MGT 6500 The Entrepreneurial Challenge Mark T. Schenkel, Ph.D. Assistant Professor in Entrepreneurship

Contact Information Office: MBC 436 Office Phone:

Learning Objectives for Term Understanding Opportunities Entrepreneurial Process Entrepreneurial Strategies Entrepreneurial Finance Business Planning Ethics and values Growth Management Entrepreneurship in Larger Organizations

Course Requirements Attendance –Required: see syllabus for details Contribution –Critical to meeting learning objectives Text –Integrated into lecture/discussions –Integrated into your papers

Course Requirements Case Analyses –Sample Feedback Major Class Project –Entrepreneurial Venture Analysis

ENTREPRENEURSHIP Myths

Myths about Entrepreneurship As an entrepreneur, I won’t have anyone looking over my shoulder. Going public with my company some day will be an easy way to make a lot of money. Money is the main reason to be an entrepreneur. Entrepreneurs have the ability to control things.

Myths about Entrepreneurship Entrepreneurs are gamblers. Entrepreneurs don’t have to worry about numbers. Entrepreneurs have more freedom in life. All you need is money to be an entrepreneur.

Defining Entrepreneurship  What is it?  Entrepreneurship and Risk  A Process, not a Type of Person “Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach [emphasis added], and leadership balanced” (Timmons, 1999: 27).

The Last Great Entrepreneurial Era in America The last great period when entrepreneurs transformed the American economy was in the late 1800’s In fact, most of the 1997 Fortune 200 were already among the largest corporations in of the 200 largest companies in America were started by entrepreneurs

The Decline of the Previous Era The large corporations formed in the last great entrepreneurial era in America are no longer creating new jobs in significant numbers Total employment by the Fortune 500 companies has dropped from 20% of US workforce in 1980, to about 7% in the late 1990s (Carlsson, 1992 and 1999) Fortune 500 actually lost over 5 million jobs during the past 20 years

The New Entrepreneurial Era in America Entrepreneurs and small business owners are responsible for 77% of new jobs created in past twenty years New business formation has grown from about 200,000 per year in mid 1900’s to over 3.5 million per year today

OPPORTUNITY RECOGNITION Ideas versus Opportunities

Ideas for New Businesses Industry changes Technology changes Knowledge breakthrough Demographic Changes (look for trends) Population Age Education Occupations Geographic location

Societal Changes: attitudes and perceptions Legal Changes: local, state or federal regulations

Sources of Opportunities Unexpected successes or failures in the market place Inefficiencies or gaps in the market place Market Changing customer attitudes Market growth

Finding an idea that worked in another market Finding an idea that worked for one product/service that can be applied to other products/services

Market?

Who is the customer? Do they need our product/service? Do they want our product/service? Do we know who actually decides to buy our product/service and who actually pays for it? How many potential customers do we think there are?

Quick and Dirty Market Research “Windshield research” Talk to several potential customers Talk to people already in the industry Talk to people who know the industry Talk to experts on business opportunities (e.g. SBDC)

Margin?

Is there a MARGIN in your idea? Economic Logic of the Venture... Operating Leverage (high/medium/low) Volumes (high/medium/low) Contribution Margin (high/medium/low) Revenue Driver Flexibility (high/medium/low)

Is there a MARGIN in your idea? Economics of the idea Rules of Thumb >50% margin indicates probable opportunity 20% to 50% margin indicates possible opportunity <20% margin indicates questionable opportunity

ME?

Measuring “Success” Income for entrepreneur Wealth for entrepreneur Goals derived from personal values of the entrepreneur

Matching Idea to “ME” “Makes me want to get up in the morning” needs: Do you have a passion for the idea? Will it be fun? Experience factor: Does the idea build off of my experiences, skills and/or interests?

Performing a Self-Assessment Examine Personal Aspirations and Priorities Examine Core Values Examine Personal Entrepreneurial Readiness Develop a Entrepreneurship/Career Plan