Entrepreneurship Entrepreneurship Glenn Muske Micro Business Specialist Oklahoma State University

EntrepreneurshipEntrepreneurship


Glenn MuskeGlenn MuskeMicro Business SpecialistMicro Business SpecialistOklahoma State UniversityOklahoma State University

OutlineOutline Entrepreneurship Entrepreneurship

– MythsMyths– DefinedDefined– Opportunity, Risk and RewardOpportunity, Risk and Reward– What the social sciences tell usWhat the social sciences tell us

Entrepreneurs and the communityEntrepreneurs and the community– Entrepreneurs vs. small business owners & Entrepreneurs vs. small business owners &

othersothers– Role of entrepreneurs in the local economyRole of entrepreneurs in the local economy– Building an entrepreneurial communityBuilding an entrepreneurial community

Entrepreneurial examplesEntrepreneurial examples Special entrepreneurial situationsSpecial entrepreneurial situations Final thoughtsFinal thoughts

Personal PassionPersonal PassionPersonal PassionPersonal Passion

The freedom to pursue personal passion The freedom to pursue personal passion leads many to start businesses.leads many to start businesses.

““Nothing great in the world has been Nothing great in the world has been accomplished without passion.”accomplished without passion.”

George Wilhelm Friedrich HegelGeorge Wilhelm Friedrich Hegel

German Philosopher (1770-1831)German Philosopher (1770-1831)

Questions often askedQuestions often askedbut aren’t the most importantbut aren’t the most important

1.1. What can I do? What business should I What can I do? What business should I start?start?

2.2. Can I get a grant?Can I get a grant?

3.3. What business will earn lots of money?What business will earn lots of money?

4.4. What about e-commerce?What about e-commerce?

Questions often not askedQuestions often not askedbut should be!!but should be!!

1.1. Am I an entrepreneur?Am I an entrepreneur?

2.2. Is there a market?Is there a market?

3.3. Can I profitably tap that market?Can I profitably tap that market?

4.4. How do I get to market?How do I get to market?- E-commerce is just a means to market- E-commerce is just a means to market

The Myths of The Myths of EntrepreneurshipEntrepreneurship

Myth #1Myth #1

Get Rich Quick!Get Rich Quick!

Truth is Truth is – Life as an entrepreneur is not about money.Life as an entrepreneur is not about money.– Success rarely happens overnight.Success rarely happens overnight.– It's about what you want to do with your life.It's about what you want to do with your life.

Myth # 2Myth # 2

You must be born an entrepreneur You must be born an entrepreneur

(trait theory)(trait theory)

Truth is:Truth is:– some of the most successful entrepreneurs are some of the most successful entrepreneurs are

the most unlikely.the most unlikely.– It is a lifestyle choice, not an accident.It is a lifestyle choice, not an accident.

Myth # 3Myth # 3

You must be at the right place at the You must be at the right place at the right timeright time

(environment theory)(environment theory)

Truth is:Truth is:– successful entrepreneurs operate whatever the successful entrepreneurs operate whatever the

macroeconomic and structural factors aremacroeconomic and structural factors are

Myth # 4Myth # 4

"I'll have all this free time…""I'll have all this free time…"

Truth is entrepreneurs work many Truth is entrepreneurs work many hourshours– advantages are:advantages are:

control of timecontrol of timevariety of tasksvariety of tasks

Myth # 5Myth # 5

It get easier.It get easier.

Truth is it gets more challengingTruth is it gets more challenging– must work faster, smarter & longermust work faster, smarter & longer– must enjoy the battlemust enjoy the battle

Myth # 6Myth # 6

If you build it, they will come.If you build it, they will come.

Truth is building your business is just the Truth is building your business is just the start.start.Next is the real work:Next is the real work:– planningplanning– timingtiming– strategizing and more.strategizing and more.

Myth # 7Myth # 7

It's all about the bottom line.It's all about the bottom line.

