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2005 entrepreneurshipandecommerce muske_entre

  1. 1. Entrepreneurship
  2. 2. Entrepreneurship Glenn Muske Micro Business Specialist Oklahoma State University
  3. 3. Outline <ul><li>Entrepreneurship </li></ul><ul><ul><li>Myths </li></ul></ul><ul><ul><li>Defined </li></ul></ul><ul><ul><li>Opportunity, Risk and Reward </li></ul></ul><ul><ul><li>What the social sciences tell us </li></ul></ul><ul><li>Entrepreneurs and the community </li></ul><ul><ul><li>Entrepreneurs vs. small business owners & others </li></ul></ul><ul><ul><li>Role of entrepreneurs in the local economy </li></ul></ul><ul><ul><li>Building an entrepreneurial community </li></ul></ul><ul><li>Entrepreneurial examples </li></ul><ul><li>Special entrepreneurial situations </li></ul><ul><li>Final thoughts </li></ul>
  4. 4. Personal Passion <ul><li>The freedom to pursue personal passion leads many to start businesses. </li></ul><ul><li>“ Nothing great in the world has been accomplished without passion.” </li></ul><ul><li>George Wilhelm Friedrich Hegel </li></ul><ul><li>German Philosopher (1770-1831) </li></ul>
  5. 5. Questions often asked but aren’t the most important <ul><li>What can I do? What business should I start? </li></ul><ul><li>Can I get a grant? </li></ul><ul><li>What business will earn lots of money? </li></ul><ul><li>What about e-commerce? </li></ul>
  6. 6. Questions often not asked but should be!! <ul><li>Am I an entrepreneur? </li></ul><ul><li>Is there a market? </li></ul><ul><li>Can I profitably tap that market? </li></ul><ul><li>How do I get to market? </li></ul><ul><li>- E-commerce is just a means to market </li></ul>
  7. 7. The Myths of Entrepreneurship
  8. 8. Myth #1 <ul><li>Get Rich Quick! </li></ul><ul><li>Truth is </li></ul><ul><ul><li>Life as an entrepreneur is not about money. </li></ul></ul><ul><ul><li>Success rarely happens overnight. </li></ul></ul><ul><ul><li>It's about what you want to do with your life. </li></ul></ul>
  9. 9. Myth # 2 <ul><li>You must be born an entrepreneur </li></ul><ul><li>(trait theory) </li></ul><ul><li>Truth is: </li></ul><ul><ul><li>some of the most successful entrepreneurs are the most unlikely. </li></ul></ul><ul><ul><li>It is a lifestyle choice, not an accident. </li></ul></ul>
  10. 10. Myth # 3 <ul><li>You must be at the right place at the right time </li></ul><ul><li>(environment theory) </li></ul><ul><li>Truth is: </li></ul><ul><ul><li>successful entrepreneurs operate whatever the macroeconomic and structural factors are </li></ul></ul>
  11. 11. Myth # 4 <ul><li>&quot;I'll have all this free time…&quot; </li></ul><ul><li>Truth is entrepreneurs work many hours </li></ul><ul><ul><li>advantages are: </li></ul></ul><ul><ul><ul><li>control of time </li></ul></ul></ul><ul><ul><ul><li>variety of tasks </li></ul></ul></ul>
  12. 12. Myth # 5 <ul><li>It get easier. </li></ul><ul><li>Truth is it gets more challenging </li></ul><ul><ul><li>must work faster, smarter & longer </li></ul></ul><ul><ul><li>must enjoy the battle </li></ul></ul>
  13. 13. Myth # 6 <ul><li>If you build it, they will come. </li></ul><ul><li>Truth is building your business is just the start. </li></ul><ul><ul><li>Next is the real work: </li></ul></ul><ul><ul><li>planning </li></ul></ul><ul><ul><li>timing </li></ul></ul><ul><ul><li>strategizing and more. </li></ul></ul>
  14. 14. Myth # 7 <ul><li>It's all about the bottom line. </li></ul><ul><li>Truth is that the bottom line is necessary but not sufficient </li></ul><ul><ul><li>purpose and meaning to the business </li></ul></ul><ul><ul><li>inspire customers and employees </li></ul></ul>
  15. 15. Myth # 8 <ul><li>Entrepreneurs are risk takers </li></ul><ul><li>Truth – Entrepreneurs are calculators </li></ul><ul><ul><li>Studies show entrepreneurs are only moderate risk takers </li></ul></ul>
  16. 16. Myth # 9 <ul><li>You have to have a great idea </li></ul><ul><li>Truth </li></ul><ul><ul><li>Your idea must be good </li></ul></ul><ul><ul><li>Your idea must be doable </li></ul></ul><ul><ul><li>Your idea must be wanted or needed </li></ul></ul><ul><ul><li>Your idea must be priced right </li></ul></ul>
  17. 17. Myth # 10 <ul><li>It takes a lot of money </li></ul><ul><li>Truth – Over 50% start for under $10,000 </li></ul><ul><ul><li>Also look for </li></ul></ul><ul><ul><ul><li>Certain business types </li></ul></ul></ul><ul><ul><ul><li>Turn-around situations </li></ul></ul></ul><ul><ul><ul><li>Possibility of using other people’s money </li></ul></ul></ul>
  18. 18. Entrepreneur’s goal is <ul><li>By finding new solutions to existing problems </li></ul><ul><li>Or by connecting existing solutions to unmet needs or new opportunities” </li></ul><ul><li>SOURCE: Lichtenstein & Lyons, Incubating New Enterprises: A Guide to Successful Practice, 1996 </li></ul>“ to create or capitalize on new economic opportunities through innovation
  19. 19. Entrepreneurship Definitions: <ul><li>Creation of an innovative economic organization for the purpose of gain or growth under conditions of risk and uncertainty </li></ul><ul><li>Self-employment through business ownership that includes significant elements of risk, control, and reward (Coleman Foundation) </li></ul><ul><li>Organizing a business venture assuming a certain amount of risk to make a profit (Burns and Bolton) </li></ul>
  20. 20. More Definitions: <ul><li>Profits from bearing uncertainty and risk </li></ul><ul><li>Purposeful activity to initiate and develop a profit-oriented business </li></ul><ul><li>Moderate risk taking </li></ul><ul><li>Creation of new organizations </li></ul><ul><li>The pursuit of opportunity without regard to resources currently controlled </li></ul>
  21. 21. Entrepreneurship: Basic Elements <ul><li>Opportunity recognition </li></ul><ul><li>Creation and/or innovation </li></ul><ul><li>Resource gathering and the founding of an economic organization </li></ul><ul><li>Desiring the chance for gain while accepting risk and uncertainty </li></ul>
  22. 22. Other Entrepreneurial Motivators
  23. 23. Be my own boss! MONEY LIFE STYLE Time With Family
  24. 24. ?? Tell a time when you were entrepreneurial ?? Were you successful??
