are three primary reasons that people
become entrepreneurs and start their own firms

Desire to be their own boss

Desire to pursue their

own ideas

Financial rewards

1-4
Economic Impact of Entrepreneurial Firms
(1 of 2)

 Innovation
 Is the process of creating something new, which is central to
the entrepreneurial process.
 Small entrepreneurial firms are responsible for 55% of all
innovations in the U.S.
 Job Creation
 In the past two decades, economic activity has moved in the
direction of smaller entrepreneurial firms, which may be due
to their unique ability to innovate and focus on specialized
tasks.

1-5
Economic Impact of Entrepreneurial Firms
(2 of 2)

 Globalization (US example)

 Today, over 97% of all U.S. exporters are small businesses
with fewer than 500 employees.
 Export markets are vital to the U.S. economy and provide
outlets for the sale of U.S. produced products and services.

1-6
Entrepreneurial Firms’ Impact on Society
and Larger Firms

 Impact on Society
 The innovations of entrepreneurial firms have a dramatic
impact on society.
 Think of all the new products and services that make our
lives easier, enhance our productivity at work, improve our
health, and entertain us in new ways.
 Impact on Larger Firms
 Many entrepreneurial firms have built their entire business
models around producing products and services that help
larger firms become more efficient and effective.

1-7
Entrepreneurs V. Intrapreneurs
 Entrepreneurs are people that notice opportunities
and take the initiative to mobilize resources to
make new goods and services.
 Intrapreneurs also notice opportunities and take
initiative to mobilize resources, however they work
in large companies and contribute to the
innovation of the firm.

 Intrapreneurs often become entrepreneurs.

Intrapreneurship
 Learning organizations encourage intrapreneurship.
 Organizations want to form:
 Product Champions: people who take ownership of a product from
concept to market.
 Skunkworks: a group of intrapreneurs kept separate from the rest of
the organization.
 New Venture Division: allows a division to act as its own smaller
company.
 Rewards for Innovation: link innovation by workers to valued
rewards.
Small Business Owners
 Small business owners are people who own a major
equity stake in a company with fewer than 500
employees.
 In 1997 there were 22.56 million small business in the
United States.
 47% of people are employed by a small business.
Employee Satisfaction
 In companies with less than 50 employees, 44%
were satisfied.
 In companies with 50-999 employees, 31% are
satisfied.
 Business with more than 1000, only 28% are
satisfied.
Employee Satisfaction

Employee Satisfaction

50 44
Satisfaction Percentage

40 less than
31 50
28
30
50-999
20
1000+
10

0
less than 50 50-999 1000+
Number of Employees
Advantages of a Small Business
 Greater Opportunity
to get rich through
stock options
 Feel more important
 Feel more secure
 Comfort Level
Disadvantages of a Small Business
 Lower guaranteed pay
 Fewer benefits
 Expected to have many skills
 Too much cohesion
 Hard to move to a big company
 Large fluctuations in income possible
Who are entrepreneurs?

 Common traits  Common traits

 Original thinkers  Self employed parents
 Risk takers  Firstborns

 Take responsibility for  Between 30-50 years old

own actions  Well educated – 80% have
college degree and 1/3 have a
 Feel competent and
graduate level degree
capable
 Set high goals and enjoy
working toward them
Successful and Unsuccessful
Entrepreneurs
 Successful  Unsuccessful
 Creative and Innovative  Poor Managers
 Position themselves in  Low work ethic
shifting or new markets
 Inefficient
 Create new products
 Failure to plan and
 Create new processes
prepare
 Create new delivery
 Poor money managers
 Characteristics of Entrepreneurs
Key Personal
Attributes