Truth is that the bottom line is necessary Truth is that the bottom line is necessary but not sufficientbut not sufficient– purpose and meaning to the businesspurpose and meaning to the business– inspire customers and employeesinspire customers and employees

Myth # 8Myth # 8

Entrepreneurs are risk takersEntrepreneurs are risk takers

Truth – Entrepreneurs are calculatorsTruth – Entrepreneurs are calculators– Studies show entrepreneurs are only Studies show entrepreneurs are only

moderate risk takersmoderate risk takers

Myth # 9Myth # 9

You have to have a great ideaYou have to have a great idea

Truth Truth – Your idea must be goodYour idea must be good– Your idea must be doableYour idea must be doable– Your idea must be wanted or neededYour idea must be wanted or needed– Your idea must be priced rightYour idea must be priced right

Myth # 10Myth # 10

It takes a lot of moneyIt takes a lot of money

Truth – Over 50% start for under Truth – Over 50% start for under $10,000$10,000– Also look forAlso look for

Certain business typesCertain business typesTurn-around situationsTurn-around situationsPossibility of using other people’s moneyPossibility of using other people’s money

Entrepreneur’s goal isEntrepreneur’s goal is

By finding new solutions to By finding new solutions to existing problemsexisting problems

Or by connecting existing Or by connecting existing solutions to unmet needs or new solutions to unmet needs or new opportunities”opportunities”

SOURCE: Lichtenstein & Lyons, Incubating New SOURCE: Lichtenstein & Lyons, Incubating New Enterprises: A Guide to Successful Practice, 1996Enterprises: A Guide to Successful Practice, 1996

“to create or capitalize on new economic opportunities through innovation

Entrepreneurship Definitions:Entrepreneurship Definitions:

1.1. Creation of an innovative economic Creation of an innovative economic organization for the purpose of gain or organization for the purpose of gain or growth under conditions of risk and growth under conditions of risk and uncertaintyuncertainty

2.2. Self-employment through business Self-employment through business ownership that includes significant ownership that includes significant elements of risk, control, and reward elements of risk, control, and reward (Coleman Foundation)(Coleman Foundation)

3.3. Organizing a business venture assuming Organizing a business venture assuming a certain amount of risk to make a profita certain amount of risk to make a profit (Burns and Bolton)(Burns and Bolton)

More Definitions:More Definitions:

Profits from bearing uncertainty and Profits from bearing uncertainty and riskrisk

Purposeful activity to initiate and Purposeful activity to initiate and develop a profit-oriented businessdevelop a profit-oriented business

Moderate risk takingModerate risk taking Creation of new organizationsCreation of new organizations The pursuit of opportunity without The pursuit of opportunity without

regard to resources currently regard to resources currently controlledcontrolled

Entrepreneurship:Entrepreneurship:Basic ElementsBasic Elements

1.1. Opportunity recognitionOpportunity recognition

2.2. Creation and/or innovationCreation and/or innovation

3.3. Resource gathering and the Resource gathering and the

founding of an economic founding of an economic

organizationorganization

4.4. Desiring the chance for gain while Desiring the chance for gain while

accepting risk and uncertaintyaccepting risk and uncertainty

Other Entrepreneurial Other Entrepreneurial MotivatorsMotivators

LIFE

STY

LE

LIFE

STY

LETime With Family

Time With Family

?? Tell a time when you ?? Tell a time when you were entrepreneurial ??were entrepreneurial ??

Were you successful??Were you successful??

Opportunity Recognition

An Entrepreneurial An Entrepreneurial Opportunity defined:Opportunity defined:

A situation in which changes in which A situation in which changes in which changes in technology, or economic, changes in technology, or economic, political, social, and demographic political, social, and demographic conditions generate the potential to conditions generate the potential to create something new or to remarket create something new or to remarket something existing. something existing.

Entrepreneurial Opportunity Entrepreneurial Opportunity GridGrid

Product/Service

Existing New

Existing

New

Market

Market Penetration

Diversification

New Offering Development

Market Development

What are opportunities?What are opportunities?

Small stepsSmall steps

Little jumpsLittle jumps

Huge leapsHuge leaps

"Don't be afraid to take a big step if one is indicated; you can't cross a chasm in two small jumps."

David Lloyd George

Opportunities can be...Opportunities can be... Technical or Technical or

scientificscientific Political and Political and

regulatoryregulatory Process or Process or

production methodproduction method OrganizingOrganizing New market and New market and

marketingmarketing PersonnelPersonnel

Social & Social & demographic demographic changeschanges

New raw materialNew raw material Product Product

obsolescenceobsolescence Corporate stagnationCorporate stagnation One-product One-product

vulnerabilityvulnerability ChanceChance

Think like a…..Think like a…..

