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STARTING A NEW BUSINESS: MYTHS AND REALITIES

STARTING A NEW BUSINESS: MYTHS AND REALITIES. A Presentation by Steven E. Phelan Director, UNLV Center for Entrepreneurship. WHO AM I?. An aussie A pracademic Professor & PhD Executive & MBA Consultant Director, UNLV Center for Entrepreneurship Teaching Research Outreach. Steve.

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STARTING A NEW BUSINESS: MYTHS AND REALITIES

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  1. STARTING A NEW BUSINESS: MYTHS AND REALITIES A Presentation by Steven E. Phelan Director, UNLV Center for Entrepreneurship

  2. WHO AM I? • An aussie • A pracademic • Professor & PhD • Executive & MBA • Consultant • Director, UNLV Center forEntrepreneurship • Teaching • Research • Outreach Steve

  3. WHY AM I HERE? • To dispel the myths about starting a business based on recent data • To obtain a realistic portrait of the life of an entrepreneur • To help you make an informed decision about starting a business • To improve your chances of success • Successful entrepreneurs do a lot of things differently than failed entrepreneurs

  4. Sources • Global Entrepreneurship Monitor (GEM) • An annual survey of national entrepreneurial activity in 42 countries • Panel Study of Entrepreneurial Dynamics (PSED) • Longitudinal studies of people intending to start a business • An initial sample of 64,000 people in 1998 (PSED I) • A sample of 34,000 people in 2005-6 (PSED II) • Kauffman Firm Survey (KFS) • A longitudinal survey of ~5,000 businesses started in 2004 • Scott Shane, Illusions of Entrepreneurship

  5. Up to 40% of the US population will be self-employed at some stage in their career • About 1 in 10 are self-employed at any given time • I will never start a business.

  6. The proportion of American households owning a business has declined • Self employment is only 58% of what it was in 1948 (the Wal*Mart effect?) • There has been significant growth in startups and small business in the last 50 years

  7. Turks and Thais are three times as likely to be self employed • Richer countries have lower self employment • The US is the most entrepreneurial country on the planet!

  8. Entrepreneurs select industries with the highest failure rates because they are familiar and easy to enter (e.g. personal services) • Entrepreneurs choose the most profitable industries

  9. Ideas are a dime a dozen • Investors will laugh if you want an NDA • Execution is what counts • Build a better mousetrap and the world will beat a path to your door

  10. The typical entrepreneur starts a business because he doesn’t like working for someone else • Making a living is more important than striking it rich • Entrepreneurs start businesses to get rich

  11. People are statistically more likely to become self employed if they are unemployed, change jobs often, or earn less money • Entrepreneurs have a record of success

  12. The typical entrepreneur is married, white, and in his forties • Demographics are more important than psychology • Pretty much anyone can become an entrepreneur

  13. 92% of owners have prior experience in the industry (10+ years on average) • Certain industries generate more self-employment (think plumber vs. librarian) • Pretty much anyone can become an entrepreneur

  14. Most are home-based businesses with a well-known product or service • Most startups don’t have a business plan • Teams are rare (more likely to be mom and pop) • Most startups are innovative hi-tech teams chasing profitable opportunities

  15. Only 1/3 of people who initiate the start-up process had positive cash flow after seven years • Starting a business is easy

  16. 75% of startups do not employ anyone • Only 10% have more than 5 employees • 81% of startups have no desire to grow • Startups create employment

  17. The median startup required ~$25-$30K • You need a lot of money to start (or buy) a business

  18. Half receive no external financing at all • Money tends to come from personal savings and personal debt • Only 1 in 12 startups received equity from family & friends • Entrepreneurs use “other people’s money”

  19. VCs funded only 0.03% of all new businesses in a given year • 92% in IT and healthcare • Venture capitalists fund new ventures

  20. Angels contribute twice as much as VCs • Other informal investors fund seven times as much but are less wealthy, make smaller investments, and expect lower returns • Angel investors fund new ventures

  21. Around 25% fail in a year, about 50% in five years, and 70% in ten. • Most businesses fail within a year!

  22. One study found entrepreneurs earn 35% less over ten years with more uncertainty and lower benefits (18% if matched) • They also work 13+ more hours a week on average but are more satisfied • You earn more working for yourself and work less

  23. On average, business owners have 5x the net worth of non-owners • The wealthiest 10% have 75% of all business wealth • Most founders are over-optimistic about their prospects • Starting a business can make you wealthy

  24. An IT firm is 600 times more likely to be in the Inc 500 than a restaurant firm • Survival rates vary by industry too • Work hard and you can be successful

  25. Secrets to success • Get some education • Get experience in your industry • Start marketing early • Work with a team • Get external financing • Form a corporation • Enter an attractive industry • Seek a competitive advantage • Write a plan • Do something • Persevere!

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