Entrepreneurship
Entrepreneurship
Glenn Muske
Micro Business Specialist
Oklahoma State University
Outline

Entrepreneurship
–
–
–
–

Myths
Defined
Opportunity, Risk and Reward
What the social sciences tell us
Entrepreneurs and the community
– Entrepreneurs vs. small business owners &
others
– Role of entrepreneurs in the local economy
– Building an entrepreneurial community

Entrepreneurial examples

Special entrepreneurial situations

Final thoughts
Personal Passion
The freedom to pursue personal passion
leads many to start businesses.
“Nothing great in the world has been
accomplished without passion.”
George Wilhelm Friedrich Hegel
German Philosopher (1770-1831)
Questions often asked
but aren’t the most important
1.
What can I do? What business
should I start?
2.
Can I get a grant?
3.
What business will earn lots of
money?
4.
What about e-commerce?
Questions often not asked
but should be!!
1.
Am I an entrepreneur?
2.
Is there a market?
3.
Can I profitably tap that market?
4.
How do I get to market?
- E-commerce is just a means to market
The Myths of
Entrepreneurship
Myth #1
 Get

Rich Quick!
Truth is
– Life as an entrepreneur is not about money.
– Success rarely happens overnight.
– It's about what you want to do with your life.
Myth # 2
 You
must be born an entrepreneur
(trait theory)

Truth is:
– some of the most successful entrepreneurs are
the most unlikely.
– It is a lifestyle choice, not an accident.
Myth # 3
 You
must be at the right place at the
right time
(environment theory)

Truth is:
– successful entrepreneurs operate whatever the
macroeconomic and structural factors are
Myth # 4
 "I'll
have all this free time…"
 Truth
hours
is entrepreneurs work many
– advantages are:
 control
of time
 variety of tasks
Myth # 5
 It
get easier.
 Truth
is it gets more challenging
– must work faster, smarter & longer
– must enjoy the battle
Myth # 6
 If

you build it, they will come.
Truth is building your business is just the
start.
Next is the real work:
– planning
– timing
– strategizing and more.
Myth # 7
 It's

all about the bottom line.
Truth is that the bottom line is necessary
but not sufficient
– purpose and meaning to the business
– inspire customers and employees
Myth # 8
 Entrepreneurs
 Truth
are risk takers
– Entrepreneurs are calculators
– Studies show entrepreneurs are only
moderate risk takers
Myth # 9
 You
have to have a great idea
 Truth
– Your
– Your
– Your
– Your
idea
idea
idea
idea
must
must
must
must
be
be
be
be
good
doable
wanted or needed
priced right
Myth # 10
 It
takes a lot of money
 Truth
– Over 50% start for under
$10,000
– Also look for
 Certain
business types
 Turn-around situations
 Possibility of using other people’s money
Entrepreneur’s goal is
“to create or capitalize on new economic
opportunities through innovation


By finding new solutions to
existing problems
Or by connecting existing
solutions to unmet needs or new
opportunities”
SOURCE: Lichtenstein & Lyons, Incubating New
Enterprises: A Guide to Successful Practice, 1996
Entrepreneurship Definitions:
1.
2.
Creation of an innovative economic
organization for the purpose of gain or
growth under conditions of risk and
uncertainty
Self-employment through business
ownership that includes significant
elements of risk, control, and reward
(Coleman Foundation)
3.
Organizing a business venture assuming
a certain amount of risk to make a profit
(Burns and Bolton)
More Definitions:
 Profits
from bearing uncertainty and
risk
 Purposeful activity to initiate and
develop a profit-oriented business
 Moderate risk taking
 Creation of new organizations
 The pursuit of opportunity without
regard to resources currently
controlled
Entrepreneurship:
Basic Elements
1.
Opportunity recognition
2.
Creation and/or innovation
3.
Resource gathering and the
founding of an economic
organization
4.
Desiring the chance for gain while
accepting risk and uncertainty
Other Entrepreneurial
Motivators
?? Tell a time when you
were entrepreneurial ??
Were you successful??
Opportunity Recognition
An Entrepreneurial
Opportunity defined:
A
situation in which changes in which
changes in technology, or economic,
political, social, and demographic
conditions generate the potential to
create something new or to remarket
something existing.
Entrepreneurial Opportunity
Grid
Market
Existing
New
Product/Service
Existing
New
Market
Penetration
New Offering
Development
Market
Development
Diversification
What are opportunities?