Manager – Problem solvingManager – Problem solving

Entrepreneur – Opportunity Entrepreneur – Opportunity ExploitationExploitation

OpportunitiesOpportunities

ExternalExternal– Unexpected eventUnexpected event– Technology changes and convergenceTechnology changes and convergence– Change in methodsChange in methods– Demographics/market – size, Demographics/market – size, – Changes in competitionChanges in competition

InternalInternal Other methodsOther methods

The Opportunity MythThe Opportunity Myth

An An IdeaIdea

does not equal andoes not equal an

OpportunityOpportunity

Creation & Innovation

CreativityCreativity

“ “ Imagination is more Imagination is more important than important than knowledge” - knowledge” - EinsteinEinstein

The Creative ProcessThe Creative Process Planning & definition Planning & definition

– focus on building the RIGHT focus on building the RIGHT productproduct

Design, demonstration & Design, demonstration & customer supportcustomer support– focus on building the product focus on building the product

RIGHTRIGHT

Customer requirementCustomer requirement

Find a consumerProductTechnology

NOT

Product solution

Basic questionsBasic questions

What is the customer’s need?What is the customer’s need?

– How large is the opportunity?How large is the opportunity?

– How likely is it to happen?How likely is it to happen?

– What is the market timing?What is the market timing?

– Is it aligned with our Is it aligned with our

organizational strengths?organizational strengths?

Time is money!Time is money!

Delays give others time to Delays give others time to develop the same product.develop the same product.

Reduce product development Reduce product development time by 1/3 & you will triple profits time by 1/3 & you will triple profits

& growth.& growth.

ExerciseExercise

In groups of 3-4, think of 3 things you In groups of 3-4, think of 3 things you have observed externally lately that have observed externally lately that would be a potential business would be a potential business opportunity. opportunity.

Resource GatheringResource Gathering

Resourced-based Theory Resourced-based Theory of Entrepreneurshipof Entrepreneurship

Dimensions of EntrepreneurshipDimensions of Entrepreneurship

New Venture Creation

Individual Characteristics

Constraints in the Environment

OrganizationEnvironment

ResourceResource

any thing or quality that is usefulany thing or quality that is useful used to develop sustainable used to develop sustainable

competitive advantagecompetitive advantage heterogeneous & immobileheterogeneous & immobile

– you have them, others cannot easily get you have them, others cannot easily get themthem

Strategic ResourcesStrategic Resources

Valuable – Exploit an environmental Valuable – Exploit an environmental opportunityopportunity

Rare – Not enough for all competitorsRare – Not enough for all competitors Imperfectly imitable – Cannot be Imperfectly imitable – Cannot be

merely copiedmerely copied Non-substitutableNon-substitutable

Competitive AdvantageCompetitive Advantage

No AdvantageNo AdvantageResource Resource

DimensionDimension AdvantageAdvantage

CommonCommon ValuableValuableExploits Exploits

opportunitiesopportunities

Readily Readily available & available &

cheapcheap RareRareUnique & Unique & expensiveexpensive

OrdinaryOrdinary ImitableImitableComplex & Complex & ambiguousambiguous

Many & easyMany & easy SubstitutableSubstitutable DifficultDifficult

Types of ResourcesTypes of Resources

FinancialFinancial PhysicalPhysical HumanHuman TechnologyTechnology ReputationReputation OrganizationalOrganizational

Risk and Reward

If the business succeeds,

the entrepreneur reaps the

reward of profits;

if it fails,

one takes the loss.

If the business succeeds,

the entrepreneur reaps the

reward of profits;

if it fails,

one takes the loss.

Business Failure RateBusiness Failure Rate

0

20

40

60

80

0 2yrs 5yrs 6yrs 8yrs

Number ofbusinessfailures per100 start-ups

StatisticsStatistics

10% of small businesses fail each 10% of small businesses fail each yearyear

40 - 80% of small businesses do not 40 - 80% of small businesses do not survive for 5 yearssurvive for 5 years

Most small businesses closures do Most small businesses closures do not result in uncovered liabilitiesnot result in uncovered liabilities

Majority of small business owners Majority of small business owners who fail will start another businesswho fail will start another business

Why do businesses fail?Why do businesses fail?

