ENTREPRENEURSHIP I

1. ENTREPRENEURSHIP I Babs Bailey Carryer Fall 2002

2. Goals of course • To distinguish between an idea and a business opportunity • Inventor vs. entrepreneur • To understand the value of and know how to conduct market research to help identify a market opportunity • Marketplace advantage(s)

3. Entrepreneurship • Why do we care? • Creation of jobs • 5% of young and fast growing companies create 77% of new jobs • 15% of them account for 94% of all these new jobs • Fortune 500 employed 1 in 5 in 1980; now 1 in 14

4. Entrepreneurship continued • 70% of companies that are hiring ≤ 4 years old • 70-80% of jobs are with companies ≤ 20 people • > 95% of the wealth in America has been created by entrepreneurs since 1980 • Millionaires are self-made : > 80% accumulated their wealth in 1 generation

5. PA entrepreneurship • PA: > 200K businesses • 98% = small (< 500) • + Almost 400K self employed • Women owned businesses increasing at 65% • 78% nationwide

6. Large companies Small businesses 1920 2000

7. New venture creation

8. Small businesses • Only 3% of US businesses > $10 million • Responsible for half of all innovation in the U.S. • Small businesses create 75%of all net new jobs • Very small (< 20) = 50% of this growth • Represent over 99% employers; 52% of workers

9. Small businesses continued • Provide 52% of private sector output • Represent 96% of all exporters of goods • Receive 28% of all federal contract $ • 53% are home based • 3% are franchises

10. Business dissolution rates

11. Survival rates

12. Entrepreneurship • What is it?

13. Entrepreneurship = • Way of thinking • Spotting opportunity • Taking initiative • Implementation driven • Resource utilization • Acceptance of risk/failure

14. Entrepreneur One who brings resources, labor, material and other assets into combinations that make their value greater than before. An entrepreneur is also one who introduces changes, innovations and a new order. Thinkers who do.

15. Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time and /or career commitment providing value for a product or service. The product or service may or may not be new or unique but value must somehow be infused by the entrepreneur.

16. Examples • Nolan Bushnell - in 1972 founded Atari (electronic games) on $500. In 1976 he sold it to Warner Communications for $28 m • Ross Perot started EDS with $1K • Michael Dell started selling computer parts by mail order while a Freshman at the University of Texas

17. The right time to start a business Market Size Time

18. Characteristics • Focus • Drive • Energy • Self confidence • Don’t start by wanting to get rich but to do something extremely well • Not seeking the trappings of success, but success itself

19. Characteristics continued • Most have history of entrepreneurship • Sports • Expulsion or fired • 2/3 are 1st children • 40% were raised by self-employed parents (vs. 18% of general population) • Entrepreneurial test

20. Entrepreneurs do • Seldom invent and market unique products but build ventures around incremental innovations and modifications • Enter industries in their growth phase, not infancy • Find fulfillment in their work • Start more than one company

21. Entrepreneurial know-how • Resource utilization - entrepreneurs know how to do more with less • Selling ability • Recognize business opportunities: • Markets in flux • Industries with low capital requirements • Customers will pay for customization • Unit sale can support direct sales effort

22. Risk tolerance • Entrepreneurs pick a relatively low level of risk and then come up with suggestions as to how to increase returns at the given level of risk • Bankers pick a return that they aspire to and then come up with ideas to reduce the risk involved at that level

23. Innovation • Entrepreneurs don’t have common personalities but a commitment to innovation • Entrepreneurship refers not to an enterprise’s size or age, but to a certain kind of activity • Innovation is the effort to create purposeful, focused change in an enterprise’s economic or social potential

24. How innovation occurs • 1. Unexpected occurrences • IBM • Ford and Edsel • 2. Incongruities • Alcon • Steel • Shipping

25. Innovation continued • 3. Process needs • Media - Linotype and modern advertising • 4. Industry and market changes • Galt • 5. Demographic changes • Woolworths vs Walmart • 6. Changes in perception • Obsession with health in spite of improvements

26. 7. New knowledge • Computer • Binary arithmetic • Calculating machine in early 19th C • Punch card for the U.S. census of 1890 • Audion tube, invented in 1906 • Symbolic logic, created between 1910 -1913 • Programming/feedback concepts from WWI efforts to develop anti-aircraft guns • The knowledge was available by 1918, but the 1st computer appeared in 1946

27. Effective innovations start small. They are not grandiose. They try to do one specific thing. It may be the elementary idea of putting the same number of matches in a matchbox. This simple notion gave the Swedes a world monopolyon matches for half a century. Peter Drucker

28. We succeeded (in the Normandy Invasion) because we didn’t know it was impossible. Winston Churchill