Entrepreneurial Characteristics

02 Lecture Notes
 Overview

 Economic Impact of Entrepreneurship

 Characteristics of an Entrepreneur
 Myth or Truth
 Types of Start-up Companies
 Importance to Society, the Economy
 Changing Demographics among Entrepreneurs
 Overview of Skills Needed
 Economic Impact of
Entrepreneurial Firms
 Innovation
 Small entrepreneurial firms are responsible for nearly
two-thirds of all innovations in the U.S.
 More effective (24 times more efficient), more agile,
and more focused than large companies.
 Job Creation
 In the past two decades, economic activity has moved
in the direction of smaller entrepreneurial firms,
 550,000 new businesses created each month in the US.
 99.7% of all employers, over 2/3 new jobs in US, 52%
of workforce
 Introduction to Entrepreneurship

Tremendous interest in According to the GEM

entrepreneurship around the 2005 study, about 350
world. million people, or 14%,
of the adults in the 40
countries surveyed, are
entrepreneurs.

About 50,000,000 new

businesses per year (137K per day)
 Entrepreneurship Defined

What is an Entrepreneur?
1) Someone who creates an enterprise founded on an
innovation, and;
2) assembles and manages the resources necessary to
successfully exploit that opportunity.
3) Entrepreneurs create new ideas, new businesses, new
industries and value.
 What is Entrepreneurship?

Pierre Omidyar, the founder of

eBay. Omidyar saw an opportunity
to create a marketplace where
people could find each other online
(the online Garage sale), he risked
his career by quitting his job to work
on eBay full time, and he worked
hard to build a profitable company
Pierre Omidyar that delivers a creative and useful
Founder of eBay
service to its customers.
Why do people become entrepreneurs?

What motivates someone to jump?

 What are the main Catalysts
that Drive someone to
Become an Entrepreneur?
The three primary reasons that people become
entrepreneurs and start their own firms

Desire to be their own boss

Desire to pursue their

own ideas

Financial rewards
 Drivers (Catalysts) of
Entrepreneurship
 Drive to create, innovate
 Opportunistic mindset
 Desire to Achieve, satisfaction of building
something
 Desire to be Independent and to control one’s
destiny
 Access to capital, individuals or organizations to
facilitate start-up.
 Dissatisfaction at work, job insecurity, downsized
 Compulsion to follow a dream, recognized
Opportunity
 Desire for financial rewards
 Is this a good or bad time
to start a business?
 Cons
 Pros
 Forces frugality

 Causes more feasibility study before launch

 Change = Disruption = Opportunity

 Cheaper solutions, reduced services, outsourcing, loosened

loyalties , weakened competitors
 Toughens companies and entrepreneurs

 Apt to seek more advice from the experienced

Companies: Famous Amos, Costco, Whole Foods, Applebees,

Microsoft, J. Crew, Procter & Gamble, Disney, Alcoa, McDonald's,
General Electric and Johnson & Johnson (over half of Dow Jones
companies)
 Should You Become An
Entrepreneur?
Self-Test
 Motives?
 Ultimate lifestyle objective, your mission?
 Highly Energetic, Optimistic, Confident, Self Starter?
 Driven by Passion, Vision?
 Intuitive, Creative, Analytic, Adaptable, Flexible?
 Goal and ACTION Oriented, (Doer vs. Dreamer)?
 Tenacious, Persistent?
 Independent
 Alert to Opportunities, Tend to Look at things
differently?
 Should You Become an
Entrepreneur? -Continued
 Ambitious? Can you work 70- 80 hrs a week?
 Can you Pay Yourself Last?, Take vacation “later”?
 Can you take Responsibility for Possible Failure?
 Can you deal with Ambiguity and Stress of a new venture?
 Do you have Financial Foundation to Sustain Yourself for a
Period of time?
 Can you Deal effectively with Crises?
 Can you take Calculated Risk?
 Characteristics of
Successful Entrepreneurs

What are the most important characteristics

that an entrepreneur should possess?
 Characteristics of Successful
Entrepreneurs
(1 of 3)
Figure 1.1
Four Primary Characteristics of Successful Entrepreneurs
 Characteristics of Successful
Entrepreneurs
(2 of 3)
 Passion for the Business
 Why is this a key characteristic
 This passion typically stems from the entrepreneur’s
belief that…
 Product/Customer Focus
 Stems from obsession to make products that satisfy
customers’ unfulfilled needs.
 Apple Macintosh: created to be a high quality computer,
that was easy to learn, fun to use and met the needs of a
wide variety of users.
 Characteristics of Successful
Entrepreneurs
(3 of 3)
 Tenacity Despite Failure
 Because entrepreneurs are typically trying something new, the failure
rate is rather high.
 A defining characteristic for successful entrepreneurs is their ability to
____________through setbacks and failures.
 Execution Intelligence (what is it?)
 The ability to fashion a solid business idea into a viable business is a
key characteristic of successful entrepreneurs.
 Starbucks: seasoned managers, world class roasting facility, great
coffee beans, great org. structure, mgmt info system to track sales.
 Segway: what went wrong? $1B fast, 40K units/mo., $9K, new
cities—vs. 6k in 21 mos (Steve Jobs, John Doerr)
 Dealers, service, carrying capacity, long distance work, no trial,
no postal market)
Characteristics of Entrepreneurs
Entrepreneurs Are Bold Gamblers.
There is a common notion that entrepreneurs
are gamblers and take big risks.
Reality is that entrepreneurs are moderate risk
takers.