– 2 general categories2 general categoriesFinancialFinancialNonfinancialNonfinancial

Financial ReasonsFinancial Reasons

Under-capitalizedUnder-capitalized Poor cash flow planningPoor cash flow planning Lack of record keepingLack of record keeping Inadequate financial forecasting and Inadequate financial forecasting and

reviewreview Lack of accounting trainingLack of accounting training Excessive debtExcessive debt

Nonfinancial ReasonsNonfinancial Reasons

LonelinessLoneliness Lack of management skills and Lack of management skills and

trainingtraining Little passionLittle passion Impact of regulationsImpact of regulations InefficiencyInefficiency InexperienceInexperience Lack of planningLack of planning

"I never failed once. It just happened to be a 200l-step process."

Thomas A. Edison

RewardsRewards

??????

"In the realm of ideas everything "In the realm of ideas everything depends on enthusiasm, in the real depends on enthusiasm, in the real world all rests on perseverance." - world all rests on perseverance." -

Johann Wolfgang von GoetheJohann Wolfgang von Goethe

The Social Sciences onThe Social Sciences on“What Makes an “What Makes an

Entrepreneur”Entrepreneur”

Trait TheoryTrait TheoryTrait TheoryTrait Theory

Energy/motivationEnergy/motivation

Business orientationBusiness orientation

Business attitudeBusiness attitude

People skillsPeople skills

http://www.sba.gov/starting_business/http://www.sba.gov/starting_business/startup/entrepreneurialtest.htmlstartup/entrepreneurialtest.html

http://www.toolkit.cch.com/tools/http://www.toolkit.cch.com/tools/downloads/swchek.rtfdownloads/swchek.rtf

Personality CharacteristicsPersonality CharacteristicsPersonality CharacteristicsPersonality Characteristics

Need for achievementNeed for achievement

Locus of controlLocus of control

Risk-taking propensityRisk-taking propensity

Career AnchorsCareer AnchorsCareer AnchorsCareer Anchors

Motivate vocational choicesMotivate vocational choices

TechnicalTechnical ManagerialManagerial SecuritySecurity CreativityCreativity AutonomyAutonomy

Sociological CharacteristicsSociological CharacteristicsSociological CharacteristicsSociological Characteristics

Negative displacementNegative displacement

Between thingsBetween things

Positive pullPositive pull

Positive pushPositive push

Situational CharacteristicsSituational CharacteristicsSituational CharacteristicsSituational Characteristics

Perceptions of desirabilityPerceptions of desirability

Perceptions of feasibilityPerceptions of feasibility

Entrepreneurial eventEntrepreneurial event

DesiresDesires

Change:Change:

– Your lifeYour life

– A product or serviceA product or service

– The environmentThe environment

Entrepreneurs and the Entrepreneurs and the CommunityCommunity

CARE Model CARE Model (Dr. Mike Woods, Jack Frye, & Stan Ralstin)(Dr. Mike Woods, Jack Frye, & Stan Ralstin)

CCreationreation

AAttractionttraction

RRetentionetention

EExpansionxpansion

% of New Jobs Created

Attraction - 1%

Retention & Expansion – 44%

Creation – 55%

We all want to find the next We all want to find the next gazelle!!gazelle!!

Entrepreneurs vs. Small Business Entrepreneurs vs. Small Business OwnersOwners

Carland, Hoy, Boulton, & Carland Carland, Hoy, Boulton, & Carland aargue they are different rgue they are different

- Entrepreneurs and entrepreneurial - Entrepreneurs and entrepreneurial businesses involve innovation & growthbusinesses involve innovation & growth

- Entrepreneurs goal-orientation is different Entrepreneurs goal-orientation is different - financial success vs. other criteriafinancial success vs. other criteria- need for achievement/powerneed for achievement/power

- Entrepreneurs use strategic management Entrepreneurs use strategic management practices practices

Small BusinessSmall BusinessIndependently owned and operated, not Independently owned and operated, not

dominant in its field, and does not engage dominant in its field, and does not engage in any new marketing or innovative in any new marketing or innovative practicespractices

Owner – Establishes and manages for Owner – Establishes and manages for purpose of furthering personal goals. purpose of furthering personal goals. Business is primary source of income & Business is primary source of income & consumes majority of time & resources. consumes majority of time & resources. Owner perceived business as extension of Owner perceived business as extension of personality, intricately bound with family personality, intricately bound with family needs and desires. needs and desires.

