MGSD24 – New Venture PlanningMGSD24 – New Venture Planning

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EntrepreneursEntrepreneurs

Last updated January 13, 2016Last updated January 13, 2016

Quick Review: Last WeekQuick Review: Last Week

What course is about: Write a business planWhat course is about: Write a business planHow course works: Group work / 3 stagesHow course works: Group work / 3 stages

SMEs in Canada: SMEs in Canada: 98+% 98+% of all businessesof all businesses50%50% of all jobs (and growing) of all jobs (and growing)78%78% of all job creation 2002-2012 of all job creation 2002-2012

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You are more likely to get a job with You are more likely to get a job with a small business than a large onea small business than a large one

You might as well learn You might as well learn to start your own…to start your own…

Quick ReviewQuick ReviewPeople who write a plan:People who write a plan:

More likely to finish product developmentMore likely to finish product developmentMore likely to start marketingMore likely to start marketing6X6X times more likely to actually start times more likely to actually startLess likely to quitLess likely to quit

Quick ReviewQuick Review

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ReadingsReadingsAngel Investment CriteriaAngel Investment CriteriaRichard SudekRichard SudekJournal of Small Business StrategyJournal of Small Business StrategyVol. 17 No. 2 Fall/Winter 2006-7Vol. 17 No. 2 Fall/Winter 2006-7

Examines what “angel” (private) investors Examines what “angel” (private) investors look for in business planslook for in business plans

ReadingsReadings

Nature or Nurture?Nature or Nurture?Decoding The DNA of an EntrepreneurDecoding The DNA of an Entrepreneur

Ernst & YoungErnst & Young

E & Y survey 685 successfulE & Y survey 685 successfulentrepreneurs about their background,entrepreneurs about their background,motivations and key success factorsmotivations and key success factors

Sudek “Angel Investment Criteria”Sudek “Angel Investment Criteria”..

Sudek “Angel Investment Criteria”Sudek “Angel Investment Criteria”..

Sudek “Angel Investment Criteria”Sudek “Angel Investment Criteria”..

Sudek “Angel Investment Criteria”Sudek “Angel Investment Criteria”..

Ernst & Young: DNA of EntrepreneurErnst & Young: DNA of Entrepreneur..

E&Y Survey of 658 EntrepreneursE&Y Survey of 658 Entrepreneurs..

..

Readings on the BlackboardReadings on the Blackboard

See…?See…?

Purpose of Reading/LecturePurpose of Reading/LectureExamine psychological/personality Examine psychological/personality characteristics of entrepreneurscharacteristics of entrepreneurs

Examine demographic characteristics Examine demographic characteristics of entrepreneursof entrepreneurs

Have Have youyou consider consider youryour motivations motivations and suitability for starting your own and suitability for starting your own ventureventure

Business Survival Rates (Canada)Business Survival Rates (Canada) 85%85% 70%70% 62%62% 53% 51%53% 51%

Source: Industry Canada, Key Small Business Statistics, July 2012.Source: Industry Canada, Key Small Business Statistics, July 2012.

SME Survival Rate - USASME Survival Rate - USA

Source: Scott Shane, Source: Scott Shane, Illusions of Entrepreneurship: The Costly Myths that Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live ByEntrepreneurs, Investors, and Policy Makers Live By. Data from US Bureau of the . Data from US Bureau of the Census, for the Office of Advocacy of the U.S. Small Business Administration.Census, for the Office of Advocacy of the U.S. Small Business Administration.

Interesting Fact About EntrepreneursInteresting Fact About Entrepreneurs

Prof. Jeffrey Timmons (Harvard) isProf. Jeffrey Timmons (Harvard) isauthority on new business start-upauthority on new business start-up

He researched attitudes and beliefs of He researched attitudes and beliefs of would-be entrepreneurswould-be entrepreneurs

Most think the odds of survival are Most think the odds of survival are worseworse than they really are! than they really are!

Who Starts A Business? - EntrepreneurWho Starts A Business? - Entrepreneur

Individual who organises and co-ordinatesIndividual who organises and co-ordinatesthe activities required to start new businessthe activities required to start new business

"Entrepreneur" from French:"Entrepreneur" from French:

entrer: to enter entrer: to enter prendre: to takeprendre: to take

Why Is This Important?Why Is This Important?Opening pages of plan must convince Opening pages of plan must convince reader that you are:reader that you are:

driven driven confident confident risk tolerantrisk tolerantprepared to workprepared to work

AndAnd

you have support (friends/family)you have support (friends/family)

““Entrepreneur” ExplainedEntrepreneur” Explained

““entrepreneur” is entrepreneur” is notnot a job a job

““entrepreneur” is a roleentrepreneur” is a role

““entrepreneur” is a personality typeentrepreneur” is a personality type

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Entrepreneurs: Personality TraitsEntrepreneurs: Personality Traits

Risk toleranceRisk tolerance““Internal” locus of controlInternal” locus of controlHigh “Need for Achievement” High “Need for Achievement” Self ConfidentSelf Confident

Risk ToleranceRisk ToleranceRisk Risk defined: defined:

Uncertainty of outcomeUncertainty of outcome

People see People see risk:risk: From new situations, From new situations, complexity, or the unknown. complexity, or the unknown.

Risk ToleranceRisk Tolerance

Risk IntoleranceRisk Intolerance: : New or previously unknown New or previously unknown situations are situations are threatening

Risk ToleranceRisk Tolerance: : New or previously unknown New or previously unknown situations are situations are desirabledesirable. .

Threatening or Inviting?Threatening or Inviting?..

..