Small steps

Little jumps

Huge leaps
"Don't be afraid to take a big
step if one is indicated; you
can't cross a chasm in two
small jumps."
David Lloyd George
Opportunities can be...
Technical or
scientific
 Political and
regulatory
 Process or
production method
 Organizing
 New market and
marketing
 Personnel

Social &
demographic
changes
 New raw material
 Product
obsolescence
 Corporate
stagnation
 One-product
vulnerability
 Chance

Think like a…..
 Manager
– Problem solving
 Entrepreneur
Exploitation
– Opportunity
Opportunities
 External
– Unexpected event
– Technology changes and convergence
– Change in methods
– Demographics/market – size,
– Changes in competition
 Internal
 Other
methods
The Opportunity Myth
An Idea
does not equal an
Opportunity
Creation & Innovation
Creativity
“ Imagination is more
important than knowledge”
- Einstein
The Creative Process
 Planning
& definition
– focus on building the RIGHT
product
 Design,
demonstration &
customer support
– focus on building the product
RIGHT
Customer requirement
Product solution
NOT
Technology
Product
Find a consumer
Basic questions
 What
is the customer’s need?
–How large is the opportunity?
–How likely is it to happen?
–What is the market timing?
–Is it aligned with our
organizational strengths?
Time is money!
Delays give others time to
develop the same product.
Reduce product development
time by 1/3 & you will triple profits
& growth.
Exercise
 In
groups of 3-4, think of 3 things
you have observed externally lately
that would be a potential business
opportunity.
Resource Gathering
Resourced-based Theory
of Entrepreneurship
Dimensions of Entrepreneurship
Individual Characteristics
Environment
New
Venture
Creation
Constraints in the
Environment
Organization
Resource
 any
thing or quality that is useful
 used to develop sustainable
competitive advantage
 heterogeneous & immobile
– you have them, others cannot easily get
them
Strategic Resources
 Valuable
– Exploit an environmental
opportunity
 Rare – Not enough for all
competitors
 Imperfectly imitable – Cannot be
merely copied
 Non-substitutable
Competitive Advantage
Resource
Dimension
Advantage
Valuable
Exploits
opportunities
Rare
Unique &
expensive
Ordinary
Imitable
Complex &
ambiguous
Many & easy
Substitutable
Difficult
No Advantage
Common
Readily
available &
cheap
Types of Resources
 Financial
 Physical
 Human
 Technology
 Reputation
 Organizational
Risk and Reward
If the business succeeds,
the entrepreneur reaps the
reward of profits;
if it fails,
one takes the loss.
Business Failure Rate
80
60
Number of
business
failures per
100 start-ups
40
20
0
0
2yrs
5yrs
6yrs
8yrs
Statistics
10% of small businesses fail each
year
 40 - 80% of small businesses do not
survive for 5 years
 Most small businesses closures do
not result in uncovered liabilities
 Majority of small business owners
who fail will start another business

Why do businesses fail?
– 2 general categories
Financial
Nonfinancial
Financial Reasons
Under-capitalized
 Poor cash flow planning
 Lack of record keeping
 Inadequate financial forecasting and
review
 Lack of accounting training
 Excessive debt

Nonfinancial Reasons
Loneliness
 Lack of management skills and
training
 Little passion
 Impact of regulations
 Inefficiency
 Inexperience
 Lack of planning

"I never failed once. It
just happened to be a
200l-step process."
Thomas A. Edison
Rewards
???
"In the realm of ideas everything
depends on enthusiasm, in the real
world all rests on perseverance." Johann Wolfgang von Goethe
The Social Sciences on
“What Makes an
Entrepreneur”
Trait Theory

Energy/motivation

Business orientation

Business attitude

People skills
http://www.sba.gov/starting_business
/startup/entrepreneurialtest.html
http://www.toolkit.cch.com/tools/dow
nloads/swchek.rtf
Personality Characteristics