  25. 25. Opportunity Recognition
  26. 26. An Entrepreneurial Opportunity defined: <ul><li>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. </li></ul>
  27. 27. Entrepreneurial Opportunity Grid Product/Service Existing New Existing New Market Market Penetration Diversification New Offering Development Market Development
  28. 28. What are opportunities? <ul><li>Small steps </li></ul><ul><li>Little jumps </li></ul><ul><li>Huge leaps </li></ul>
  29. 29. &quot;Don't be afraid to take a big step if one is indicated; you can't cross a chasm in two small jumps.&quot; David Lloyd George
  30. 30. Opportunities can be... <ul><li>Technical or scientific </li></ul><ul><li>Political and regulatory </li></ul><ul><li>Process or production method </li></ul><ul><li>Organizing </li></ul><ul><li>New market and marketing </li></ul><ul><li>Personnel </li></ul><ul><li>Social & demographic changes </li></ul><ul><li>New raw material </li></ul><ul><li>Product obsolescence </li></ul><ul><li>Corporate stagnation </li></ul><ul><li>One-product vulnerability </li></ul><ul><li>Chance </li></ul>
  31. 31. Think like a….. <ul><li>Manager – Problem solving </li></ul><ul><li>Entrepreneur – Opportunity Exploitation </li></ul>
  32. 32. Opportunities <ul><li>External </li></ul><ul><ul><li>Unexpected event </li></ul></ul><ul><ul><li>Technology changes and convergence </li></ul></ul><ul><ul><li>Change in methods </li></ul></ul><ul><ul><li>Demographics/market – size, </li></ul></ul><ul><ul><li>Changes in competition </li></ul></ul><ul><li>Internal </li></ul><ul><li>Other methods </li></ul>
  33. 33. The Opportunity Myth <ul><li>An Idea </li></ul><ul><li>does not equal an </li></ul><ul><li>Opportunity </li></ul>
  34. 34. Creation & Innovation
  35. 35. Creativity <ul><li>“ Imagination is more important than knowledge” - Einstein </li></ul>
  36. 36. The Creative Process <ul><li>Planning & definition </li></ul><ul><ul><li>focus on building the RIGHT product </li></ul></ul><ul><li>Design, demonstration & customer support </li></ul><ul><ul><li>focus on building the product RIGHT </li></ul></ul>
  37. 37. Customer requirement Find a consumer Product Technology NOT Product solution
  38. 38. Basic questions <ul><li>What is the customer’s need? </li></ul><ul><ul><li>How large is the opportunity? </li></ul></ul><ul><ul><li>How likely is it to happen? </li></ul></ul><ul><ul><li>What is the market timing? </li></ul></ul><ul><ul><li>Is it aligned with our organizational strengths? </li></ul></ul>
  39. 39. Time is money! Delays give others time to develop the same product.
  40. 40. Reduce product development time by 1/3 & you will triple profits & growth.
  41. 41. Exercise <ul><li>In groups of 3-4, think of 3 things you have observed externally lately that would be a potential business opportunity. </li></ul>
  42. 42. Resource Gathering Resourced-based Theory of Entrepreneurship
  43. 43. Dimensions of Entrepreneurship New Venture Creation Individual Characteristics Constraints in the Environment Organization Environment
  44. 44. Resource <ul><li>any thing or quality that is useful </li></ul><ul><li>used to develop sustainable competitive advantage </li></ul><ul><li>heterogeneous & immobile </li></ul><ul><ul><li>you have them, others cannot easily get them </li></ul></ul>
  45. 45. Strategic Resources <ul><li>Valuable – Exploit an environmental opportunity </li></ul><ul><li>Rare – Not enough for all competitors </li></ul><ul><li>Imperfectly imitable – Cannot be merely copied </li></ul><ul><li>Non-substitutable </li></ul>
  46. 46. Competitive Advantage Difficult Substitutable Many & easy Complex & ambiguous Imitable Ordinary Unique & expensive Rare Readily available & cheap Exploits opportunities Valuable Common Advantage Resource Dimension No Advantage
  47. 47. Types of Resources <ul><li>Financial </li></ul><ul><li>Physical </li></ul><ul><li>Human </li></ul><ul><li>Technology </li></ul><ul><li>Reputation </li></ul><ul><li>Organizational </li></ul>
  48. 48. Risk and Reward
  49. 49. If the business succeeds, the entrepreneur reaps the reward of profits; if it fails, one takes the loss.
