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Entrepreneurship
It All Starts with an Idea

Entrepreneurs have started all different kinds of businesses from overnight shipping to electronics, music, skin-care products, to retail stores, because each saw an unmet need in the market.

Generally, an entrepreneur is someone who says, “There’s a better way, and I will find it.” An entrepreneur is not only open to new ways of thinking and of doing things, but also has the vision, drive, and energy to bring an idea from concept to reality. Generally, an entrepreneur is someone who says, “There’s a better way.”

Example 1

Although most commercial airlines have been working on policies and procedures to make pets more comfortable when traveling, and give their owners more peace of mind, husband-and-wife team Alysa Binder and Dan Wiesel just didn’t feel that options like Delta’s Pet First and Continental’s PetSafe really filled the bill.

So, they launched Pet Airways, the first airline dedicated exclusively to transporting animals. The airline includes nineteen turboprop planes that have been converted to carry up to fifty live animal crates and one certified pet attendant. [1]
Who else but entrepreneurs would conceive a business idea like this?

Example 2

Fred Smith started FedEx in 1971 based on a paper he wrote for a Yale University economics class and used his $4 million to start the company. [2] Sam Walton founded Wal-Mart in 1962 because he was convinced that Americans wanted a new type of store, a discount store. [3]

In 1930, Colonel Harland Sanders started cooking for weary travelers who stopped by his gas station; they ate at his own dining table because he didn’t have a restaurant. [4] William Hewlett and David Packard decided to start a business in 1939; their first product was an audio oscillator, an electronic instrument used to test sound equipment. They decided the name of their company on the toss of a coin. [5]

Example 3

Musician Jay-Z parlayed his passion and business prowess into a net worth of over $350 million. [6] Estée Lauder started selling creams that were created by her uncle in 1946 “with four products and the belief that every woman can be beautiful.” [7], [8]
Walt Disney, a cartoonist, saw the opportunity to entertain, when he founded the Disney Company. [9] He said, “I am interested in entertaining people, in bringing pleasure, particularly laughter, to others.” [10]

What sets an entrepreneur apart from any other businessperson is that fact that she is willing to assume risk to make a profit.[11] Entrepreneurs are willing to take risks to make things better. [12]

Entrepreneurs and the Economy
Approximately 75 percent of new jobs added in America are from small businesses according to the U.S. Department of State. [13], [14], [15]

Entrepreneurs literally power the country. There are twenty-seven million businesses in the United States; 99.7 percent of them are considered small businesses, that means that only 80,000 businesses are considered large businesses; the other 26.9 million are small businesses. [16]

Patents

Besides providing jobs, entrepreneurial businesses are more likely to provide specialty and custom goods and services to consumers and businesses.

In fact, small businesses produce nearly thirteen times more patents (rights of exclusivity to make and market the product or service granted by the United States government) per employee than large firms. [17], [18] Small businesses represent one-third of all companies that have fifteen or more patents. [19]

The Global Entrepreneurship Monitor (GEM) report

This provides conclusive evidence that promoting entrepreneurship should be an integral element of any government, according to Paul Reynolds, GEM project coordinator. [20]

According to the study, Canada, Israel, and the United States are those countries that are experiencing the highest level of activity, while Denmark, Finland, France, Germany, and Japan have the lowest levels of activity. The GEM constructed a framework for countries to work within to encourage entrepreneurial activity and the entrepreneurial process. [21]

Support

Entrepreneurship is rewarded in the United States because the economy is based on a free market system. [22] Free market governments not only support them, but they often encourage entrepreneurial business ventures.

According to Harvard Business School professor Josh Lerner, the United States government played a key role in the early development of Silicon Valley. The government has also provided support for the growth of innovation in places such as Tel Aviv and Singapore. [23]

Statistics

While statistics are no guarantee of success for the future, especially in today’s tough economy, you might find it interesting to know that small businesses employ a little more than half of all US private sector workers, pay 44 percent of all private sector payroll, and have generated 64 percent of new jobs over the past fifteen years.

In 2008, approximately 530,000 new businesses were created every month, which was a slight increase over 2007. [24]



Limits

Entrepreneurialism isn’t limited to a specific type of organization or business; it’s a state of mind, a way of thinking and behaving, a way of pushing for something better than the status quo.