Need for achievement

Locus of control

Risk-taking propensity
Career Anchors
 Motivate vocational choices





Technical
Managerial
Security
Creativity
Autonomy
Sociological Characteristics

Negative displacement

Between things

Positive pull

Positive push
Situational Characteristics

Perceptions of desirability

Perceptions of feasibility

Entrepreneurial event
Desires
Change:
–Your life
–A product or service
–The environment
Entrepreneurs and the
Community
CARE Model
(Dr. Mike Woods, Jack Frye, & Stan Ralstin)
Creation
Attraction
Retention
Expansion
% of New Jobs
Created
Attraction - 1%
Retention &
Expansion – 44%
Creation – 55%
We all want to find the next
gazelle!!
Entrepreneurs vs. Small Business
Owners
Carland, Hoy, Boulton, & Carland
argue they are different
- Entrepreneurs and entrepreneurial
businesses involve innovation & growth
- Entrepreneurs goal-orientation is different
- financial success vs. other criteria
- need for achievement/power
-
Entrepreneurs use strategic management
practices
Small Business
Independently owned and operated, not
dominant in its field, and does not engage
in any new marketing or innovative
practices
Owner – Establishes and manages for
purpose of furthering personal goals.
Business is primary source of income &
consumes majority of time & resources.
Owner perceived business as extension of
personality, intricately bound with family
needs and desires.
Entrepreneurial Venture
Engages in growth and profitability
and innovation by introducing new
products, new processes, opening
new markets, or reorganizes the
industry
Entrepreneur – Establishes and
manages the business for growth
and profit. Is innovative and
employees strategic management
practices.
??QUESTION??
Are entrepreneurs and small business
owners the same thing?
Why??
Why not??
Does rural make a difference??
Comparing Entrepreneurs to
Managers and Leaders
Entrepreneur
Manager
Leader
Innovates
Administers
Innovates
Creates
Maintains
Develops
Sees
opportunities
See problems
Sees the future
Asks how and
Asks how and
when
when
Makes it happen Does things
right
Builds the team
Asks what and
why
Uses influence
Relies on control Inspires trust
Entrepreneurship is a style
and a general method of
operating, not just a set of
business skills.
Jerry Gustafson
Beloit College
Entrepreneurs
People who create and grow
enterprises
 Aspiring entrepreneurs
 Survival entrepreneurs
 Lifestyle entrepreneurs
 Growth entrepreneurs
 Serial entrepreneurs
 Social entrepreneurs
SOURCE: WK Kellogg Foundation
Entrepreneurs and the
Community
What they bring
Does it matter what they are
called?
Both:
 Add income to the household and
jobs and wealth to the community
 Add economic strength to a
community
 Add stability to a community
 Provide the owner with the ability to
achieve his or her goals
 Create new opportunities within the
community - Multiplier
Who entrepreneurs are?
 Classified
as:
– Small business
– Micro business
– Home-based business
– Family business
 Also:
– Underground economy
– Informal economy
– Formal economy
Metro, Micro, Rural Comparison
20% of OK households own & run a business
Primary bus.
Metro
Micro
Rural
(n=146)
(n=54)
(n=46)
Service
Ag/For/Fish Ag/For/Fish
Construction Service
Construction,
Retail
Retail
FIRE & Service
Family bus.
62%
74%
78%
Home-based
66%
63%
70%
Spouse in
bus.
48%
46%
65%
Metro, Micro, Rural Comparison
Avg # empl
Metro
Micro
Rural
(n=146)
(n=54)
(n=46)
1.83
2.04
2.11
$241,891
$49,000
$333,589
$35,000
$162,190
$40,000
Gross inc.
- Mean
- Median
The numbers

Small businesses – 16 million nonfarm
– OK – 290,000 (employer & nonemployer)

50% of private workforce
– OK – 54%
Create 2/3 of all new jobs
 52% of all nonfarm output
 Micro businesses – ???

