ENTREPRENEURSHIP MYTH vs. REALITY 1

Myth Entrepreneurs are a rare breed, a kind of genius who is born not made. A jet- setting Silicon Valley engineer who along with a couple of his buddies, has raised millions of dollars of venture capital to start a new company to make a patent-protected gizmo. This company will employ thousands, go public in four years and generate huge globs of money for its founders and investors. 2

Reality Much more common than most think. Married white man in his 40’s who attended some college. Lives much of his life where he was born, has a low tech endeavor in an industry where he has worked most of his life such as construction or a retail trade. 3

What is Entrepreneurship? Merriam-Webster Online Dictionary: “The activity of organizing, managing, and assuming the risks of a business or enterprise.” An entrepreneur is a person who engages in these activities. 4

How Popular is Entrepreneurship? If you Google Entrepreneur 76,500,ooo hits! If You Google Sex 43,800,000 hits 5

What Businesses Look Like 11.1% of US households have self-employed head In 2005, about 13% of people were in the process of starting a business 40% of US population will be self employed at some time Major motivation is to avoid working for someone else. Started with $25,000 of his own savings No plans to employ lots of people or make lots of money Just wants to support his family 6

Retail & Service Businesses Outnumber Manufacturing 8 to 1 Retail trade18.6% Professional, scientific & technical svc12.0% Accommodation and food service10.9% Construction10.0% Finance, insurance & real estate8.4% Educational services4.8% Information services4.2% Manufacturing3.5% 7

Failure Rates of Small Businesses 8

Of 20% Who Survive 5 Years 9

Top 2 Reasons Businesses Fail 1. Lack of Management Skills People management skills are extremely important Sales & Marketing skills How are you going to grow your business Financial skills Reading P&L’s and Balance sheets Knowing when and how to borrow money Handling accounts receivable and payable 10

Top 2 Reasons Businesses Fail 2. Lack of Operating Capital Lack of funds to carry the business through the slow times. Lack of funds to grow the business. Lack of funds to provide for home living expenses for a year. Lack of funds usually results in cutting advertising expenses first 11

Two Most Critical Steps To Insure Business Success 1. Having a Business Plan Forces owners to look at the management, marketing and financial aspects of the business. Having a business plan increases the odds that other organizing activities and product development will occur. 12

Two Most Critical Steps To Insure Business Success 2. Business in a Team Sport Most entrepreneurs try to make decisions on their own. A team consists of many people with various skills. SCORE can be a big part of this! 13

Education and Experience Count Those with more education and experience are more likely to start successful business. Work experience increases the chances if: In the business world…not government or education Experience managing people Figuring out how to satisfy customers Experience keeping financial records 14

15 Percentage Who Start A Business

Image of The Entrepreneur Mark Zuckerberg, the founder of Facebook Steve Jobs, the founder of Apple Michael Dell, founder of Dell Computer Bill Gates, founder of Microsoft Larry Ellison, founder of Oracle These are the image of entrepreneurs to many of us ALL DROPPED OUT OF COLLEGE 16

Highest start-ups = Highest failures First. Many entrepreneurs start businesses in industries where they have worked before and therefore understand. On average, these industries tend to be the ones that employ the most people and are the most competitive. As a result, many entrepreneurs end up starting their new firms in industries that aren’t the most attractive for start ups. 17

Highest start-ups = Highest failures Second. Many entrepreneurs start businesses in industries where starting a new company is easy, and industries where it is easy to get started are also more failure prone. 18

Age Myth: Entrepreneurs are, by and large, risk takers, and college students are especially prone to take risks because they are generally unencumbered by family obligations and mortgages. New firm creation tends to be a young man’s game. Younger individuals are more likely to start a new firm than older ones. Reality: Age groupBusiness Owners % % % % 65+10% 19

What Does a Start-Up Look Like? Myth: Finds innovative new markets, develop new products or opportunities, explores risk Reality: Is not innovative and does not intend to challenge existing companies Lacks a single competitive advantage Does not intend to grow Only 25% of new businesses started each year employ more than the owner. Of those new businesses with employees, only 10% had more than 5 employees 20

Revenue Size of New Businesses Federal Reserve survey of owner-managed firms, the typical revenue is $90K Another survey by Census Bureau found that self-employed owners, partnerships, or Sub- S corporations the average revenue was $183K More than 1/3 of new owners do not expect their new business to replace their existing job. And, 46% of new businesses started each year that survive for 5 years will remain home-based businesses. 21

Individuals vs Teams 50% to 60% are started by an individual. 76% are founded by individual along with their spouses. 89% are individuals along with their spouses or a relative. So only around 10% of business are started by teams of unrelated individuals. Venture teams are rare. 22

How Much Gets Invested? $15,000 - $20,000 for average start-up. Again most are home based with only one person. The average price to purchase an existing company is $35,000 23

Where Do Businesses Get Money? Even after 8 years, most start- up capital comes from the founders savings. Of new businesses, 61% did not intend to get external financing. However, new businesses that do receive external funding are capitalized at a much higher level. 24