ENTREPRENEURSHIP I

Babs Bailey Carryer

Fall 2002
 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)

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 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

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 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

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

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 Largecompanies

Smallbusinesses

1920 2000
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 New venture creation
Growth of New Ventures Per Year (in 000s)

1,200
1,000
800
600
400
200
0
1950s 1970s 1990s

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 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

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 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

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 Business dissolution rates
Time Period All Firms Firms creating 1-4
jobs
After 2 years 44% 8%
After 4 years 50% 20%
After 6 years 60% 24%
After 8 years 71% 47%

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 Survival rates
Firms 92 93 94 95 Firms
closing surviving
ineach until
year 96

Allfirms 7.3 6.7 5.8 4.7 75.5

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 Entrepreneurship
What is it?

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

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 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.

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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.

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 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
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 The right time to start a
business

Market
Size

Time
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 Characteristics
Focus
Drive
Energy
Self confidence
Dont start by wanting to get rich but
to do something extremely well
Not seeking the trappings of success,
but success itself

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 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
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 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
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 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

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 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

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 Innovation
Entrepreneurs dont have common
personalities but a commitment to
innovation
Entrepreneurship refers not to an
enterprises size or age, but to a certain
kind of activity
Innovation is the effort to create
purposeful, focused change in an
enterprises economic or social potential

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

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 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

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 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
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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 monopoly on matches for half a
century.
Peter Drucker

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We succeeded (in the
Normandy Invasion) because
we didnt know it was
impossible.
Winston Churchill

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