ENTREPRENEURSHIPMYTH vs. REALITY

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MythEntrepreneurs are a rare breed, a

kind of genius who is born not made. A jet-setting Silicon Valley engineer who along with a couple of his buddies, has raised millions of dollars of venture capital to start a new company to make a patent-protected gizmo. This company will employ thousands, go public in four years and generate huge globs of money for its founders and investors.

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RealityMuch more common than

most think. Married white man in his 40’s who attended some college. Lives much of his life where he was born, has a low tech endeavor in an industry where he has worked most of his life such as construction or a retail trade.

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What is Entrepreneurship?Merriam-Webster

Online Dictionary: “The activity of organizing, managing, and assuming the risks of a business or enterprise.”

An entrepreneur is a person who engages in these activities.

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How Popular is Entrepreneurship?If you Google Entrepreneur

76,500,ooo hits!If You Google Sex43,800,000 hits

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What Businesses Look Like11.1% of US households have self-

employed headIn 2005, about 13% of people 18-74

were in the process of starting a business

40% of US population will be self employed at some time

Major motivation is to avoid working for someone else.

Started with $25,000 of his own savings

No plans to employ lots of people or make lots of money

Just wants to support his family 6

Retail & Service Businesses Outnumber Manufacturing 8 to 1Retail trade 18.6%Professional, scientific & technical svc 12.0%Accommodation and food service 10.9%Construction 10.0%Finance, insurance & real estate 8.4%Educational services 4.8%Information services 4.2%Manufacturing 3.5%

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Failure Rates of Small Businesses

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Of 20% Who Survive 5 Years

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Top 2 Reasons Businesses Fail1. Lack of Management Skills

People management skills are extremely important

Sales & Marketing skillsHow are you going to grow your business

Financial skillsReading P&L’s and Balance sheetsKnowing when and how to borrow moneyHandling accounts receivable and payable

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Top 2 Reasons Businesses Fail2. Lack of Operating Capital

Lack of funds to carry the business through the slow times.

Lack of funds to grow the business.

Lack of funds to provide for home living expenses for a year.

Lack of funds usually results in cutting advertising expenses first

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Two Most Critical Steps To Insure Business Success

1. Having a Business PlanForces owners to look at the management,

marketing and financial aspects of the business.

Having a business plan increases the odds that other organizing activities and product development will occur.

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Two Most Critical Steps To Insure Business Success

2. Business in a Team Sport

Most entrepreneurs try to make decisions on their own.

A team consists of many people with various skills.

SCORE can be a big part of this!

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Education and Experience CountThose with more education and experience

are more likely to start successful business.Work experience increases the chances if:

In the business world…not government or education

Experience managing peopleFiguring out how to satisfy customersExperience keeping financial records

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Percentage Who Start A Business

Image of The EntrepreneurMark Zuckerberg, the founder of FacebookSteve Jobs, the founder of AppleMichael Dell, founder of Dell ComputerBill Gates, founder of MicrosoftLarry Ellison, founder of OracleThese are the image of entrepreneurs to

many of usALL DROPPED OUT OF COLLEGE

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Highest start-ups = Highest failures

First. Many entrepreneurs start businesses in industries where they have worked before and therefore understand. On average, these industries tend to be the ones that employ the most people and are the most competitive. As a result, many entrepreneurs end up starting their new firms in industries that aren’t the most attractive for start ups.

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Highest start-ups = Highest failures

Second. Many entrepreneurs start businesses in industries where starting a new company is easy, and industries where it is easy to get started are also more failure prone.

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AgeMyth: Entrepreneurs are, by and large, risk

takers, and college students are especially prone to take risks because they are generally unencumbered by family obligations and mortgages. New firm creation tends to be a young man’s game. Younger individuals are more likely to start a new firm than older ones.

Reality: Age group Business Owners

18-24 1% 25-34 8% 35-44 24% 45-64 53% 65+ 10%

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What Does a Start-Up Look Like?Myth: Finds innovative new markets,

develop new products or opportunities, explores risk

Reality: Is not innovative and does not intend to challenge existing companies

Lacks a single competitive advantageDoes not intend to growOnly 25% of new businesses started each

year employ more than the owner.Of those new businesses with employees,

only 10% had more than 5 employees

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Revenue Size of New BusinessesFederal Reserve survey of owner-

managed firms, the typical revenue is $90K

Another survey by Census Bureau found that self-employed owners, partnerships, or Sub-S corporations the average revenue was $183K

More than 1/3 of new owners do not expect their new business to replace their existing job.

And, 46% of new businesses started each year that survive for 5 years will remain home-based businesses.

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Individuals vs Teams50% to 60% are started by an

individual.76% are founded by individual

along with their spouses.89% are individuals along with

their spouses or a relative.So only around 10% of business

are started by teams of unrelated individuals. Venture teams are rare.

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How Much Gets Invested?$15,000 - $20,000 for

average start-up. Again most are home

based with only one person.

The average price to purchase an existing company is $35,000

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Where Do Businesses Get Money?Even after 8 years, most

start-up capital comes from the founders savings.

Of new businesses, 61% did not intend to get external financing.

However, new businesses that do receive external funding are capitalized at a much higher level.

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