  50. 50. Business Failure Rate
  51. 51. Statistics <ul><li>10% of small businesses fail each year </li></ul><ul><li>40 - 80% of small businesses do not survive for 5 years </li></ul><ul><li>Most small businesses closures do not result in uncovered liabilities </li></ul><ul><li>Majority of small business owners who fail will start another business </li></ul>
  52. 52. Why do businesses fail? <ul><ul><li>2 general categories </li></ul></ul><ul><ul><ul><li>Financial </li></ul></ul></ul><ul><ul><ul><li>Nonfinancial </li></ul></ul></ul>
  53. 53. Financial Reasons <ul><li>Under-capitalized </li></ul><ul><li>Poor cash flow planning </li></ul><ul><li>Lack of record keeping </li></ul><ul><li>Inadequate financial forecasting and review </li></ul><ul><li>Lack of accounting training </li></ul><ul><li>Excessive debt </li></ul>
  54. 54. Nonfinancial Reasons <ul><li>Loneliness </li></ul><ul><li>Lack of management skills and training </li></ul><ul><li>Little passion </li></ul><ul><li>Impact of regulations </li></ul><ul><li>Inefficiency </li></ul><ul><li>Inexperience </li></ul><ul><li>Lack of planning </li></ul>
  55. 55. &quot;I never failed once. It just happened to be a 200l-step process.&quot; Thomas A. Edison
  56. 56. Rewards <ul><li>??? </li></ul>
  57. 57. <ul><li>&quot;In the realm of ideas everything depends on enthusiasm, in the real world all rests on perseverance.&quot; - Johann Wolfgang von Goethe </li></ul>
  58. 58. The Social Sciences on “What Makes an Entrepreneur”
  59. 59. Trait Theory <ul><li>Energy/motivation </li></ul><ul><li>Business orientation </li></ul><ul><li>Business attitude </li></ul><ul><li>People skills </li></ul>
  60. 60. <ul><li>http://www.sba.gov/starting_business/startup/entrepreneurialtest.html </li></ul><ul><li>http://www.toolkit.cch.com/tools/downloads/swchek.rtf </li></ul>
  61. 61. Personality Characteristics <ul><li>Need for achievement </li></ul><ul><li>Locus of control </li></ul><ul><li>Risk-taking propensity </li></ul>
  62. 62. Career Anchors <ul><li>Motivate vocational choices </li></ul><ul><ul><li>Technical </li></ul></ul><ul><ul><li>Managerial </li></ul></ul><ul><ul><li>Security </li></ul></ul><ul><ul><li>Creativity </li></ul></ul><ul><ul><li>Autonomy </li></ul></ul>
  63. 63. Sociological Characteristics <ul><li>Negative displacement </li></ul><ul><li>Between things </li></ul><ul><li>Positive pull </li></ul><ul><li>Positive push </li></ul>
  64. 64. Situational Characteristics <ul><li>Perceptions of desirability </li></ul><ul><li>Perceptions of feasibility </li></ul><ul><li>Entrepreneurial event </li></ul>
  65. 65. Desires <ul><li>Change: </li></ul><ul><ul><li>Your life </li></ul></ul><ul><ul><li>A product or service </li></ul></ul><ul><ul><li>The environment </li></ul></ul>
  66. 66. Entrepreneurs and the Community
  67. 67. CARE Model (Dr. Mike Woods, Jack Frye, & Stan Ralstin) <ul><li>C reation </li></ul><ul><li>A ttraction </li></ul><ul><li>R etention </li></ul><ul><li>E xpansion </li></ul>% of New Jobs Created Attraction - 1% Retention & Expansion – 44% Creation – 55%
  68. 68. <ul><li>We all want to find the next gazelle!! </li></ul>
  69. 69. Entrepreneurs vs. Small Business Owners <ul><li>Carland, Hoy, Boulton, & Carland a rgue they are different </li></ul><ul><ul><ul><li>- Entrepreneurs and entrepreneurial businesses involve innovation & growth </li></ul></ul></ul><ul><ul><ul><li>Entrepreneurs goal-orientation is different </li></ul></ul></ul><ul><ul><ul><ul><li>financial success vs. other criteria </li></ul></ul></ul></ul><ul><ul><ul><ul><li>need for achievement/power </li></ul></ul></ul></ul><ul><ul><ul><li>Entrepreneurs use strategic management practices </li></ul></ul></ul>
  70. 70. Small Business <ul><li>Independently owned and operated, not dominant in its field, and does not engage in any new marketing or innovative practices </li></ul><ul><li>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. </li></ul>
  71. 71. Entrepreneurial Venture <ul><li>Engages in growth and profitability and innovation by introducing new products, new processes, opening new markets, or reorganizes the industry </li></ul><ul><li>Entrepreneur – Establishes and manages the business for growth and profit. Is innovative and employees strategic management practices. </li></ul>
  72. 72. ??QUESTION?? <ul><li>Are entrepreneurs and small business owners the same thing? </li></ul><ul><li>Why?? </li></ul><ul><li>Why not?? </li></ul><ul><li>Does rural make a difference?? </li></ul>
  73. 73. Comparing Entrepreneurs to Managers and Leaders Inspires trust Relies on control Builds the team Uses influence Does things right Makes it happen Asks what and why Asks how and when Asks how and when Sees the future See problems Sees opportunities Develops Maintains Creates Innovates Administers Innovates Leader Manager Entrepreneur
  74. 74. <ul><li>Entrepreneurship is a style and a general method of operating, not just a set of business skills. </li></ul><ul><li>Jerry Gustafson </li></ul><ul><li>Beloit College </li></ul>
  75. 75. Entrepreneurs <ul><li>People who create and grow enterprises </li></ul><ul><li>Aspiring entrepreneurs </li></ul><ul><li>Survival entrepreneurs </li></ul><ul><li>Lifestyle entrepreneurs </li></ul><ul><li>Growth entrepreneurs </li></ul><ul><li>Serial entrepreneurs </li></ul><ul><li>Social entrepreneurs </li></ul><ul><li>SOURCE: WK Kellogg Foundation </li></ul>
