Essentials of Entrepreneurship: A Practical Approach
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General Entrepreneurship
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The authors of this web site believe there is an entrepreneurial life cycle. In this section the preparation necessary for an entrepreneurial career, the importance of experience, life cycle constraints and risks associated with being an entrepreneur are considered.
Preparing for an Entrepreneurial Career
Being an entrepreneur requires preparation. The preparation begins with a good education. It is useful for an individual to have a business or technical undergraduate degree. Obtaining an MBA is a good strategy for individuals considering an entrepreneurial career.
After completing the undergraduate degree or MBA, the entrepreneur needs to obtain business experience. A recommended approach is to work several years in a well-managed, large company in the industry in which the entrepreneur wants to participate. The next step is to work for an additional few years in a mid-size company that is dynamic and has a high growth rate. Then the prospective entrepreneur is ready to start a company. Of course the individual must decide whether or not to start a company. To go forward the individual must be willing to take the risks associated with starting an enterprise. Such an approach to preparation enhances the probability that the start-up company will be successful, but of course does not guarantee the new enterprise will be successful.
Importance of Experience
The importance of experience cannot be overstated. A significant portion of the preparation of an entrepreneur is to gain business experience. It is preferable that this experience be in the industry in which the entrepreneur wants to start a company. Individuals need to have enough experience in the industry to fully understand its operations and unique attributes, the keys and levers that make money for a company so to speak.
Competition
Regardless of the industry selected, there is always competition. Entrepreneurs must decide whether they are smart enough to compete against other entrepreneurs and larger firms in the industry. For example, individuals wishing to enter technology industries will find many other very capable and bright people trying to create technology companies because of the high returns on investment generally accorded successful technology start-ups.
An alternative strategy is to consider industries not requiring extensive high technology. Examples of such industries include the funeral home business, the trash collection business, and highway construction. These industries generally have very mature and established technologies when compared to more technical business such as bio-medical, information technology, and telecommunications. In such industries, there may not be as much intense competition among entrepreneurs.
Life Cycle Constraints
There are often individual life cycle constraints placed on an entrepreneur when he/she decides to pursue an entrepreneurial endeavor. Assuming an individual pursues one’s entrepreneurial interests using the approach describe above, then he/she is probably 30+ years old. By this time, the prospective entrepreneur may well be married and have children. Having a supportive spouse and children is very important to the entrepreneur. Typically, an entrepreneurial venture requires much more time and effort than in an employment position where an individual is working for someone else. Without the support of the family, it is much more difficult for the entrepreneur to have a successful enterprise.
Another constraint is the nature of one’s financial obligations. By the time the prospective entrepreneur is ready to start a company, a home mortgage, automobile payments, and other financial obligations may be present. Because this scenario is the typical situation, the entrepreneur must work hard to save a “poke,” which is the amount of funds the entrepreneur has to invest in the new venture. Furthermore, the entrepreneur must have enough funds set aside to take of care of family expenses. Many people recommend having at least 1 year of living expenses in the bank prior to starting a company. Wilson Greatbach, the individual who invented the pacemaker for the heart, did not start his new venture until he had 2 years living expenses in savings.6 He did not want his family to have to reduce its lifestyle because he was starting the company.
Risks
There are numerous risks related to being an entrepreneur. A primary one is financial. The entrepreneur may lose all his/her investment as well as savings spent for living expenses while embarking on an entrepreneurial venture. Often individuals leave lucrative careers to start a business and then have the business fail. A person’s image among friends, family and others may be tarnished. For the first time in the entrepreneur’s life he/she may feel like a failure. The unsuccessful venture may also cause financial and other types of hardship for the family as the entrepreneur struggles to start another venture or find employment with a company.
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