The Entrepreneurial
Spirit
If you are in the
Bus 88 class you have what it takes to be an entrepreneur... a spirit,
a business idea and enough motivation to do something that takes
you a step closer to opening the doors to your new business or that
helps your new business run and grow. Let's look at what it means to
be an entrepreneur.
Definition
#1 -
One who assumes the risks of business.
Professor: "You've
never been one until you've met a payroll."
Ambrosini: "You've
never been one until you've missed a payroll."
Definition
#2 -
One who doesn't realize that the job is impossible.
Reported National
Statistic show:
+ 650,000 new businesses each year; (573,000 start ups in 2003; 554,800 closed;
36,000 bankrupted)
- 65,000 bankrupted/failed yearly; 60%+ in 4 years
+ Half with employees survive 4 years at least
- 30% left after five years
+/- The NFIB estimates that over the lifetime of a business, 39% are profitable,
30% break even, and 30% lose money, with 1% falling in the "unable to
determine" category.
Wells
Fargo National Federation of Independent Business' http://www.nfib.com/page/home.html
Dun & Bradstreet http://www.dnb.com/us/
Robert Morris Associates http://www.rmahq.com/RMA/
Financial Research Associates http://www.frafssb.com/
Are
these stats accurate?
"How do you define failure?" That's
the rub...statistics you'll hear about business "failures" are
likely to mean business "closures." In some cases, not even
closures, just business changes. As Mark Twain said, "News of my
death is greatly exaggerated."
http://www.usatoday.com/money/smallbusiness/columnist/abrams/2004-05-06-success_x.htm
So what is your chance
of success? I think David Birch's research statistics are probably
as accurate as any. His survival rates:
• First year:
85%
• Second: 70%
• Third: 62%
• Fourth: 55%
• Fifth: 50%
• Sixth: 47%
• Seventh: 44%
• Eighth: 41%
• Ninth: 38%
• Tenth: 35%
What's
this mean to you? Studies examining entrepreneurs
who have had training and/or education in entrepreneurial skills
consistently show a much higher success rate (as high as 80-90%).
Jeff Cornwall
Director of the Belmont University
Center for Entrepreneurship
Posted July 6, 2005 05:15 AM http://forum.belmont.edu/cornwall/archives/002937.html
or Abrams
| Types
of businesses most likely to fail: |
| ...computer
stores, laundries, dry cleaners, florists, used-car dealerships,
gas stations, trucking firms, restaurants, infant's clothing stores,
bakeries, grocery/meat markets, night clubs/bars. |
| The
Entrepreneur's Goals |
- Be
my own boss
- Make
a lot of money
- Take
vacations when I want to
- Employ
my family
- Retire
young
- Work
when I want to
- Make
a lot of money
|
|
| Benefits & Drawbacks
of Small Business Ownership |
|
Benefits (see "Entrepreneur's
Goals" above )
|
Drawbacks |
- Control
your own destiny
- Use your
personal skills and knowledge to express your potential
- Unlimited
profit potential
- Contribute
to society
- Achieve
recognition and status
|
- Uncertainty
of Income
- Risk losing
entire invested capital and/or personal assets
- Quality
of life, particularly in startup
- Complete
responsibility
- Time, labor & energy
commitment
|
| Are
You Ready to be a Business Owner and Operator? |
You
probably want to start a business because you have a skill, have
worked for someone else, you've seen an unfilled need in the
marketplace or you seek the financial awards, lifestyle and status.
But
are you ready?
|
| Business
Ideas & Opportunities... |
...where
do they come from?
1) Sources:
- technology
- law
- social
issues
- marketing
changes, etc.
2) Product
variations
- new benefits
- distinct
advantages
3) Competition
- advantages
- ability
to imitate
- poor efforts/dissatisfied
customers
4) Personal
Skills/Knowledge/Ability
5) Market Niche/Positioning
6) Acquired knowledge/Skill/Opportunity from workplace
7) NEW IDEA/INNOVATION - fairly rare
First:
Do you have an idea and opportunity for a business?
MYBx8 -
Bad Startup Ideas and Plans Turned Good?
Key
|
|
Second:
How ready are you? Why
do you think you can do this?
Case Example
1:
|
| I
will be the new owner of an existing graphic design firm.