Entrepreneurial Venture Entrepreneurial Venture

Engages in growth and profitability and Engages in growth and profitability and innovation by introducing new innovation by introducing new products, new processes, opening new products, new processes, opening new markets, or reorganizes the industrymarkets, or reorganizes the industry

Entrepreneur – Establishes and manages Entrepreneur – Establishes and manages the business for growth and profit. Is the business for growth and profit. Is innovative and employees strategic innovative and employees strategic management practices. management practices.

??QUESTION????QUESTION??

Are entrepreneurs and small business Are entrepreneurs and small business owners the same thing?owners the same thing?

Why??Why??

Why not??Why not??

Does rural make a difference??Does rural make a difference??

Comparing Entrepreneurs toComparing Entrepreneurs toManagers and LeadersManagers and Leaders

EntrepreneurEntrepreneur ManagerManager LeaderLeader

InnovatesInnovates AdministersAdministers InnovatesInnovates

CreatesCreates MaintainsMaintains DevelopsDevelops

Sees Sees opportunitiesopportunities

See problemsSee problems Sees the futureSees the future

Asks how and Asks how and whenwhen

Asks how and Asks how and whenwhen

Asks what and Asks what and whywhy

Makes it happenMakes it happen Does things Does things rightright

Uses influenceUses influence

Builds the teamBuilds the team Relies on controlRelies on control Inspires trustInspires trust

Entrepreneurship is a style Entrepreneurship is a style and a general method of and a general method of

operating, not just a set of operating, not just a set of business skills. business skills.

Jerry GustafsonJerry Gustafson

Beloit CollegeBeloit College

EntrepreneursEntrepreneurs

People who create and grow People who create and grow enterprisesenterprises

Aspiring entrepreneursAspiring entrepreneurs Survival entrepreneursSurvival entrepreneurs Lifestyle entrepreneursLifestyle entrepreneurs Growth entrepreneursGrowth entrepreneurs Serial entrepreneursSerial entrepreneurs Social entrepreneursSocial entrepreneurs

SOURCE: WK Kellogg FoundationSOURCE: WK Kellogg Foundation

Entrepreneurs and the Entrepreneurs and the CommunityCommunity

What they bringWhat they bring

Does it matter what they are Does it matter what they are called?called?

Both:Both: Add income to the household and jobs Add income to the household and jobs

and wealth to the communityand wealth to the community Add economic strength to a communityAdd economic strength to a community Add stability to a communityAdd stability to a community Provide the owner with the ability to Provide the owner with the ability to

achieve his or her goalsachieve his or her goals Create new opportunities within the Create new opportunities within the

community - Multipliercommunity - Multiplier

Who entrepreneurs are?Who entrepreneurs are?

Classified as:Classified as:– Small businessSmall business– Micro businessMicro business– Home-based businessHome-based business– Family businessFamily business

Also:Also:– Underground economyUnderground economy– Informal economyInformal economy– Formal economyFormal economy

Metro, Micro, Rural ComparisonMetro, Micro, Rural Comparison20% of OK households own & run a business20% of OK households own & run a business

MetroMetro(n=146)(n=146)

MicroMicro(n=54)(n=54)

RuralRural(n=46)(n=46)

Primary bus.Primary bus. ServiceService

ConstructioConstructionn

RetailRetail

Ag/For/Fish Ag/For/Fish Service Service

RetailRetail

Ag/For/FishAg/For/Fish

Construction, Construction,

FIRE & ServiceFIRE & Service

Family bus.Family bus. 62%62% 74%74% 78%78%

Home-basedHome-based 66%66% 63%63% 70%70%

Spouse in bus.Spouse in bus. 48%48% 46%46% 65%65%

Metro, Micro, Rural ComparisonMetro, Micro, Rural Comparison

MetroMetro(n=146)(n=146)