  76. 76. Entrepreneurs and the Community What they bring
  77. 77. Does it matter what they are called? <ul><li>Both: </li></ul><ul><li>Add income to the household and jobs and wealth to the community </li></ul><ul><li>Add economic strength to a community </li></ul><ul><li>Add stability to a community </li></ul><ul><li>Provide the owner with the ability to achieve his or her goals </li></ul><ul><li>Create new opportunities within the community - Multiplier </li></ul>
  78. 78. Who entrepreneurs are? <ul><li>Classified as: </li></ul><ul><ul><li>Small business </li></ul></ul><ul><ul><li>Micro business </li></ul></ul><ul><ul><li>Home-based business </li></ul></ul><ul><ul><li>Family business </li></ul></ul><ul><li>Also: </li></ul><ul><ul><li>Underground economy </li></ul></ul><ul><ul><li>Informal economy </li></ul></ul><ul><ul><li>Formal economy </li></ul></ul>
  79. 79. Metro, Micro, Rural Comparison 20% of OK households own & run a business 65% 46% 48% Spouse in bus. 70% 63% 66% Home-based 78% 74% 62% Family bus. Ag/For/Fish Construction, FIRE & Service Ag/For/Fish Service Retail Service Construction Retail Primary bus. Rural (n=46) Micro (n=54) Metro (n=146)
  80. 80. Metro, Micro, Rural Comparison 2.11 2.04 1.83 Avg # empl $162,190 $40,000 $333,589 $35,000 $241,891 $49,000 Gross inc. - Mean - Median Rural (n=46) Micro (n=54) Metro (n=146)
  81. 81. The numbers <ul><li>Small businesses – 16 million nonfarm </li></ul><ul><ul><li>OK – 290,000 (employer & nonemployer) </li></ul></ul><ul><li>50% of private workforce </li></ul><ul><ul><li>OK – 54% </li></ul></ul><ul><li>Create 2/3 of all new jobs </li></ul><ul><li>52% of all nonfarm output </li></ul><ul><li>Micro businesses – ??? </li></ul><ul><ul><li>OK – 270,000 – 94% </li></ul></ul><ul><li>+ 84,000 farm/ranch operations </li></ul>
  82. 82. The numbers <ul><li>Family businesses – 12.7% of households </li></ul><ul><ul><li>OK – 185,000 - $6.5 billion inc transferred to family </li></ul></ul><ul><ul><li>South – 3.3 million - $109 billion transferred </li></ul></ul><ul><ul><li>U.S. – 9.7 million - $348 billion transferred </li></ul></ul><ul><li>Home-based businesses – 5% - 18% of hh </li></ul><ul><ul><li>OK – 67,000 – 176,000 </li></ul></ul><ul><ul><li>- $1 - $6.2 billion/year </li></ul></ul>
  83. 83. Creating Entrepreneurial Communities People Informal Organizations Formal Institutions
  84. 84. Entrepreneurial Communities <ul><li>4 types </li></ul><ul><ul><li>Those that develop entrepreneurs </li></ul></ul><ul><ul><li>Those that act entrepreneurially </li></ul></ul><ul><ul><li>Those that do both </li></ul></ul><ul><ul><li>Those that do neither </li></ul></ul>
  85. 85. <ul><li>Entrepreneurship development </li></ul><ul><li>the infrastructure of public and private supports that facilitate entrepreneurship </li></ul><ul><li>Entrepreneurial communities </li></ul><ul><li>those where significant economic and social entrepreneurial activity exists and where there is an effective system of entrepreneurship development </li></ul><ul><li>SOURCE: WK Kellogg Foundation </li></ul>
  86. 86. Entrepreneurial Communities <ul><li>Has critical mass of entrepreneurs actively engaged in capturing new market opportunities </li></ul><ul><li>Group of entrepreneurs recognizable within the community </li></ul><ul><li>Community as a whole is entrepreneurial </li></ul><ul><li>Social capital (Floras) </li></ul><ul><li>Human capital-diversity (Florida) </li></ul><ul><li>Clusters (Porter) </li></ul><ul><li>Public-Private Partnerships (Tupelo-Grishom) </li></ul><ul><li>Innovative Infrastructure (Feldman) </li></ul>
  87. 87. Theory Expansion <ul><li>Social capital </li></ul><ul><ul><li>Trust, networks, reciprocity, and collective action </li></ul></ul><ul><ul><li>Horizontal, vertical, and flexible (not in the group at all times) </li></ul></ul><ul><li>Human capital </li></ul><ul><ul><li>Education </li></ul></ul><ul><ul><ul><li>Beyond high school </li></ul></ul></ul><ul><ul><ul><li>Continuous and life-life long </li></ul></ul></ul><ul><ul><ul><li>Include specific and general </li></ul></ul></ul><ul><ul><ul><li>Inclusive – pre-K – older citizen </li></ul></ul></ul><ul><ul><ul><li>Just-in-time </li></ul></ul></ul><ul><ul><li>Knowledgeable and involved citizens </li></ul></ul>
  88. 88. Theory Expansion <ul><li>Clusters </li></ul><ul><ul><li>Why? – Based on economies of scale, technology transfer & availability of human capital (Eric Scorsone, Industrial clusters: Enhancing rural economies through business linkages, SRDC 21 st Century Series) </li></ul></ul><ul><li>Innovative infrastructure </li></ul><ul><ul><li>Basics plus items such as a visionary government, day care, & technology </li></ul></ul>
  89. 89. Creating an Entrepreneurial Climate <ul><li>Entrepreneurship must be an explicit economic development strategy </li></ul><ul><li>Community must embrace and nurture entrepreneurs </li></ul><ul><ul><li>Goal - A continuous pipeline of entrepreneurs </li></ul></ul><ul><ul><li>Supportive public policies </li></ul></ul><ul><ul><li>Balances regulations with business needs </li></ul></ul><ul><ul><li>Education – early & on-going, formal and nonformal </li></ul></ul><ul><li>Access to capital – banks, investment, angels </li></ul><ul><li>Access to quality workers </li></ul><ul><li>Recognize entrepreneurial efforts </li></ul>