– OK – 270,000 – 94%

+ 84,000 farm/ranch operations
The numbers

Family businesses – 12.7% of households
– OK – 185,000 - $6.5 billion inc transferred to
family
– South – 3.3 million - $109 billion transferred
– U.S. – 9.7 million - $348 billion transferred

Home-based businesses – 5% - 18% of hh
– OK – 67,000 – 176,000
- $1 - $6.2 billion/year
Creating Entrepreneurial
Communities
People
Formal
Institutions
Informal
Organizations
Entrepreneurial Communities
4 types
1.
2.
3.
4.
Those
Those
Those
Those
that
that
that
that
develop entrepreneurs
act entrepreneurially
do both
do neither
Entrepreneurship
development
the infrastructure of public and
private supports that facilitate
entrepreneurship
Entrepreneurial communities
those where significant economic and
social entrepreneurial activity exists
and where there is an effective system
of entrepreneurship development
SOURCE: WK Kellogg Foundation
Entrepreneurial Communities
1.
Has critical mass of entrepreneurs actively
engaged in capturing new market
opportunities
2.
Group of entrepreneurs recognizable within
the community
3.
Community as a whole is entrepreneurial
Social capital (Floras)
Human capital-diversity (Florida)
Clusters (Porter)
Public-Private Partnerships (Tupelo-Grishom)
Innovative Infrastructure (Feldman)
Theory Expansion

Social capital
– Trust, networks, reciprocity, and collective action
– Horizontal, vertical, and flexible (not in the
group at all times)

Human capital
– Education
 Beyond
high school
 Continuous and life-life long
 Include specific and general
 Inclusive – pre-K – older citizen
 Just-in-time
– Knowledgeable and involved citizens
Theory Expansion
 Clusters
– Why? – Based on economies of scale,
technology transfer & availability of
human capital (Eric Scorsone, Industrial clusters: Enhancing rural
economies through business linkages, SRDC 21st Century Series)
 Innovative
infrastructure
– Basics plus items such as a visionary
government, day care, & technology
Creating an Entrepreneurial
Climate
1.
2.
Entrepreneurship must be an explicit economic
development strategy
Community must embrace and nurture
entrepreneurs
–
a.
b.
c.
3.
4.
5.
Goal - A continuous pipeline of entrepreneurs
Supportive public policies
Balances regulations with business needs
Education – early & on-going, formal and nonformal
Access to capital – banks, investment, angels
Access to quality workers
Recognize entrepreneurial efforts
Enterprise Development
“Assistance to entrepreneurs in support
of the creation, growth, and survival of
their businesses” Koven & Lyons (2003)
nonprofit, private, public service providers
youth entrepreneurship programs
micro enterprise programs
business incubators
manufacturing network
small business development centers
angel capital networks
revolving loan funds
technology transfer programs
Nurturing of Entrepreneurs
 Mentors
and coaches
 Business/management assistance &
support
– Coordinated, seamless, and local
 Access
to technology
 Technical assistance
 Inclusion of all into events,
programs, & groups
Other Examples:
How Communities Can Help




Purchase locally
Help create new
local businesses

Develop human
resources
Free-up potentially
productive space

Initiate local
investment strategies
(endowments,
fundraising, microloan programs)
Mobilize external
resources
Challenges for Sustainable
Rural Economic Development
1.
2.
3.
Translating models to placebased strategies
- no silver bullet
Implement strategy with
tangible benefits
- taxpayers see return on
investment
Need to create good jobs
- self-sustaining wages
Challenges for Sustainable
Rural Economic Development
(cont.)
4.
5.
Need for strategies that build on
all assets
- young, old, men, women,
ethnicities
Shortage of resources in most
small towns.
SOURCE: Emery, Wall, Macke, 2004
Shortcomings of Enterprise
Development
#1 Tool-Driven-Not Needs-Focused
Worked one-place and one-time
Solutions in search of a client base
Voice of the customer-the entrepreneur-is
missing
Entrepreneurial Needs
Hard for entrepreneurs to articulate
Entrepreneurs may not trust those asking the
questions
Entrepreneurs difficult to identify and reach
SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004
Shortcomings of Enterprise
Development (continued)
#2 Fragmented and Categorical
“Creaming” – we need more than a
quarterback
#3 Too Little Focus on Execution
Various gurus crisscross the country – then go
home
Gap between ideas and education
#4 The Broken Learning Cycle
Best practices vs. successful practices
SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004
Shortcomings of Enterprise
Development (continued)
#5 Focus on the Business, not the Entrepreneur
#6 Missing Function: Responsibility for the
Community’s Supply of Entrepreneurs
#7 Funders, not Clients, Drive the Program
#8 Impact is not Scalable
Community-wide impact
SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004
Successful Entrepreneurial(?)
Communities
1.
Acceptance of Controversy
2.
Ability to Depersonalize Politics
3.
Surplus Income to Invest
4.
Willingness to Take Risks
5.
Ability to Define Community More Broadly
6.
Networking Ability
7.
Emphasis on Academics
8.
Flexible, Dispersed Leadership
SOURCE: Flora and Flora
SOURCES FOR THIS
PRESENTATION
Lichtenstein, Lyons, Kutzhanova
“Building Entrepreneurial Communities:
The Appropriate Role of Enterprise
Development Activities” Journal of the
Community Development Society, 2004
Emery, Wall, Macke
“From Theory to Action: Energizing
Entrepreneurship (E2), Strategies to Aid
Distressed Communities Grow Their
Own” Journal of the Community Society,
2004
Entrepreneurs We
Know
Do you know who they are?
Stan
Clark
Frank Epperson
Fred Smith
Bill Bowerman & Philip Knight
Dr. John Pemberton & Asa
Chandler
Do you know who they are?
Jeff
Bezos
Cohen and Greenfield
Ray Kroc
Tom Monaghan
Bill Gates
Howard Schultz
Entrepreneurs
All are not equal,
nor do they want to be!!
Entrepreneurs
People who create and grow
enterprises