Strong Managerial Successful

Competencies Entrepreneurs

Good Technical Skills

Key Personal Attributes
 Entrepreneurs are Made, Not Born!
 Many of these key attributes are developed early in life,
with the family environment playing an important role
 Entrepreneurs tend to have had self employed parents
who tend to support and encourage independence,
achievement, and responsibility
 Firstborns tend to have more entrepreneurial attributes
because they receive more attention, have to forge their
own way, thus creating higher self-confidence
Key Personal Attributes (cont.)
 Entrepreneurial Careers
 The idea that entrepreneurial success leads to more
entrepreneurial activity may explain why many
entrepreneurs start multiple companies over the course
of their career
 Corridor Principle- Using one business to start or acquire
others and then repeating the process
 Serial Entrepreneurs- A person who founds and operates
multiple companies during one career
Key Personal Attributes (cont.)
 Need for Achievement
 A person’s desire either for excellence or to succeed in
competitive situations
 High achievers take responsibility for attaining their
goals, set moderately difficult goals, and want
immediate feedback on their performance
 Success is measured in terms of what those efforts have
accomplished
 McClelland’s research
Key Personal Attributes (cont.)
 Desire for Independence
 Entrepreneurs often seek independence from others
 As a result, they generally aren’t motivated to perform
well in large, bureaucratic organizations
 Entrepreneurs have internal drive, are confident in their
own abilities, and possess a great deal of self-respect
Key Personal Attributes (cont.)
 Self-Confidence
 Because of the high risks involved in running an
entrepreneurial organization, having an “upbeat” and
self-confident attitude is essential
 A successful track record leads to improved self-
confidence and self-esteem
 Self-confidence enables that person to be optimistic in
representing the firm to employees and customers alike
Key Personal Attributes (cont.)
 Self-Sacrifice
 Essential
 Nothing worth having is free
 Success has a high price, and entrepreneurs have to be
willing to sacrifice certain things
Technical Proficiency
 Many entrepreneurs demonstrate strong technical skills,
typically bringing some related experience to their business
ventures
 For example, successful car dealers usually have lots of
technical knowledge about selling and servicing
automobiles before opening their dealerships
 Especially important in the computer industry
 NOT ALWAYS NECESSARY
Planning
 Business Plan – A step-by-step outline of how an
entrepreneur or the owner of an enterprise expects to
turn ideas into reality.
Questions To Keep In Mind
 What are my motivations for owning a business?

 Should I start or buy a business?

 What and where is the market for what I want to sell?

 How much will all this cost me?

 Should my company be domestic or global?

Motivations
 Deciding what your motivations are will direct you
toward what type of business fits you best.
 Types:
1. Lifestyle Venture
2. Smaller Profit Venture
3. High Growth Venture
1. Lifestyle Venture
 Small company that provides its owner independence,
autonomy, and control.
 Is often run out of household
 Provides flexibility (hours, meeting places, attire)
 Aligns your personal interests and hobbies with your
desire to make a profit.
2. Smaller Profit Venture
 Small company not concentrated on pushing the
envelope and growing inordinately large.
 Making millions of dollars not important.
 Content with making a decent living.
 Ex. Mom and Pop Stores
3. High Growth Ventures
 Goal is maximum profit and growth.
 Concentrated on pushing envelope and growing as
large as possible.
 Focus on innovation
Start or Buy?
 Start – cheapest, but very difficult
-requires most planning/research
 Buy – expensive – may be out or reach
-requires less planning and research
 Franchise (middle ground) – a business run by an
individual (the franchisee) to whom a franchiser
grants the right to market a certain good or service.
The Market???
 Planning & Research essential
 Extensive market surveys (family, friends,
neighbors…)
 Magazines and Polls offer some information on the
market -Businessweek, Harris
Poll
What about the cost?
 Plan realistically, not optimistically
 Don’t overestimate your profits
 Don’t underestimate your costs
 Sources of Funds
 Banks
 Venture Capitalists – filthy rich, high risk investors looking for a
many-times-over yield
 Angels – seem to have altruistic motives and less stringent
demands than venture capitalists
Domestic or Global?
 Drawbacks to Global – more research and less
accessible connections in startup phase, more travel
time required, more considerations.
 Advantages to Global – more human resources, more
demand, more financing, easier to start global than go
from domestic to global.
Entrepreneurship: Growth Pressures
Entrepreneurs often find that as their business grows, they feel more
pressure to use formal methods to lead their organizations.

