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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 Large companies

Small businesses

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
in each until
year 96

All firms 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
• Don’t 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 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

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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
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the 1st computer appeared in 1946 26
 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 didn’t know it
was impossible.
Winston Churchill

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