  90. 90. Enterprise Development <ul><li>“ Assistance to entrepreneurs in support of the creation, growth, and survival of their businesses” Koven & Lyons (2003) </li></ul><ul><li>nonprofit, private, public service providers </li></ul><ul><li>youth entrepreneurship programs </li></ul><ul><li>micro enterprise programs </li></ul><ul><li>business incubators </li></ul><ul><li>manufacturing network </li></ul><ul><li>small business development centers </li></ul><ul><li>angel capital networks </li></ul><ul><li>revolving loan funds </li></ul><ul><li>technology transfer programs </li></ul>
  91. 91. Nurturing of Entrepreneurs <ul><li>Mentors and coaches </li></ul><ul><li>Business/management assistance & support </li></ul><ul><ul><li>Coordinated, seamless, and local </li></ul></ul><ul><li>Access to technology </li></ul><ul><li>Technical assistance </li></ul><ul><li>Inclusion of all into events, programs, & groups </li></ul>
  92. 92. Other Examples: How Communities Can Help <ul><li>Purchase locally </li></ul><ul><li>Help create new local businesses </li></ul><ul><li>Develop human resources </li></ul><ul><li>Free-up potentially productive space </li></ul><ul><li>Initiate local investment strategies (endowments, fundraising, micro-loan programs) </li></ul><ul><li>Mobilize external resources </li></ul>
  93. 93. Challenges for Sustainable Rural Economic Development <ul><li>Translating models to place- based strategies </li></ul><ul><li>- no silver bullet </li></ul><ul><li>Implement strategy with tangible benefits </li></ul><ul><li>- taxpayers see return on investment </li></ul><ul><li>Need to create good jobs </li></ul><ul><li>- self-sustaining wages </li></ul>
  94. 94. Challenges for Sustainable Rural Economic Development (cont.) <ul><li>Need for strategies that build on all assets </li></ul><ul><li>- young, old, men, women, ethnicities </li></ul><ul><li>Shortage of resources in most small towns. </li></ul><ul><li>SOURCE: Emery, Wall, Macke, 2004 </li></ul>
  95. 95. Shortcomings of Enterprise Development <ul><li>#1 Tool-Driven-Not Needs-Focused </li></ul><ul><li>Worked one-place and one-time </li></ul><ul><li>Solutions in search of a client base </li></ul><ul><li>Voice of the customer-the entrepreneur-is missing </li></ul><ul><li>Entrepreneurial Needs </li></ul><ul><li>Hard for entrepreneurs to articulate </li></ul><ul><li>Entrepreneurs may not trust those asking the questions </li></ul><ul><li>Entrepreneurs difficult to identify and reach </li></ul><ul><li>SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004 </li></ul>
  96. 96. Shortcomings of Enterprise Development (continued) <ul><li>#2 Fragmented and Categorical </li></ul><ul><li>“ Creaming” – we need more than a quarterback </li></ul><ul><li>#3 Too Little Focus on Execution </li></ul><ul><li>Various gurus crisscross the country – then go home </li></ul><ul><li>Gap between ideas and education </li></ul><ul><li>#4 The Broken Learning Cycle </li></ul><ul><li>Best practices vs. successful practices </li></ul><ul><li>SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004 </li></ul>
  97. 97. Shortcomings of Enterprise Development (continued) <ul><li>#5 Focus on the Business, not the Entrepreneur </li></ul><ul><li>#6 Missing Function: Responsibility for the Community’s Supply of Entrepreneurs </li></ul><ul><li>#7 Funders, not Clients, Drive the Program </li></ul><ul><li>#8 Impact is not Scalable </li></ul><ul><li>Community-wide impact </li></ul><ul><li>SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004 </li></ul>
  98. 98. Successful Entrepreneurial(?) Communities <ul><li>Acceptance of Controversy </li></ul><ul><li>Ability to Depersonalize Politics </li></ul><ul><li>Surplus Income to Invest </li></ul><ul><li>Willingness to Take Risks </li></ul><ul><li>Ability to Define Community More Broadly </li></ul><ul><li>Networking Ability </li></ul><ul><li>Emphasis on Academics </li></ul><ul><li>Flexible, Dispersed Leadership </li></ul><ul><li>SOURCE: Flora and Flora </li></ul>
  99. 99. SOURCES FOR THIS PRESENTATION <ul><li>Lichtenstein, Lyons, Kutzhanova </li></ul><ul><li>“ Building Entrepreneurial Communities: The Appropriate Role of Enterprise Development Activities” Journal of the Community Development Society , 2004 </li></ul><ul><li>Emery, Wall, Macke </li></ul><ul><li>“ From Theory to Action: Energizing Entrepreneurship (E2), Strategies to Aid Distressed Communities Grow Their Own” Journal of the Community Society , 2004 </li></ul>
  100. 100. Entrepreneurs We Know
  101. 101. Do you know who they are? <ul><li>Stan Clark </li></ul><ul><li>Frank Epperson </li></ul><ul><li>Fred Smith </li></ul><ul><li>Bill Bowerman & Philip Knight </li></ul><ul><li>Dr. John Pemberton & Asa Chandler </li></ul>
  102. 102. Do you know who they are? <ul><li>Jeff Bezos </li></ul><ul><li>Cohen and Greenfield </li></ul><ul><li>Ray Kroc </li></ul><ul><li>Tom Monaghan </li></ul><ul><li>Bill Gates </li></ul><ul><li>Howard Schultz </li></ul>
  103. 103. Entrepreneurs All are not equal, nor do they want to be!!
