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The Nature of Entrepreneurship Who are these people? Who are these people? Who are these people? Introduction This is the era of the entrepreneur! Through the world, growing numbers of people are realizing their dreams of owning and operating their own business. Entrepreneurship is thriving. The past two decades have seen record numbers of entrepreneurs launching new businesses and each year. American entrepreneurs alone start 3 to 4.3 million businesses each year and 84 percent are doing that for the first time. A study by the Global Entrepreneurship Monitor (GEM) found 11.3 percent of the adult population in the United States is working to start a business. North America, South America and Latin America lead the world in entrepreneurial activity. Who is an ENTREPRENEUR? An entrepreneur is one who creates a new business in the face of risk and uncertainty for achieving profit and growth opportunities and assembles the necessary resources to capitalize on those opportunities. Scarborough (2005) Traits of an ENTREPRENEUR Desire for responsibility Preference for moderate risk (risk eliminators) Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation (serial entrepreneurs) Skill in organization Value of achievement over money Traits of an ENTREPRENEUR Other characteristics of entrepreneurs include: High degree of commitment Willingness to accept risk, work hard and take action Flexibility YOU BE THE CONSULTANT SUMMARY – A Pigskin Revolution Ed Sabol, a once unhappy coat salesman, had a passion for filming his son’s high school football games and other activities. Word of Ed’s filming abilities soon got around and he found himself working a number of local high school games. This led to Ed’s successful bid ($3,000) to film the 1962 NFL championship game. Then Commissioner Pete Rozelle was so impressed with the work that he agreed to Ed’s proposal to create a new entity known as NFL Films that would both preserve the history of the game and promote it to the nation’s sports fans. NFL Films’ creative approach to the game has resulted in 82 Emmy Awards to date. Ed retired in 1987, turning the reins over to his son Steve who has taken the company to new heights thanks in part to his empowering leadership style and product innovation. The company now has a 200,000 square foot state-of-the-art facility. Questions Q1. Identify the entrepreneurial traits that Ed Sabol and his son Steve exhibit? Q2. How would you characterize the Sabol’s philosophy, beliefs, and values to a small business as it grows? Q3. What factors have led to NFL Films’ success? The Benefits of Entrepreneurship The primary benefits entrepreneurs enjoy include the opportunity to: Create their own destiny Make a difference Reach their full potential Generate impressive profits Contribute to society and be recognized for their efforts Do what they enjoy and have fun at it! The Potential Drawbacks of Entrepreneurship With these potential rewards, Entrepreneurship also presents risk and uncertainty. Entrepreneurs may experience: Uncertainty of income –”The entrepreneur is the last one to be paid.” Risk of losing their entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement Behind the Boom: What’s Feeding the Entrepreneurial Fire? The rapid increase in entrepreneurs has been a result of: Considering entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles Commerce and the Internet Additional international opportunities Discussion What is your perception of entrepreneurs in our community and in our society? Why do you believe entrepreneurs have that reputation? Never Too Young Erica Gluck had a desire to earn her own money at the age of seven. She convinced a local pasta shop to allow her to sell their products off site on weekends. Erica never looked back as she went on to start her own pasta company, expand its product lines, hire her parents and give a portion of her profits back to the community. Never Too Young Adam Witty, a college student, observed his father repeatedly giving up (season) tickets to Orlando Magic games that often went unused because of last minute business commitments. That sparked the idea for a Web-based company that allows buyers to securely purchase tickets to events that normally would not be available. Adam started the company from his dorm room, was able to utilize the facilities of his school and expanded his product lines to include a wide variety of sporting events. Never Too Young The University of Maryland created a forum that allows about 100 student entrepreneurs to live and work together. That environment has inspired about twenty of those students to start their own business. Questions Q1. In addition to the normal obstacles of starting a business, what other barriers do young entrepreneurs face? Q2. What advantages do young entrepreneurs have when launching a business? Q3. What advice would you offer a fellow college student about to start a business? Q4. Work with a team of your classmates to develop ideas about what your college or university could do to create a culture of entrepreneurship on your campus or in your community. Discussion If you were to begin a business immediately after your academic career concluded, what challenges would you face? Would you consider that an ideal time in your life to launch your first venture? If not, at what point in your life might be a better time and why? What experiences might you find beneficial before you started your own business. The Cultural Diversity in Entrepreneurship Entrepreneurs are found in virtually every walk of life including: • Young Entrepreneurs • Women Entrepreneurs • Minority Enterprises • Immigrant Entrepreneurs • Part-time Entrepreneurs • Home-Based Businesses • Family Businesses • Copreneurs • Corporate Castoffs • Corporate Dropouts Promoting Innovation Innovation - the act or process of introducing new ideas, devices, or methods Promoting Innovation All Innovation begins with creative ideas. Innovation is the implatation of creative inspiration. Creativity is the function of three components: Expertise, creative thinking skills and motivation Promoting Innovation Innovation is fostered by information