Entrepreneurs can be found in large multinational corporations as well as nonprofit organizations, and new business start-ups. Every large business or organization had to start small but think differently.


Entrepreneurial at Any Age


Whether it’s the challenging economy or the idea of controlling your destiny, entrepreneurs begin their journey at different ages.

Tech-savvy teenagers are starting online businesses since the Internet has lowered the barriers to entry and provided anonymity from their age. Challenges in finding part-time work also drive teens to start traditional businesses such as yard work, party planning, and tutoring. [25]

At the other end of the spectrum, many of the baby boomer generation who are reaching retirement age are now asking themselves if retirement is “when you stop working completely or retire from one job and begin another.”

Independence, passion, flexibility, and additional income are significant motivators to “mid-life entrepreneurs.” In fact, boomers compose nearly half of the nation’s self-employed workers. [26]

Getting Started
Life as an entrepreneur is very different from life in the corporate world. The thrill of running your own show and making your dream come alive is a learning process.

Everything is all you, all the time. Skills such as time management, understanding financial statements, are all challenges in the entrepreneurial world.“Entrepreneurs have to be willing to listen and learn and make judgments and be adaptive,” according to Monica Doss. [27] Entrepreneurs also have to understand when it’s no longer feasible to keep a business running. [28]

Genetics


Not everyone will grow up to be an entrepreneur. A recent study, which focused on the behaviors of identical twins, has found evidence that entrepreneurialism may be based on genetics, not environment. [29] The study found a connection between different genes causing someone to be extrovert, is important to salesmanship, which is also a strong trait in many entrepreneurs.[30]

Genetics or not, the current state of the economy has forced many to consider owning their own business. “These are people that two years ago did not aspire to own a business,” says Ken Yancey, CEO of nonprofit entrepreneur-mentoring group Service Corps of Retired Executives (SCORE).

Data


In fact, US Internal Revenue Service (IRS) data confirm that the number of nonemployer firms (those that have paid employees) is up 8.1 percent from 2007 to 2008. [31] These entrepreneurs have come of age due to a variety of circumstances.

Some, like Maureen Rothman, president of Rothman Associates, started her business when her employer went out of business. Although she had selling and sales management experience, her first thought was, “I’m not an entrepreneur.” After developing a business plan and getting input and direction from resources such as SCORE, she launched Rothman Associates, a manufacturers’ representative for hospitality seating products. [32]

Products


Imagine auditioning your product idea in front of a panel of judges. The reward for the winner? A television commercial for your product sponsored by Telebrands, the company that advertises “As Seen on TV,” quirky, practical products on television and in their retail stores. CEO A. J. Khubani goes on the hunt regularly for new and unique products.

Would-be entrepreneurs demonstrate and sell their products in front of a panel that includes Khubani, his wife, and other executives of the company. He looks for products with “mass appeal, inexpensive production costs, and good
demonstrability in ads.” [33]

What Does It Take
Entrepreneurialism is based on dreams and risk. Not every idea is commercially viable or economically feasible, and not every dream comes true.

But there are some common ingredients that are part of being an entrepreneur. The bottom line is that there has to be some recognition by the customer that there is a need for the product or service you want to bring to market. Without demand, it will be virtually impossible to have a successful business.

Importance of Research

“Entrepreneurs are often so passionate about their ideas, they can lose objectivity,” according to Nancy A. Shenker, president of theONswitch LLC. “Rather than taking the time to thoroughly plan and research, they sometimes plow ahead with execution, only to spend valuable dollars on unfocused or untargeted activities,”.[35]

That’s why it’s important to research the viability of a business idea starting with the size of the market and if the idea will be compelling enough to meet a need. Checking out the competition can be extremely educational. You might be surprised about what you learn by visiting your competitors and asking questions to their customers. [36]

Social Entrepreneurialism

You might be wondering if there’s more to being an entrepreneur than simply selling a product or service for a profit. Social entrepreneurialism uses the concepts of entrepreneurship to bring about social change. While some social entrepreneurial efforts are nonprofit organizations, others are for-profit companies that focus on adding value to society.