  104. 104. Entrepreneurs <ul><li>People who create and grow enterprises </li></ul><ul><li>Aspiring entrepreneurs </li></ul><ul><li>Survival entrepreneurs </li></ul><ul><li>Lifestyle entrepreneurs </li></ul><ul><li>Growth entrepreneurs </li></ul><ul><li>Serial entrepreneurs </li></ul><ul><li>Social entrepreneurs </li></ul><ul><li>SOURCE: WK Kellogg Foundation </li></ul>
  105. 105. Family Business Names Cargill Koch Industries Ikea Cox Communication Enterprise Rent-A-Car Hallmark Levi Strauss Kohler Wal-Mart Ford Weyerhaeuser Michelin Gap Anheuser-Busch Tyson Foods Dillards
  106. 106. Family Businesses <ul><li>Generate 62% of nonfarm business receipts - $16.8 trillion in 1996 </li></ul><ul><ul><li>Even greater impact in midwest economy </li></ul></ul><ul><li>Dominate form in agriculture, retail, wholesale, and distribution sectors </li></ul><ul><li>Employ 54.8% of workforce – 69.5 million </li></ul><ul><li>Provide higher than average household income and net worth </li></ul><ul><ul><li>Only 1% of households are poor vs. 11% overall </li></ul></ul>
  107. 107. Sustainable Family Business Model Available Resources and Constraints PROCESSES Time of Stability Interpersonal Transactions Resource Constraints Times of Change Interpersonal Transactions Resource Transactions Achievements Objective Success Subjective Success BUSINESS Disruptions in Family/Business Transactions Responses to Disruptions in Family/Business Transactions Sustainability Available Resources and Constraints PROCESSES Time of Stability Interpersonal Transactions Resource Constraints Time of Change Interpersonal Transactions Resource Transactions Achievements Objective Success Subjective Success
  108. 108. More info <ul><li>www.hce.osu.edu/fambus </li></ul><ul><li>http://www.human.cornell.edu/ne167/ </li></ul>
  109. 109. Home-based Business Names <ul><li>Hewlet-Packard </li></ul><ul><li>Nike </li></ul><ul><li>Coke </li></ul><ul><li>Mrs. Fields Cookies </li></ul><ul><li>Microsoft </li></ul><ul><li>Dell </li></ul>
  110. 110. Home-based Business Facts <ul><li>Nine-state study (1988) </li></ul><ul><ul><li>Typical home-based worker </li></ul></ul><ul><ul><ul><li>44 year old male, married, with children, 14 yrs. education, & a homeowner </li></ul></ul></ul><ul><ul><ul><li>Mean gross business income - $53,164 </li></ul></ul></ul><ul><ul><ul><li>Mean net business income - $15,628 </li></ul></ul></ul><ul><ul><ul><li>Mean household income - $42,263 </li></ul></ul></ul><ul><ul><li>Had medical insurance from some other source </li></ul></ul><ul><ul><li>As # children increased, number of work hours decreased (1 day per child on average) </li></ul></ul><ul><ul><li>Had greater longevity in the community </li></ul></ul>
  111. 111. Copreneurs <ul><li>Defined – Couples in business together </li></ul><ul><ul><li>31% of family businesses </li></ul></ul><ul><ul><li>Have more children, lower educational levels, rural location, business manager earns less per year, more likely home-based, and have fewer employees </li></ul></ul><ul><ul><li>Make significantly less business income and business profits (by factor of 5) & feel business is less successful </li></ul></ul><ul><ul><li>Copreneurs more likely to view business as a way of life as opposed to a way to earn income </li></ul></ul>
  112. 112. Copreneurs cont. <ul><ul><li>More likely to intermingle money between business and family – More often family to business </li></ul></ul><ul><ul><ul><li>Also use more ways of intermingling </li></ul></ul></ul><ul><ul><li>Approximately 20% of couples discontinued the copreneurial relationship (but stayed together as a couple) in a 3-year period </li></ul></ul><ul><ul><ul><li>Made less money & saw the business as less successful. </li></ul></ul></ul><ul><ul><li>Another 20% started a copreneurial relationship </li></ul></ul><ul><ul><ul><li>Made most money of all 3 groups, run by older men with more education, had fewer dependents, and spouse worked fewer hours in business. </li></ul></ul></ul>
  113. 113. Value-Added Opportunities
  114. 114. Value-Added <ul><li>Defined: Adding consumer-desired features to raw materials </li></ul><ul><li>Done by: </li></ul><ul><li>Additional processing </li></ul><ul><li>Marketing - change from the current method of distribution </li></ul><ul><li>Use existing resources to produce a new, more valued product/service </li></ul><ul><li>Some combination </li></ul>
  115. 115. Marketing Strategies for Farmers & Ranchers Reap New Profits :
  116. 116. Farmers Markets
  117. 117. “ 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
  119. 119. <ul><li>Farm Stands </li></ul><ul><li>Community supported agriculture (CSA) </li></ul><ul><li>Cooperatives </li></ul><ul><li>Restaurant sales </li></ul><ul><li>Mail order/ Internet/ Direct marketing </li></ul>OTHER OPTIONS
  120. 122. Resources: <ul><li>USDA Sustainable Agriculture Research and Education (SARE) – www.sare.org </li></ul><ul><li>Farmers Markets - www.ams.usda.gov/farmersmarkets </li></ul><ul><li>Alternative Farming Systems Info Ctr </li></ul><ul><li>www.nal.usda.gov/afsic </li></ul><ul><li>USDA Farmer Direct Marketing </li></ul><ul><li>www.ams.usda.gov/directmarketing </li></ul><ul><li>North American Direct Marketing Assn. </li></ul><ul><li>www.familyfarms.com </li></ul>