gathered from new connections; from insights gained by journeys into other disciplines or places; from active, collegial networks and fluid open boundaries. Innovation arises from organizing circles of exchange, where information is not just accumulated or stored, but created. Knowledge is generated a new from connections that were not there before. Wheatley (1994). Promoting Innovation Innovation requires a fresh way of looking at things, an understanding of people, and an entrepreneurial willingness to take risks and to work hard. An idea doesn’tbecome an innovation until it is widely adopted and incorporated into people’s daily lives. Most people resist change, so a key part of innovating is convincing other people that your idea is a good one – by enlisting their help, and, in doing so, by helping them see the usefulness of the idea. Elements of Innovation 1. Challenge: What we are trying to change or accomplish-the “pull” 2. Customer focus: Creating value for your customers – the “Push” 3. Creativity: Generating and sharing the idea(s)- the “brain” 4. Communication: The flow of information and ideas –the “life blood” Elements of Innovation 5. Collaboration: People coming together to work together on the idea(s) - the “heart.” 6. Completion: Implementing the new idea-the “muscle”. 7. Contemplation; Learning and sharing lessons lead to higher competency-the “ladder” Elements of Innovation 8. Culture: The playing field of innovation includes: Leadership (sees the possibilities and positions the team for action-the role model) People (diverse groups of radically empowered people innovate –the source of innovation) Basic values (trust and respect define and distinguish an innovative organization-the backbone). Innovation values (certain values stoke the fires that make the“impossible” possible-the Spark). 9. Context: Innovation is shaped by interactions with the world CREATIVITY AND INNOVATION IN AN ENTREPRENEURIAL ORGANIZATION The “winning performance” of the entrepreneur and the organization focuses on. Competing on quality not prices: Domination of a market niche; Competing in an area of strength Having tight financial, and operating controls: Frequent product or service innovation (particularly important in manufacturing Six Criteria for Assessing New Business Opportunities Entrepreneurs often begin with innovative ideas, but succeeding in a new business also requires objective assessment procedures. If your gut tells you a product, service or existing business is a risk you want to take, use objective measurements to better determine its likelihood of success. The bottom line is profitability. Financials Assess the company's financial performance or potential financial performance. Evaluate historical sales revenues, profit margins of products and services, recent sales trends and cash flow. Examining cash flow lets you determine when you will get your money in and how much credit you might need to obtain. For example, your business might have excellent sales, but if the customers don’t pay for 60 days, you might have to delay your salary, operate using your savings while you wait for your bills to be paid, or take out a loan to buy materials. If you are launching a new business, look for trade association data that shows financial trends for similar companies and expected trends for the coming year. Sales A thorough sales assessment will give you insight into how sales have taken place and where you might improve them. Spot trends by analyzing where products are selling and to what types of customers. Certain geographic territories with low sales may not be underperforming, but are simply underserved, offering opportunities to grow the business. Market Data Researching the marketplace will help determine if it is being underserved or possibly saturated. Detailed demographic data can show that even if the marketplace contains significant competition, you have an opportunity to successfully introduce a new business or improve the performance of an existing one. Demographics such as gender, age, race and marital status will help you better understand who your potential customers are. Analyzing the price points of your competitors will also give you insight into why people might be buying a particular product or service. Look at market trends, such as sales during the last three years, and look for advances in technology that might affect the marketplace. Assets and Liabilities Look at the assets of an existing business to determine how it depends on them. The business might depend on a recipe, trademark, copyright or patent for its unique selling proposition. A company’s location, specific manufacturing process, grandfathered agreements or no-compete agreements with a supplier might be giving the business an edge, without which it would struggle to compete. A franchise might be thriving because of a restricted territory it owns or specific benefit it has been receiving from the owner’s status as a minority. Check the assets of any business you plan to purchase to determine what would happen if you lose them. Look for liabilities, such as debts, lawsuits and expiring contracts and assets. Relationships Key factors in a small business’s success often include personnel, endorsements and relationships. Key personnel, such as a well-known chef, IT whiz or top sales performer can make or break a business. Having a professional sports league or a celebrity endorse a business might be key to driving its sales. Having official sponsor, supplier or partner status of a trade association or other organization can also boost sales. Opportunity Costs Look at what entering a new business will cost you, in terms of lost revenue, personal time or sales connected to other business or opportunities you have. For example, using your cash to buy a business reduces your ability to pay down debt, lower interest payments, improve or upgrade current facilities, increase advertising and make other investments with that cash. You will need to devote your personal time to the new business. Accurately assess the number of hours you will need to spend on a new business venture and calculate the revenue your time would generate spent on another opportunity.