Transcript Chapter 5 Entrepreneurship

Entrepreneurship
old Ch 5
new Ch 6
What is an entrepreneur?
Why do it?
What does it take, personally?
What business?
Causes of success and failure?
Common challenges?
Increasing chance of success?
How to foster e’ship in a large company?
What is an Entrepreneur?
Entrepreneur – an individual who establishes a new
organization without the benefit of corporate
sponsorship.
Textbook’s view
Small business: < 100 employees, independent, not
dominant, not innovative.
Entrepreneurial venture: A new business having growth
and high profitability as primary objectives
Pruett’s view
Entrepreneurship = Freedom + Creativity + Risk
Myths about Entrepreneurship
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Anyone can start a business. (growing/prospering is hard)
Gamblers. (careful calculators)
Want whole show to themselves.
(growth takes teamwork)
Own bosses and independent. (many stakeholders)
Work longer and harder. (some do, some don’t)
Stress and sacrifice. (satisfied, less likely to retire)
Motivated by money. (creation, control, autonomy)
Seek power (seek accomplishment)
Talent means quick success (usually takes 7-8 years)
Good ideas bring venture capital (1-3% of good ideas)
Money helps (too much leads to spending)
Lone wolves (team-builders, cooperators)
Brain power (many personal factors matter)
Why become an entrepreneur?
Challenge
Profit potential
Satisfaction
Quality of life
Independence
Creative outlet—building something from nothing
What does it take to succeed?
Innovation and creativity skills
General management skills
Business know-how
Social networks
Ingredients for starting a business
A great idea
Spot, create and exploit opportunities
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Technological discoveries
Demographic changes
Lifestyle and taste changes
Economic dislocations
Calamities
Government initiatives and rule changes
Franchises
Franchisor – an innovator who has created at least one
successful store and seeks partners to operate the same
concept in other local markets.
Franchisee – the operator of one or more stores according to
the terms of a contract.
E-commerce Business Models
Transaction fee – selling goods or services.
Advertising support – website operator is paid by
advertisers who seek access to the demographic
group that visits the site.
Intermediary – website brings buyers and sellers
together, charges a commission on sales.
Affiliate – sites pay commissions to other sites to drive
business to their own sites.
Subscription – charge a monthly or annual fee for site
visits or access to site content.
Characteristics of an Entrepreneur
Commitment/determination
Leadership
Opportunity obsession
Tolerance of risk, ambiguity, and uncertainty
Creativity, self-reliance, and ability to adapt
Motivation to excel
Improving the odds of success
Anticipate risk, create cushions.
Planning and research of environment.
Business incubators – protected environments
for new, small businesses.
Common Management Challenges
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You might not enjoy it
Survival is difficult
Growth creates new challenges
It’s hard to delegate
Misuse of funds
Poor controls
Mortality/failure
Going public
Anybody involved in a family business?
Some tips
Family members must contribute like other
employees.
An non-family member in at least one key job
Use outside advice to help plan succession.
What is an Initial Public Offering?
Sale to the public, for the first time, of
federally registered and underwritten shares
of stock in the company.
Business Plans
determine the idea’s viability
help plan and organize
help convince yourself and others -- whom??
Key Business Plan Issues
The People
The Opportunity
The Competition
The Context
Risk and reward
Who?
What?
Where/How?
Where/How?
Why?
DOES THE MATH WORK?!
Nonfinancial Resources
Legitimacy – acceptance and desirability; goals and
methods consistent with societal values.
Social capital – the strength derived from relationships
and the image other people have of you.
Top-management team
Advisory boards
Partners
Creating Intrapreneurship
Skunkworks – project team designated to create new
products.
Bootlegging – informal work on projects, other than
those officially assigned, of employees’ own choosing
and initiative.
Bootlegging:
How to build support for your ideas
Get others involved or supportive
Clear it with your immediate boss
Find cheerleaders – who will support your project
before formal approval from higher levels?
Horse trading – what can you offer peers and others
from the project in return for their support, time,
money, etc. and other resources?
Get the blessing of relevant higher-level officials