  121. 123. Minorities and Women
  122. 124. General Information <ul><li>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 </li></ul><ul><ul><li>Women – 9.8% own businesses </li></ul></ul><ul><ul><ul><li>Translates to over 50% of all businesses </li></ul></ul></ul><ul><ul><li>Minorities – Ranges from 5% (Blacks) to 10.4% (Asian) </li></ul></ul><ul><li>Firm receipts average about 2/3 of all bus. </li></ul><ul><li>Proprietor income averages about 50% of all other businesses </li></ul><ul><li>Firms employee fewer people </li></ul>
  123. 125. Special Issues <ul><li>Access to capital </li></ul><ul><li>Acceptance by business community </li></ul><ul><li>Acceptance by family and friends </li></ul><ul><li>Networks are smaller and more family-focused </li></ul><ul><li>Most often in retail or service industries </li></ul><ul><ul><li>Industries with highest failure rates and lowest profits </li></ul></ul>
  124. 126. Barriers to Entrepreneurship
  125. 127. A lack of: <ul><li>Steady stream of “want-a-be’s” </li></ul><ul><li>“ Can-do” attitude held by the entrepreneur and the community </li></ul><ul><li>Coordinated, accessible, long-term support network </li></ul><ul><li>Coaches and mentors </li></ul><ul><li>Capital </li></ul><ul><li>Available human capital </li></ul><ul><li>Multi-faceted healthy community </li></ul><ul><li>Supportive regulatory environment </li></ul>
  126. 128. <ul><li>The man who makes no mistakes does not usually make anything.&quot; </li></ul><ul><li>Edward John Phelps, American lawyer and diplomat (1822-1900) </li></ul><ul><li>&quot;Nothing great was ever achieved without enthusiasm.&quot; Ralph Waldo Emerson </li></ul>
  127. 129. Highlights
  128. 130. Highlights <ul><li>Entrepreneurship is an ever-continuing, growing trend </li></ul><ul><li>Entrepreneurs contribute to their household and to their community </li></ul><ul><li>Entrepreneurship is a learned talent </li></ul><ul><li>Entrepreneurs form our economic base </li></ul><ul><li>Entrepreneurship allows people to remain in a community </li></ul><ul><li>Communities can encourage entrepreneurship </li></ul>
  129. 131. <ul><li>Entrepreneurs: </li></ul><ul><li>- See opportunity </li></ul><ul><li>- Are innovative in developing that </li></ul><ul><li>opportunity through creativity </li></ul><ul><li>and resource gathering </li></ul><ul><li>- Seek gain while accepting risk </li></ul><ul><li>and uncertainty </li></ul>
  130. 132. One Last Myth The key to success is a great idea Good idea Great plan Passion! The keys are:
  131. 133. How Extension can help?
  132. 134. <ul><li>One-on-one </li></ul><ul><li>Mentoring </li></ul><ul><li>Advocating </li></ul><ul><li>Partnering </li></ul><ul><li>Community support </li></ul><ul><li>Awareness of other programs </li></ul><ul><li>Education </li></ul><ul><li>Awareness of owner’s priorities </li></ul><ul><li>Comfort with subject matter </li></ul>
  133. 135. Resources <ul><li>Southern Rural Development Center </li></ul><ul><li>http://srdc.msstate.edu/ </li></ul><ul><li>Kansas City Federal Reserve Bank </li></ul><ul><ul><li>Center for the Study of Rural America </li></ul></ul><ul><li>http://www.kc.frb.org/RuralCenter/RuralMain.htm </li></ul><ul><li>Rural Policy Research Institute (RUPRI) </li></ul><ul><li>http://www.rupri.org/ </li></ul>
  134. 136. Resources cont. <ul><li>Adult </li></ul><ul><ul><li>Cashing In On Business Opportunities </li></ul></ul><ul><ul><li>NeXt Level/Fasttrac/other commercial </li></ul></ul><ul><ul><li>OSU </li></ul></ul><ul><ul><ul><li>Putting It All Together </li></ul></ul></ul><ul><ul><ul><li>Food Based Business: The Owner’s Guide </li></ul></ul></ul><ul><ul><ul><li>An Exploration of Entrepreneurship </li></ul></ul></ul><ul><ul><ul><li>Visual Merchandising </li></ul></ul></ul><ul><ul><ul><ul><li>Educational program </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Demonstration program </li></ul></ul></ul></ul><ul><ul><ul><li>Mapping Your Marketing Future </li></ul></ul></ul><ul><ul><li>Magazines, i.e. Entrepreneur </li></ul></ul>
  135. 137. Resources cont. <ul><li>Youth </li></ul><ul><ul><li>Mini-Society </li></ul></ul><ul><ul><li>Be the E: Entrepreneurship (4-H CCS) </li></ul></ul><ul><ul><li>http://youngbiz.com/ </li></ul></ul><ul><ul><li>http://www.celcee.edu/ - clearinghouse </li></ul></ul><ul><li>General </li></ul><ul><ul><li>http://www.entre-ed.org/index.htm </li></ul></ul>
  136. 138. Entrepreneurship Glenn Muske Micro Business Specialist Oklahoma State University

Notes de l'éditeur

  • The interviews on the CD talk about personal passion. Be sure that students visit the entrepreneurs on the CD and hear their stories. Most people start a business because of a passion
  • These are the questions you might often hear
  • These are the questions that you need to direct the entrepreneur into examining.