For example, City Year is a nonprofit organization that provides full-time year of service for young people from the United States and South Africa with the objective that they will go on to use their skills to better the world. Social entrepreneurialism is recognized and supported by several mainstream organizations.

Good Business Decisions
No one plans to bring a mediocre product or service to market, but the best way to avoid that fate is to ask yourself the right questions before you start your business.

Asking the right questions helps identify important opportunities or explain the lack of them. [38] For example, can you really answer the question “What sets your product or service apart from what the competitors offer?” A claim like “the best burger in Seattle” doesn’t offer any real point of difference to the customer.

A good idea before starting a new business is to ask yourself these three questions:

What are you selling?

To whom are you selling it?

Why would they buy it from you?

If answered honestly and specifically, these questions help identify the validity of a new business idea. [39]

Hard Work, Long Hours
You might consider the concept of being your own boss to be a good deal.

After all, you can do what you want, when you want, and work as hard as you want on what you want do to because you’re the boss.Well, that’s not really completely true. The challenge of bringing an idea to life is hard work and there’s no guarantee of success. According to the U.S. Census Bureau, only 48.8 percent of the new businesses that were started in the US in 1977 were still around in 2000. [40]

Being an entrepreneur is hard work. Think about Melissa Carter, the owner of San Diego’s first CiCi’s Pizza. She works about seventy hours a week and put in even more hours before the grand opening. [41]

Dan Sanker, president and founder of CaseStack, a logistics outsourcing company, admits that he really doesn’t take any time off, despite his good intentions. Sanker strongly encourages people to follow their dreams, but he also reminds us that business ownership does not provide complete freedom and flexibility because you will ultimately “be beholden to investors, clients, and employees.” [42]

Vinny Lingham, founder of do-it-yourself Web site building company Yola, who recently secured $20 million in investor funding and was featured on the cover of the July 2009 issue of Entrepreneur magazine, says, “Success may look like it happened overnight but that’s rarely the case in reality.

You have to be prepared to put in long hours, take risks, and make personal sacrifices.” But he goes on to say, “And ideally the best time to make them is when you’re young, which is why I encourage young entrepreneurs to go for it.” [43]

Get Rich Quick. Probably Not
Entrepreneurs are motivated by discovery, creativity, and innovation.

While almost three-quarters of current business owners surveyed by the Kauffman Foundation said that “building wealth” is the reason they became an entrepreneur, it may take a long time to realize the financial benefit of entrepreneurship. [44] It’s more than money that motivates many entrepreneurs, according to Scott Laughlin, director of the University of Maryland’s Tech Entrepreneurship Program. Entrepreneurs are more interested in “wealth” which is broader, encompassing less tangible rewards such as respect and independence”. [48]

For example, a franchise, a form of business organization in which a person, or franchisee, pays a company to use its name and market its products, can cost hundreds of thousands of dollars in up-front fees. [45]

A Subway franchise can cost as much as $250,000, not including any royalty fees, rent, product, or labor costs. [46], [47]

Meanwhile, businesses that require inventory, such as retail stores or restaurants, require an investment in inventory, real estate, or even technology before the doors even open. But if the franchise or business idea is right, and the business is well run, the payback can be significant financially and personally.

KEY TAKEAWAYS

Entrepreneurship is the practice of selling ideas and having the passion and perseverance to make it become a reality. Entrepreneurs are willing to take risks to bring a product or service to market.

Some of the world’s largest companies were started by entrepreneurs.

Entrepreneurs have a significant impact on the economy of the United States and the world.

Entrepreneurs protect their ideas by applying for a patent from the United States government.

Entrepreneurs flourish in a free market system, one in which an individual’s success is dictated by demand on the part of the consumer, not the government.

Being an entrepreneur requires a unique idea, passion, and hard work to bring it to fruition.

Social entrepreneurship includes nonprofit organizations as well as for-profit companies that focus on impacting society in a positive way.

An entrepreneur may start a business based on a new idea or expand an existing brand by buying a franchise.

Exercises

Review the list of Entrepreneur magazine’s fastest-growing franchises: Visit the Web sites of at least three of the franchises and answer these three key questions about their business: What do they sell? To whom do they sell it? Why do people want to buy it from them?





Visit the Web site of Entrepreneur magazine: Read a current article about an entrepreneur and discuss his or her unique idea.

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