Chapter 2- The Entrepreneur

							Chapter 2- The Entrepreneur

The Entrepreneur’s Guide to Finance and Business- Rogers

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Chapter 2 Concepts
• Success (and failure) rates of Entrepreneurs • What drives the Entrepreneur • Traits of the Entrepreneur • Economic Impacts of the Entrepreneur

• Social Impacts of the Entrepreneur
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Success (failure) rates of Entrepreneurs
• The Entrepreneur has an uphill battle to succeed. Failure rates of small businesses per SBA:
– – – – 24% within 2 years of startup 52% after 4 years 63% after 6 years 80% after 10 years

• See Table 2-1 of Text (p 16 for #’s of failures)
– Numbers can be deceiving

• The average entrepreneur fails 3.8 times before succeeding
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Success (failure) rates of Entrepreneurs
Proportion of businesses Founded in 1992 still alive by Year

Source:

Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By

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Success (failure) Rates of Entrepreneurswhy do Entrepreneurs fail?
In his book Small Business Management, Michael Ames gives the following reasons for small business failure: •Lack of experience •Insufficient capital (money) •Poor location •Poor inventory management •Over-investment in fixed assets •Poor credit arrangements •Personal use of business funds •Unexpected growth Gustav Berle adds two more reasons in The Do It Yourself Business Book: •Competition •Low sales Source:
http://www.sba.gov/smallbusinessplanner/plan/getready/SERV_SBPLANNER_ISENTFORU.html

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What drives the Entrepreneur? Or, if so many fail, why do it is all?
• Henry Ford once said “Failure is the chance to begin again more intelligently. It is just a resting place.” • Failure is an entrepreneurial “rite of passage.”
– Venture capitalists would rather deal with someone who has failed and learned from the failure than someone new to the business – “how you recover is more important than the mistakes you make.”

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What drives the Entrepreneur? Or, if so many fail, why do it is all?
• 50% of adult population wanted to own their own business- source: Gallup study • Reasons cited in the text for wanting to be an Entrepreneur:
– Gain independence and control the workload (Be the boss!) – Sense of accomplishment in a successful company – Chance to make a lot of money
• 63% of 400 richest were 1st generation Entrepreneurs in 1984; increased to 72% in late 1990’s

– Respect given to Entrepreneurs by community – Outlet for creative talent or new idea – Added community/social benefits
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What drives the Entrepreneur? Or, if so many fail, why do it is all?
• Reasons cited in the text for wanting to be an Entrepreneur (Continued):
– Forced into it (e.g. lost their job; corporate downsizing)
• Downsizing due to cost control, mergers, overseas competition, recession) • Inc. study reported that 40% of Inc. 500 founders were victims of corporate reshuffling • ESPN (Bill Rasmussen is an example)

– Born into it (e.g. second generation Entrepreneurs) – Role models spurred Entrepreneurship – Corporations sometimes encouraging entrepreneurship in employees

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Entrepreneurship and Technology
• The technological revolution forever changed the face of entrepreneurship
– Hardware/Software firms (Lotus, Microsoft, Apple, Dell) – Internet (Yahoo, Google, AOL) – Telecommunications (CISCO, Verizon)

• Unprecedented job growth and opportunity
– – – – Silicon valley, rte 128 corridor, etc Home based businesses (60M in 1998) Lowered the cost of starting a business (evens playing field) Internet created new markets

• “Dot-bomb” shakeup was a bump in the road of technological innovation
– Different players in the market – See p. 32 statisics

Traits of an Entrepreneur
• Survey of 400 entrepreneurs yields following traits:
– – – – – – – – – – Focused, steadfast, and undeviating Positive outlook Opinionated and judges quickly Impatient Prefers simple solutions Autonomous and independent Aggressive Risk taker Acts without deliberation and reactive Emotionally aloof

Traits of an Entrepreneur (Cont’d)
• Author adds the following traits:
– – – – – Opportunist Sacrificer Visionary Problem solver Comfortable with ambiguity or uncertainty

Economic Impacts of the Entrepreneur
• Fortune 500 companies:
– In 1960’s, 1 out of 4 worked for one – In early 2000’s, 1 out of 14 work for one

• Small and medium-sized business:
– Employ 57 percent of all employees – 10 million people work at companies with 20-49 employees – Companies with <500 employees had 95% of exporters and 30% of all exports in 1992

• Out of 22.5M businesses in U.S., 4% with revenues >$1M • Dominance of small business holds true on the international level, particularly in Asia

Social Impacts of the Entrepreneur
• See Pages 46-47 pie charts: • Trends in small businesses:
– More minority owned businesses – More women-owned business – Mix in educational background
• More college-based education programs

– More service-based business
• Technology based; financial services