Entrepreneurs: Risk TolerantEntrepreneurs: Risk Tolerant

Entrepreneurs start new businessesEntrepreneurs start new businesses

Entrepreneurs try new opportunitiesEntrepreneurs try new opportunities

Entrepreneurs know: they Entrepreneurs know: they mightmight fail fail

Entrepreneurs are Entrepreneurs are risk tolerantrisk tolerant

Q.Q. What have you done that What have you done that others might consider to have others might consider to have

been risky?been risky?

““Locus of Control”Locus of Control”

A person's belief about what causes good or bad results in his or her life.

The extent to which people believe that they can control events that affect them.

““Internal” Locus of ControlInternal” Locus of ControlPeople belief that events result from their own behavior and actions.

“internals” try to influence others.

“internals” assume their efforts will succeed

““External” Locus of ControlExternal” Locus of Control

People who believe that powerful others, fate, or chance determine events.

Less likely to be leaders

Less likely to take risks

Less likely to start their own business

..

..

Entrepreneurs are “Internals”

Entrepreneurs:

recognise opportunities assemble and mobilise resources assume risks to realise rewards

Entrepreneurs are “internals”

Q.Q. What have you done to What have you done to bring about change to a large bring about change to a large

organisation or activity?organisation or activity?

Need for AchievementNeed for Achievement

Psychologist David McClelland Psychologist David McClelland (1961)(1961)

““Needs Motivation” TheoryNeeds Motivation” Theory

Three basic human motivationsThree basic human motivations

““Needs Motivation” TheoryNeeds Motivation” TheoryNeed for power (N-Pow)Need for power (N-Pow)People who are 'authority motivated'. They needPeople who are 'authority motivated'. They needto be influential. N-Pow produces a need to lead.to be influential. N-Pow produces a need to lead.These people need personal status and prestige.These people need personal status and prestige.

Need for affiliation (N-Aff)Need for affiliation (N-Aff)People who need friendly relationships, motivatedPeople who need friendly relationships, motivatedby interaction with others. N-Aff produces needby interaction with others. N-Aff produces needto be liked, held in high regard. Team players.to be liked, held in high regard. Team players.Need for achievement (N-Ach)Need for achievement (N-Ach)People who seek achievement, want to attainPeople who seek achievement, want to attainchallenging goals. N-Ach produces people whochallenging goals. N-Ach produces people whoneed accomplishment.need accomplishment.

““Needs Motivation” TheoryNeeds Motivation” Theory

Entrepreneurs seek challenges.Entrepreneurs seek challenges.

Entrepreneurs set goals.Entrepreneurs set goals.

Entrepreneurs take risks.Entrepreneurs take risks.

Entrepreneurs:Entrepreneurs:

Very high “Need for Very high “Need for Achievement”Achievement”

Q.Q. What have you achieved What have you achieved that you are proud of? that you are proud of?

Q.Q. What have you What have you accomplishedaccomplished??

Entrepreneurs: Demographic TraitsEntrepreneurs: Demographic Traits

Kids of entrepreneursKids of entrepreneursImmigrants/kids of immigrantsImmigrants/kids of immigrantsOlder than average worker Older than average worker NotNot great students great studentsWomen more successfulWomen more successful

Kids of EntrepreneursKids of Entrepreneurs

Entrepreneur in family: single most telling Entrepreneur in family: single most telling indicator of successful entrepreneursindicator of successful entrepreneurs

80% of entrepreneurs have heritage of 80% of entrepreneurs have heritage of family businessfamily business

Importance of Role Models (“Nurture”)Importance of Role Models (“Nurture”)

Genetic Predispositions (“Nature”)Genetic Predispositions (“Nature”)

Kids of EntrepreneursKids of Entrepreneurs

Importance of Role Models (“Nurture”)Importance of Role Models (“Nurture”)

Genetic Predispositions (“Nature”)Genetic Predispositions (“Nature”)

Q.Q. Have you been positively Have you been positively influenced by the example of your influenced by the example of your

parents?parents?

Q.Q. Can you look to your family for Can you look to your family for experience and advice?experience and advice?

Immigrant EntrepreneursImmigrant Entrepreneurs

Immigrants / their children thought to make Immigrants / their children thought to make good entrepreneurs. good entrepreneurs.

Immigrants to Canada are economic Immigrants to Canada are economic migrants. Packed up lives, belongings, migrants. Packed up lives, belongings, families, to improve economic well-being families, to improve economic well-being

Immigrants need: confidence, willingness Immigrants need: confidence, willingness to take reasonable risks, high need to to take reasonable risks, high need to achieveachieve

Immigrant EntrepreneursImmigrant Entrepreneurs

confidentconfident

willing to take riskswilling to take riskshigh need to achievehigh need to achieve

Older Than AverageOlder Than Average

Average Canadian employee: 34Average Canadian employee: 34

Average Canadian entrepreneur: 42Average Canadian entrepreneur: 42

… … and rising!and rising!

Older Than AverageOlder Than AverageWhy?Why?It takes experienceIt takes experienceIt takes confidenceIt takes confidenceIt takes contactsIt takes contactsIt takes $$$ to start a business.It takes $$$ to start a business.

See also the Huffingtom Post:See also the Huffingtom Post:

http://www.huffingtonpost.com/2011/01/04/older-entrepreneurs-are-t_n_803986.html

Entrepreneurs: Average StudentsEntrepreneurs: Average Students

Entrepreneurs: “doers” not “thinkers”

Prefer action to contemplation

Entrepreneurs: Average StudentsEntrepreneurs: Average Students

“A” students more likely to become:

academicsresearchersprofessionals (doctors, lawyers)

Women Are More SuccessfulWomen Are More SuccessfulWomen start business with fewer $$$Women start business with fewer $$$

But, women owned businesses:But, women owned businesses:less likely to failless likely to failmore profitablemore profitablegrow fastergrow fastertake on more employeestake on more employees

Why?Why?

Why Is This Important?Why Is This Important?

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