Aspiring entrepreneurs
Survival entrepreneurs
Lifestyle entrepreneurs
Growth entrepreneurs
Serial entrepreneurs
Social entrepreneurs
SOURCE: WK Kellogg Foundation
Family Business Names
Wal-Mart
Ford
Weyerhaeuser
Michelin
Gap
Anheuser-Busch
Tyson Foods
Dillards
Cargill
Koch Industries
Ikea
Cox Communication
Enterprise Rent-A-Car
Hallmark
Levi Strauss
Kohler
Family Businesses

Generate 62% of nonfarm business
receipts - $16.8 trillion in 1996
– Even greater impact in midwest economy
Dominate form in agriculture, retail,
wholesale, and distribution sectors
 Employ 54.8% of workforce – 69.5 million
 Provide higher than average household
income and net worth

– Only 1% of households are poor vs. 11%
overall
Sustainable Family Business Model
PROCESSES
Available Resources
and Constraints
Time of Stability
Interpersonal Transactions
Resource Constraints
Times of Change
Interpersonal Transactions
Resource Transactions
Disruptions in
Family/Business
Transactions
Achievements
Objective Success
Subjective Success
Responses to
Disruptions in
Family/Business
Transactions
Sustainability
PROCESSES
Available Resources
and Constraints
Time of Stability
Interpersonal Transactions
Resource Constraints
Time of Change
Interpersonal Transactions
Resource Transactions
Achievements
Objective Success
Subjective
Success
BUSINESS
More info


www.hce.osu.edu/fambus
http://www.human.cornell.edu/ne167/
Home-based Business Names
 Hewlet-Packard
 Nike
 Coke
 Mrs.
Fields Cookies
 Microsoft
 Dell
Home-based Business Facts
Nine-state study (1988)
– Typical home-based worker
 44
year old male, married, with children, 14 yrs.
education, & a homeowner
 Mean gross business income - $53,164
 Mean net business income - $15,628
 Mean household income - $42,263
– Had medical insurance from some other source
– As # children increased, number of work hours
decreased (1 day per child on average)
– Had greater longevity in the community
Copreneurs
Defined – Couples in business together
– 31% of family businesses
– Have more children, lower educational levels,
rural location, business manager earns less per
year, more likely home-based, and have fewer
employees
– Make significantly less business income and
business profits (by factor of 5) & feel business
is less successful
– Copreneurs more likely to view business as a
way of life as opposed to a way to earn income
Copreneurs cont.
– More likely to intermingle money between
business and family – More often family to
business

Also use more ways of intermingling
– Approximately 20% of couples discontinued
the copreneurial relationship (but stayed
together as a couple) in a 3-year period

Made less money & saw the business as less successful.
– Another 20% started a copreneurial
relationship