Although this formalization process may compromise some

entrepreneurs spirit, it often leads to more focus, organization, and
greater financial returns.

Basically, it’s a movement from a “seat-of-the-pants” operation to a

more structured, legitimate and recognizable business.
Entrepreneurship: Growth Pressures

Entrepreneurial and Formal Organizations differ in

six business dimensions:

 Strategic orientation
 Commitment to opportunity
 Commitment to resources
 Control of resources
 Management structure
 Compensation policy
 Entrepreneurship: Growth Pressures
Business Entrepreneurial Formal
Dimension Organization Organization
Strategic orientation Seeks opportunity Controls resources

Commitment to Revolutionary Evolutionary

opportunity Short duration Long duration
Commitment to Lack of stable needs and Systematic planning
resources resource bases systems
(capital, people, and
equipment)
Control of resources Lack of commitment to Power, status, financial
permanent ventures rewards for maintaining
status quo
Management Structure Flat Clearly defined authority
Many informal networks and responsibility

Compensation policy Unlimited; based on Short-term driven;

team’s accomplishments limited by investors
Entrepreneurship: Growth Pressures
Going Global….
From domestic to worldwide expansion, globalization can be extremely
rewarding for entrepreneurs.
THINK: Money and Business Exposure

However, it is a huge undertaking. Adapting your business to operate

in the global market can lead to a decrease in ownership, and a forced
focus on raising money to keep your business alive.
THINK: Selling out, Private to Public (Initial Public Offering, IPO)
Entrepreneurship: Managing a Family Business
 Over 50% of the U.S. Gross Domestic Product (GDP) is generated from
family business.

 12% of CEOs on the Inc. 500 list describe their company as a family
business.

So, why not dream up a plan and go

into business with your family or
friends?
Entrepreneurship: Managing a Family Business
Two reasons not to go into business with your family or friends.…

Families fight
Friends fight.
Often, it involves money. So a business environment could potentially
breed arguments, disagreements, and feuds.

Fighting can occur during early developmental stages when hours are
long and pay is low. Or, after success has been achieved.
Entrepreneurship: Managing a Family Business
Six steps to help lead you to a successful Family Business:

 Clear job responsibilities

 Clear hiring criteria
 Clear plan for management transition
 Agreement on whether and when to sell business
 Commitment to resolving conflicts quickly
 Outside advisors are used to mediate conflicts.

Clarity is key…. but NO GUARANTEE.

Entrepreneurship: Managing a Family Business
Operational vs. Survival Issues….

Operational = Decisions about the economics of the business and how

to balance that with rational and family obligation criteria.
THINK: Day-to-day grind.

Survival = Develop out of a lack of attention on the operational issues

within the business.
THINK: Festering problems; ultimately compromise livelihood.
Entrepreneurship: Managing a Family Business
FAMILY FEUD:

Severed Divorce Poor business Low morale,

relationships performance motivation
Entrepreneurship: Corporate INTRA-preneurs
Intrapreneur = someone in an existing organization who turns new
ideas into profitable realities.

Not every employee has the ability to become a successful intrapreneur.

It takes well-developed strategic action, teamwork and communication
abilities.
Entrepreneurship: Corporate INTRA-preneurs
Organizations that redirect themselves through innovation have
the following characteristics:

 Commitment from senior management

 Flexible organization design
 Autonomy of the venture team
 Competent/Talented people with entrepreneurial
attitudes
 Incentives and rewards for risk taking
 Appropriately designed control system
Entrepreneurship: Corporate INTRA-preneurs
In order to for this type of forward thinking to reap long-term benefits,
top management must allow it to flourish in the day-to-day operations
of the business….

This is known as “skunkworks”

Skunkworks = Islands of intrapreneurial activity within an organization.

REMEMBER: On the island, formal rules and policies of the

organization often DO NOT apply.