 Risk Taking
 Myth or Truth
(1 of 3)

 2: Entrepreneurs Are Born Not Made

 Consensus of many studies:
 no one is “born” to be an entrepreneur; everyone has the
potential to become one
 people are not genetically predisposed to be entrepreneurs

 Becoming an entrepreneur (or not), is a function of

the environment, life experiences, and personal
choices.
 Myth or Truth
(2 of 3)

3: Entrepreneurs Are Motivated Primarily by

Money.
 While it is naïve to think that entrepreneurs don’t
seek financial rewards, money is rarely the reason
entrepreneurs start new firms.
 In fact, some entrepreneurs warn that the pursuit of
money can be distracting.

Key to entrepreneurship—don’t focus on the money.

 Myth or Truth
(3 of 3)

4: Entrepreneurs are Young And Energetic.

What is the optimum age group for
entrepreneurship?
 The average entrepreneur is 35 to 45 years old and
has 10 or more years of experience in a large firm.

 What about youthful vs. “more mature”

entrepreneur? Who has the advantage.

1-22
Example of Walt Disney
as an Entrepreneur
 True or False

1. Anyone can create a business.

2. Entrepreneurs want the whole show to

themselves.

3. Entrepreneurs are their own bosses and completely independent.

4. Entrepreneurs work longer and harder than managers of big

companies.
 True or False —
continued
5. Entrepreneurs experience lots of stress and pay a high price.

6. Start a business and fail and you will never raise capital again.

7. Money is the most important ingredient in a start-up.

8. Entrepreneurs seek power over others.

9. Success will happen in a year or two.

10. Entrepreneurs are most successful working alone.

 True or False —continued
11. Any entrepreneur with a good idea can raise $.

12. If you have enough capital you can’t miss.

13. You have to achieve 600+ on your SAT scores to achieve

success. (creativity, leadership, analytic ability, flexibility, deal
with ambiguity)

14. “Nice guys” finish last

15. Regarding ethics, “If you can get away with it, its okay”.

16. Your business plan is your ongoing roadmap to success.

Importance of Gaining Broad
Experience Prior to Starting
Company
 Changing Demographics of
Entrepreneurial Firms
(1 of 2)
 Women Entrepreneurs
 6.5 million women-owned businesses in 2002 up 20% from 1997 (2002
is most recent U.S. Census).
 Senior Entrepreneurs
 Strong evidence suggests that the number of older people starting their
own businesses is rapidly growing.
 The dramatic increase in the number of senior entrepreneurs is
attributed to a number of factors, including:
 Corporate downsizing.

 An increasing desire among older workers for more personal

fulfillment in their lives.
 Growing worries among seniors that they need to earn additional
income to pay for future health care services and other expenses.
 Changing Demographics of
Entrepreneurial Firms
(2 of 2)
 Young Entrepreneurs
 Interest in entrepreneurship among young people is also growing.

 A Gallup study revealed that 7 out of 10 high school students

want to start their own companies.
 Interest in entrepreneurship on college campuses is growing.
According to a recent study, 1,992 colleges and universities now
offer course work in entrepreneurship, up from 300 in the 1984-
1985.
 Entrepreneurship education offered mostly in business schools,
but many other colleges and departments are offering
entrepreneurship courses as well, including engineering,
agriculture, theater, dance, education, law, and nursing.
 Economic Impact of
Entrepreneurial Firms
 Globalization
 Today, over 97% of all U.S. exporters are small
businesses with fewer than 500 employees.
 Over 2/3 have < 20 employees

 Export markets are vital to the U.S. economy.

Entrepreneurial Firms’ Impact on Society
 Impact on Society
 The innovations of entrepreneurial firms have a dramatic
impact on society—how?
 New products and services make our lives easier, enhance
work productivity, improve health, and entertain us in new
ways.

 Entrepreneurs engage in “Creative Destruction”

 develop innovative products and technologies that over
time make current products and technologies obsolete,
stimulating the economy.
Shumpeter
 Entrepreneurial Firms’
Impact on Larger Firms
 Impact on Larger Firms
 Many entrepreneurial firms produce products and
services that help larger firms become more efficient
and effective. (big pharma vs. biotech)
 The Effective
Entrepreneur is Not…
 Just a Dreamer

 An Ego driven gambler

 A Quick quitter when the going gets tough

 Greedy or Selfish with company gains

 Dishonest in any way

 Arrogant with successes

 Preoccupied with status

 A blamer of others for problems but a solution finder

 The Entrepreneurial Process

 Four distinct phases:

 Identify and evaluate the opportunity
 Window of opportunity
 Develop a business plan
 Determine the resource requirement

 Manage the resulting enterprise

 Summary and Discussion
Insight
1. Entrepreneurs have had a positive impact on the economy and
job creation
2. Entrepreneurs create useful products and services
3. Entrepreneurs are highly motivated to create and build
4. Entrepreneurs are passionate, adaptable, tenacious and alert to
opportunities
5. Entrepreneurial firms are an integral part of the “Creative
Destruction” process that replaces old products with new

Question for the Week

Identify those entrepreneurial characteristics that describe
yourself. What characteristics do you lack and can those be
changed or re-learned?