Made most money of all 3 groups, run by older men with
more education, had fewer dependents, and spouse worked
fewer hours in business.
Value-Added
Opportunities
Value-Added
Defined: Adding consumer-desired features
to raw materials
Done by:
1. Additional processing
2. Marketing - change from the current
method of distribution
3. Use existing resources to produce a new,
more valued product/service
4. Some combination
Reap New Profits:
Marketing
Strategies
for
Farmers
& Ranchers
Farmers
Markets
“People don’t come all the way out here to get
cheap food. They come because it’s fun and the
berries are absolutely fresh.”
-- Earnie Bohner, Persimmon Hill Berry Farm
Pick Your Own
E
N
T
E
R
T
A
I
N
M
E
N
T
F
A
R
M
I
N
G
O
T
H
E
R
O
P
T
I
O
N
S
Farm Stands
Community supported
agriculture (CSA)
 Cooperatives
 Restaurant sales
 Mail order/ Internet/
Direct marketing
Resources:

USDA Sustainable Agriculture Research and
Education (SARE) – www.sare.org

Farmers Markets www.ams.usda.gov/farmersmarkets

Alternative Farming Systems Info Ctr
www.nal.usda.gov/afsic

USDA Farmer Direct Marketing
www.ams.usda.gov/directmarketing

North American Direct Marketing Assn.
www.familyfarms.com
Minorities and Women
General Information

Small business ownership rates for women
and minorities are increasing faster than
for white males – Still men start new
businesses at twice the rate of women
– Women – 9.8% own businesses
 Translates
to over 50% of all businesses
– Minorities – Ranges from 5% (Blacks) to
10.4% (Asian)
Firm receipts average about 2/3 of all bus.
 Proprietor income averages about 50% of
all other businesses
 Firms employee fewer people

Special Issues
 Access
to capital
 Acceptance by business community
 Acceptance by family and friends
 Networks are smaller and more
family-focused
 Most often in retail or service
industries
– Industries with highest failure rates and
lowest profits
Barriers to
Entrepreneurship
A lack of:
1.
2.
3.
4.
5.
6.
7.
8.
Steady stream of “want-a-be’s”
“Can-do” attitude held by the
entrepreneur and the community
Coordinated, accessible, long-term
support network
Coaches and mentors
Capital
Available human capital
Multi-faceted healthy community
Supportive regulatory environment
The man who makes no
mistakes does not usually
make anything."
Edward John Phelps, American lawyer and diplomat (18221900)
"Nothing great was ever
achieved without
enthusiasm." Ralph Waldo Emerson
Highlights
Highlights
Entrepreneurship is an ever-continuing,
growing trend
 Entrepreneurs contribute to their
household and to their community
 Entrepreneurship is a learned talent
 Entrepreneurs form our economic base
 Entrepreneurship allows people to remain
in a community
 Communities can encourage
entrepreneurship

Entrepreneurs:
- See opportunity
- Are innovative in developing that
opportunity through creativity
and resource gathering
- Seek gain while accepting risk
and uncertainty
One Last Myth
The key to success is a great idea
The keys are:
Good idea
Great plan
Passion!
How Extension can help?
1. Awareness of owner’s priorities
2. Comfort with subject matter
One-on-one
Mentoring
Advocating
Partnering
Community support
Awareness of other programs
Education
Resources

Southern Rural Development Center
http://srdc.msstate.edu/

Kansas City Federal Reserve Bank
– Center for the Study of Rural America
http://www.kc.frb.org/RuralCenter/RuralMain.htm

Rural Policy Research Institute (RUPRI)
http://www.rupri.org/
Resources cont.
 Adult
– Cashing In On Business Opportunities
– NeXt Level/Fasttrac/other commercial
– OSU
 Putting
It All Together
 Food Based Business: The Owner’s Guide
 An Exploration of Entrepreneurship
 Visual Merchandising
– Educational program
– Demonstration program
 Mapping
Your Marketing Future
– Magazines, i.e. Entrepreneur
Resources cont.
 Youth
– Mini-Society
– Be the E: Entrepreneurship (4-H CCS)
– http://youngbiz.com/
– http://www.celcee.edu/ - clearinghouse
 General
– http://www.entre-ed.org/index.htm
Entrepreneurship
Glenn Muske
Micro Business Specialist
Oklahoma State University