It is a small operation with just the owner and a graphic
design artist. This is my first experience with business
ownership and I have neither design experience nor sales/marketing
experience. The seller will train me in all aspects of the
business but I feel that an experienced marketing person
would do a better job at sales and marketing than I could.
Should I hire a full time sales and marketing person so I
can focus on running the office? And should it be someone
with experience in graphic design or would a generalist be
OK? |
What's your
answer?
|
|
Some Statistic about the Nation's and Santa Cruz County's Small
Business Climate:
- 5-10% of all products > 5
year old
- Small Business
= < 500 employees or < $10 million annual revenue
- 74% sole proprietors
- Small Businesses
produce 43% of GNP
- Small businesses
account for 44.4% of the total U.S. private payroll
- 90% of new jobs
in the last 20 years are services
- 60% of the workforce
- Businesses with < 50
employees account for about 2/3 of all jobs
- 21,500 businesses
in Santa Cruz County
- S.C.C. has 50%
more self-employed people per capita than the U.S. average and 33%
more than the California average
- Self-employment
is 25% of S.C.C's employment base: about 35,000 out of 140,000 people
- The number of
self-employed people has risen about 48% over the past 10 years
- 25 businesses
in S.C.C. have more than 200 employees (http://www.co.santa-cruz.ca.us/cao/econprof.htm)
- Local Small Businesses
experience more than double the national failure rates
- S.C.C. bankruptcy
rate is 55% higher than the national average
- 60% of California's
small businesses are in Southern California
- 42,000 commute
out of S.C.C. daily, in 35,000 cars
- 8000 cars commute
into S.C.C. (click
for more info)
- S.C.C population
is ____________?
Some notes
on local business ownership & customer
behavior.
- Local Talk, a Good Times column
- U.S. Census Report:
- Santa Cruz is the only county in California with a shrinking
population for the last five years (2001-2006)
- Median housing prices make us the least affordable place to live
in the U.S. except for Hawaii
- Average one-way commute in county is 30 minutes
- Half the county's children live in homes where both parents work
- Better educated and more Masters degress per capita than the
U.S.
- Tend to prefer the informal to the formal (anecdotal)
- Tend to be overextended in time and money (anecdotal)
- Doing Business
in Downtown Santa Cruz
- Average household owes over $10,000 in credit card debt
- Local businesses
practice and performance of service is sloppy, slow to be completed and are not
customer service oriented (anecdotal)
| The
Entrepreneur's Reality |
|
|
| Education
Level and Small Business Ownership |
 |
 |
| Types
of Businesses You Might Form |
|
RMS
|
|
Producers
- Manufacturers
- Services
- Creators/Performers
|
|
Distributors,
aka Resellers
- Wholesaler
- Retailer
- Agent
- Broker
|
| Major
challenges in managing a small business |
- lack of
experience or knowledge
- lack of
money - undercapitalized
- poor location
- too much
money tied up in fixed assets
- poor inventory
management
- poor credit
practices
- poor cash
flow management
- taking too
much money for yourself
- poorly planned
growth or expansion
- poor attitudes
- poor employees
or ill-trained
- poor time
and task management
|
| Why
businesses fail |
- Managerial
incompetence - 45%
- Lack of
experience/unbalanced experience - 27%
- Poor financial
management - 23%
- Failure
to plan
- Inappropriate
location
- Poor
inventory control
- Neglect
- 3%
- Fraud -
2%
- Disaster
- 1%
- unforeseeable
reasons < 2%
|
| Why
Businesses Succeed: Strategies |
Strategies
Include:
- Focus
on target market(s)
- Respond
to customer wants & needs
- Choose
a "good" location
- Provide
good customer service before, during and after the sale
- They price
appropriately
- They have
a method of operations and they evolve
- Diversification
- don't rely on:
- a
few customers - many businesses start this way but
what happens if your largest customer can't pay his
bills, closes, moves, are all in the same industry
(think banks and Real Estate in the early 1990's; Hi-Tech
crash in early 2000's)?
- a
few vendors (suppliers) - what if a key vendor raises
prices, can't delivery inventory on time, quits business?
(note: if you ship products don't rely on one shipper)
- a
few key employees - share information, allocate responsibilities,
have a plan
|
|
