Introduction to Entrepreneurship

New Venture Development

Walter Good

Asper School of Business

University of Manitoba

What is Entrepreneurship?

Researchers have been very inconsistent in their definitions of ‘entrepreneurship’. Definitions have emphasized a broad range of activities including: The creation of organizations The carrying out of new combinations The exploration of opportunities The bearing of uncertainty The bringing together of factors of production And others

Some Examples

Richard Cantillon (circa 1730)

“Self-employment of any sort. Entrepreneurs buy at certain prices in the present and sell at uncertain prices in the future. The entrepreneur is a bearer of uncertainty.”

Jean Baptiste Say (1816)

“The entrepreneur is the agent ‘who unites all means of production and who finds in the value of the products…the reestablishment of the entire capital he employs, and the value of the wages, the interest, and the rent which he pays, as well as profits belonging to himself.’”

Joseph Schumpter (1934)

“The entrepreneur is the innovator who implements change within markets through the carrying out of new combinations. As such, the entrepreneur moves the market away from equilibrium”

Penrose (1963)

“Entrepreneurial activity involves identifying opportunities within the economic system. Managerial capacities are different from entrepreneurial capacities.”

Kirzner (1979)

“The entrepreneur recognizes and acts upon market opportunities. The entrepreneur is essentially an arbitrageur.”

Gartner (1988)

“The creation of new organizations”

Timmons (1994)

“Entrepreneurship is creating something of value from practically nothing”

Bygraves (1997)

“An entrepreneur is someone who perceives an opportunity and creates an organization to pursue it”

There is no single accepted definition of entrepreneurship.

•Small business?

•Micro business?

•Corporate entrepreneurship or intrapreneurship?

•High-growth firms?

•Family businesses?

•Franchises?

Entrepreneurship & Economic ThoughtEntrepreneurship & Economic Thought

S

D

S

D

Joseph Schumpeter (1930s) Israel Kirzner (1970s)

““CREATIVE DESTRUCTION”CREATIVE DESTRUCTION”Entrepreneurship moves marketaway from equilibrium

““ENTREPRENEURIAL DISCOVERY”ENTREPRENEURIAL DISCOVERY”Entrepreneurship moves markettoward equilibrium.

New combinations: new goods,methods of production, new markets,sources of supply, organizations.

Entrepreneur alert to opportunitiesthat already exist and are waiting tobe noticed.

Entrepreneurs Can Play a Number of Roles in the Economy

1. Create new product and/or service businesses.

2. Bring creative and innovative methods to developing or producing new products or services.

3. Provide employment opportunities and create new jobs as a result of growing their businesses consistently and rapidly.

4. Help contribute to regional and national economic growth.

5. Encourage greater industrial efficiency/productivity to enhance our international competitiveness.

Some Facts About EntrepreneurshipSome Facts About Entrepreneurship

1998 adult working population was 130 million, 17.3% or 21+ million were self-employed

Since WWII small entrepreneurial firms have been responsible for ½ of all innovation and 95% of all radical innovation.

Since 1980, large companies have lost more than 5M jobs, but 34M new jobs have been created.

At any point in time, 8.5% of the adult population is starting a new business.

In 1950s 50,000 businesses were incorporated per year. 770,000 businesses were incorporated in 1998.

Entrepreneurship Drives Job & Wealth Creation.

Entrepreneurship Drives Job & Wealth Creation.

Small businesses are the backbone of the North American Economy.They create 2 of every 3 new jobs and produce 39% of the GNP.

Firms with fewer than 20 employees currently create almost 95% of net new jobs.

Increasingly women are questioning traditional corporate jobs to seek their careers in entrepreneurship.

People in their 50’s or 60’s are planning second careers as entrepreneurs rather than retiring.

The vast majority or nearly 3 million millionaires accumulated their wealth through entrepreneurial ventures.

The Components of Successful Entrepreneurial Ventures

Business Plan

The Entrepreneur Opportunity

ResourcesOrganization

Strategy

Outline of the Entrepreneurial Process

Decide to go into business for yourself

Assess your potential

Find an appropriate product or service idea

Buy a business Start a new business Acquire a franchise

Conduct a feasibility study

Technical feasibility Market acceptability Financial viability

Organize your business structure and legal requirements

Protect your idea

Arrange the necessary financing

Develop a comprehensive business plan

Myths About Entrepreneurship

Myth 1 Entrepreneurs are born, not made.

Myth 2 Anyone can start a business. It’s just a matter of luck and guts.

Myth 3 Entrepreneurs are gamblers.

Myth 4 Entrepreneurs want to run the whole show themselves.

Myth 5 Entrepreneurs are their own bosses and completely independent.

Myth 6 Entrepreneurs work longer and harder than corporate managers.

Myth 7 Entrepreneurs face greater stress and more pressures, and thus pay a higher personal price in their jobs than do other managers.

Continued

Myths About Entrepreneurship(Continued)

Myth 8 Starting a business is risky and often ends in failure

Myth 9 Money is the most important ingredient of success

Myth 10 New business start-ups are for the young and energetic

Myth 11 Entrepreneurs are motivated solely by their quest for the almighty dollar

Myth 12 Entrepreneurs seek power and control over other people so that they can feel “in charge”

STAGE TWOAssess Your Potential for an Entrepreneurial Career

Realistically assess your potential for an

Entrepreneurial Career

Understand thepersonal attributes

important for success in a

business of your own

Understand thedemands the

entrepreneurialrole will make on

you and yourfamily

Evaluateyour managerial

skills

Conduct a personal financial

assessment

Develop apersonal

balance sheet

Develop apersonalbudget

Assess your strengths and weaknesses that will affect your ability to achieve

your entrepreneurial goals

Attitudes and Behaviours Valuable forTurning a Business Dream into Reality

Commitment, Determination, and Perseverance

A Success Orientation

Opportunity and Goal Orientation

Action Orientation and Personal Responsibility

Persistent Problem Solving and a Need to Achieve

A Reality Orientation

The Ability to Seek and Use Feedback

Self-Reliance

Continued

Attitudes and Behaviours Valuable forTurning a Business Dream into Reality

(Continued)

S

Self-Confidence

A tolerance of Ambiguity and Uncertainty

Moderate Risk-Taking and Risk Sharing

The Ability to Respond Positively to Failure

A Need for Status and Power

Integrity and Reliability

A Team Builder

Business Skills Needed by Successful Entrepreneurs

1. Managing Money

2. Managing People

3. Directing Business Operations

4. Directing Sales and Marketing Operations

5. Setting Up a Business