Essentials of Entrepreneurship: A Practical Approach

Home > Essentials of Entrepreneurship: A Practical Approach > Chapter 1: Introduction

Some General Thoughts on Entrepreneurship

Next Section: Importance of Entrepreneurs and Small Businesses

Amar Bhide completed a survey of two samples of Harvard Business School graduates and also analyzed the results of a survey of 100 entrepreneurs from the “Inc. 500” companies on entrepreneurs.  Broad conclusions from these surveys provide some excellent general thoughts for entrepreneurs to consider.⁷

1. Almost anyone can become an entrepreneur.  Bhide notes that many MBAs are starting businesses because of the limited opportunities within large companies.  Furthermore he notes that one does not have to have an MBA to be an entrepreneur.  There are many opportunities available in many different fields in which an entrepreneur can succeed.  Colleen Chapin moved from the northeast to Florida.  She missed many foods that she enjoyed, but which were not available in Florida.  Colleen noticed that many of her friends were in the same situation.  She decided to start a company named Hometown Favorites to purchase and distribute these popular foods to her friends.  She then started selling foods on the Internet at the site www.hometownfavorites.com.  The company sales are now in the millions and it is profitable.  Subsequently, she sold the company for a nice return on her investment.  Colleen remains a member of the management team and board of directors.  She found a consumer need and satisfied it.
    

2. The rewards appear to be worthwhile.  Most entrepreneurs find a great deal of fulfillment in their entrepreneurial careers.  There are also significant financial rewards as a result of pursuing an entrepreneurial career.  In their popular book The Millionaire Next Door, Stanley and Danko found that 2/3 of the households in the United States that had a net worth in excess of $1,000,000 were headed by individuals who were self employed.  Seventy-five percent of the self-employed individuals considered themselves to be entrepreneurs.⁸

   Similarly, Kotter followed a group of 115 Harvard Business School graduates who graduated in 1974.  By 1991, those members of the class who were “entrepreneurs, small business people, and non-manufacturers” had a mean total compensation of just over $450,000 while those who were “professional managers, medium and, large business people, and manufacturers” only had a mean total compensation of $250,000.  That is an 80% higher mean total compensation for the entrepreneurs, small business people, and non-manufacturers.⁹
    

3. And what’s the alternative.  The alternative to being an entrepreneur is to work for someone else and have that organization or individual receive a return on one’s efforts.  Given the amount of downsizing in large corporations and the resulting lack of long-term security or opportunity for advancement, hard-driving people are finding there are better opportunities in entrepreneurial endeavors.

   A pair of entrepreneurs decided they wanted to start a business in addition to their current full-time jobs. They decided the best way was to create a company that was affiliated with Amazon.com. Amazon and other companies provide referral fees when someone clicks on a hyperlink that provides a link to their site. The two individuals created a website named Books for Managers. The website is located at www.booksformanagers.com. The site includes a list of business books on best seller lists provided by Business Week, The Wall Street Journal, The New York Times, Harvard Business School Publishing, and USA Today. Popular Dilbert books and leisure items are also included on the site. Hyperlinks are built for each item. If a person clicks on a link, then the person is directed to the Amazon site. The entrepreneurs receive a referral fee of up to 15% if the person purchases the specific item or other item while visiting Amazon.
    

4. Don’t rush – or wait forever.  Most students do not start a business right out of school.  In fact, it appears that the peak period for starting a business is five to ten years after graduation.  By waiting, the entrepreneur will be exposed to various opportunities, save money for the seed capital for the business, and gain experience.  It is important for the entrepreneur to obtain the necessary experience, have a poke for investing in the new venture, and savings for living expenses.  This will take some time.

   But the entrepreneur cannot wait too long to start a business.  Some experience is needed, but it does not appear that very deep experience is always required.  You must be able to eliminate poor ideas quickly. The entrepreneur may not want to jump at the first opportunity, but it is a good idea to start looking at opportunities early.  If the entrepreneur waits too long, then he/she may never start the new venture.
    

5. Know where the fish are.  The entrepreneur should make sure he/she is going to create a business for which there is a demand for the company’s products or services.  Some areas to consider include a) markets in flux rather than stable or mature markets, b) industries with low capital requirements and/or flat or declining returns to scale so the company does not have to face large incumbent competitors.  Another approach is to identify problems people have and develop products or services that provide a solution to these problems.
    

6. Prepare to travel steerage class.  Because entrepreneurs starting a company do not typically have any excess capital, they must learn to run a company with less resources than their larger competitors.  They will need to stretch advertising dollars, utilize employees that may not be as strong as those available to large corporations, and learn how other successful entrepreneurs run their businesses.
    

7. Maintain a low personal overhead.  An entrepreneur needs to be prudent in all his/her spending habits.  This approach will help the entrepreneur save the funds for his/her poke and living expenses.  Most successful entrepreneurs live below their means and are thrifty with respect to their spending habits.  This approach is particularly important when a person is starting a business.  It is also important to potential investors in the company.  They want to make sure the entrepreneur will be a wise steward of their money!
    

8. Learn to sell.  An entrepreneur must develop selling skills.  The entrepreneur must be able to sell products/services to customers who have other sources of supply.  Furthermore, the entrepreneur must be able to sell his/her idea to investors, suppliers and employees.
    

9. Expect major course changes.  The entrepreneur must recognize that starting a business is a dynamic activity.  The business will change over time.  To maintain an organization over a long period of time, the entrepreneur will probably need to restructure the business concept to survive.
    

10. Know what you want.  Personal preferences have a lot to do with starting a business and making it successful.  It is important to have a definite set of goals and objectives to help decide what type of business to start and be successful in growing and developing.  Having a “destination” in mind will assist the entrepreneur, as we see later in developing our business plan.

Next Section: Importance of Entrepreneurs and Small Businesses
 

Copyright 2003 - 2005 - Edward E. Williams, H. Albert Napier, Ph.D., and T&NO Corp. - All rights reserved.

By using this site, you agree to our terms of use.

Privacy Policy - Contact Us - Site Map