  • The five steps are grouped into 2 overall process categories.
  • This quote focuses on the customer and what they need. A short discussion of needs is appropriate here. Needs are what the customer wants and is willing to pay for. New software that enhances images in ways the customer is not interested is not going to generate business. You must convince the customer that it is easier, better, faster, etc. and make the technology part of the solution.
  • Remind the students that they have already started to gather market data information in Unit 3. This question encourages the student to consider the macro environment as well as timing. Often products or services are introduced simply before the public is willing to accept them. Car safety issues were introduced in the mid-1930’s. Yet it was not until the mid-1970’s that the public became concerned about it. Finally the business must build on its strengths. It is usually not an effective strategy for a small business to attempt to introduce a new product or service that is not in alignment with the existing company focus.
  • Product development times are rapidly shrinking, especially where one firm is trying to imitate another.
  • All entrepreneurs risk some of their own resources. For most entrepreneurs that includes some of their financial resources. All entrepreneurs risk the use of their time.
  • Point out that not all failures mean a loss to the owner. These numbers include businesses that are simply closed or sold. Also most business closings are done without leaving any outstanding debt.
  • These traits can be summarized into 4 categories. Energy/motivation - #1, 9, 10, 11 &amp; 16 Business orientation - #3, 7, 12, 13 &amp; 15 Business attitude - # 4, 5, 6 &amp; 14 People skills - #2, 3 &amp; 17 Notice however that there is no score for passion. That is something that cannot be measured.
  • Psychologists have also looked at the personality from the perspective of what drives us. They have evaluated entrepreneurs on these three attributes.
  • Some researchers have evaluated what they call “career anchors.” These anchors represent our most significant motivator.
  • Some research has looked at the idea that entrepreneurs are not entirely self-determined, but that the environment in which we live has a significant impact on our decision to start a business. Negative displacement - immigrant status (immigrants are more likely to own a business overall but some nationalities are even more likely), fired, angry, bored, middle-age, divorced Between things - army, school, prison Positive pull - partner, mentor, investor, customer Positive push - father, career, motivation, experience
  • Perceptions of desirability - culture, family, colleagues, mentors, peers Perceptions of feasibility - support, demonstration, models, mentors, partners
  • Entrepreneurs see change as a positive thing. The entrepreneur desires to be a part of the change process.
  • Small business - Based on number of employees or sales Micro business - 10 employees or less Home-based business - Work done in the home or from that property that results in income and for which there is no other regular scheduled work place Family business - Business owned by 2 or more related individuals working together in business Underground economy – illegal, unreported, no desire for visibility, Formal economy – visible, formal, reported, regulated, etc - Desired is the “gazelles” Informal – range from totally informal through obey some regs /declare some inc to planning to go formal - legal but unregulated - typically a cash economy - often patching together income – (1) fill a dead season, (2) pay essential bills, (3) provide extra income - often not primary source of income, just a small part constraints - market small &amp; local - regulations - production - personal &amp; household responsibilities - why - way to earn income - small scale, can get in or out - activity new and untested
  • This chart just shows some of the same information we just looked at only now broken down by where the business is located, in a metropolitan area, in a micropolitan area (city of 50,000 that is a trade center), or in a rural area.
  • Again just looking at the businesses by where they are located.
  • Needs to include problem solving, creative thinking, English, business skills, futuristic thinking
  • Howard Schultz - Starbucks
  • So how do you reach success? As mentioned in the myths, people will not typically beat a path to your door if you have the greatest idea. Your idea needs to be good in the sense it must meet people’s needs by offering them the benefits they want – not the features but the benefits. What is more important is that a great plan be built around the good idea. Parts of the plan include where and how to market the product or service, the “right” price, record keeping, locating other professionals to be part of your team, etc. Finally the owner need commitment – to continue on when nothing seems to be going right or sitting all day without one customer entering the door.
  • So what can you do? First, undertand the owner’s priorities - Understand where they are at and their goals. Is this something to fill-in-the-gaps or are they aiming for the next Microsoft. - Fit your assistance and program to that - Help them understand it is a business. If a person is just interested in operating a hobby (best defined as not interested in making a profit), they will provide little spark to the local economy. - Assist in pricing - Help them understand the business must pay market-rate compensation for owner’s time - How can decrease costs (example, buying at the market or wholesale) - Assist in formalizing business - feasibility assessment - marketing and promotion How you do any of the above depends on your comfort in answering the question, the other resources you have at hand, and the owner’s specific need? We can do general education and develop community support to ensure our community has a flow of new entrepreneurs. However once in business, often the owner’s needs require one-on-one assistance immediately either by yourself or through some partnering/mentoring program.