MicroMicro(n=54)(n=54)

RuralRural(n=46)(n=46)

Avg # emplAvg # empl 1.831.83 2.042.04 2.112.11

Gross inc.Gross inc. - Mean- Mean

- Median- Median$241,891$241,891

$49,000$49,000$333,589$333,589

$35,000$35,000$162,190$162,190

$40,000$40,000

The numbersThe numbers

Small businesses – 16 million nonfarmSmall businesses – 16 million nonfarm– OK – 290,000 (employer & nonemployer)OK – 290,000 (employer & nonemployer)

50% of private workforce50% of private workforce– OK – 54%OK – 54%

Create 2/3 of all new jobsCreate 2/3 of all new jobs 52% of all nonfarm output52% of all nonfarm output Micro businesses – ???Micro businesses – ???

– OK – 270,000 – 94%OK – 270,000 – 94% + 84,000 farm/ranch operations+ 84,000 farm/ranch operations

The numbersThe numbers

Family businesses – 12.7% of householdsFamily businesses – 12.7% of households– OK – 185,000 - $6.5 billion inc transferred to OK – 185,000 - $6.5 billion inc transferred to

familyfamily– South – 3.3 million - $109 billion transferred South – 3.3 million - $109 billion transferred – U.S. – 9.7 million - $348 billion transferredU.S. – 9.7 million - $348 billion transferred

Home-based businesses – 5% - 18% of hhHome-based businesses – 5% - 18% of hh– OK – 67,000 – 176,000OK – 67,000 – 176,000

- $1 - $6.2 billion/year- $1 - $6.2 billion/year

Creating Entrepreneurial Creating Entrepreneurial CommunitiesCommunities

People

Informal Organizations

Formal Institutions

Entrepreneurial CommunitiesEntrepreneurial Communities

4 types4 types1.1. Those that develop entrepreneursThose that develop entrepreneurs

2.2. Those that act entrepreneuriallyThose that act entrepreneurially

3.3. Those that do bothThose that do both

4.4. Those that do neitherThose that do neither

Entrepreneurship Entrepreneurship developmentdevelopmentthe infrastructure of public and the infrastructure of public and private supports that facilitate private supports that facilitate entrepreneurshipentrepreneurship

Entrepreneurial communitiesEntrepreneurial communitiesthose where significant economic and those where significant economic and social entrepreneurial activity exists social entrepreneurial activity exists and where there is an effective system and where there is an effective system of entrepreneurship developmentof entrepreneurship development


Entrepreneurial CommunitiesEntrepreneurial Communities1.1. Has critical mass of entrepreneurs actively Has critical mass of entrepreneurs actively

engaged in capturing new market engaged in capturing new market opportunitiesopportunities

2.2. Group of entrepreneurs recognizable within Group of entrepreneurs recognizable within the communitythe community

3.3. Community as a whole is entrepreneurialCommunity as a whole is entrepreneurial

Social capital (Floras)

Human capital-diversity (Florida)

Clusters (Porter)

Public-Private Partnerships (Tupelo-Grishom)

Innovative Infrastructure (Feldman)

Theory ExpansionTheory Expansion Social capitalSocial capital

– Trust, networks, reciprocity, and collective actionTrust, networks, reciprocity, and collective action– Horizontal, vertical, and flexible (not in the group Horizontal, vertical, and flexible (not in the group

at all times)at all times) Human capitalHuman capital

– EducationEducation Beyond high schoolBeyond high school Continuous and life-life longContinuous and life-life long Include specific and generalInclude specific and general Inclusive – pre-K – older citizenInclusive – pre-K – older citizen Just-in-timeJust-in-time

– Knowledgeable and involved citizensKnowledgeable and involved citizens

Theory ExpansionTheory Expansion

ClustersClusters– Why? – Based on economies of scale, Why? – Based on economies of scale,

technology transfer & availability of technology transfer & availability of human capitalhuman capital (Eric Scorsone, Industrial clusters: Enhancing rural (Eric Scorsone, Industrial clusters: Enhancing rural economies through business linkages, SRDC 21economies through business linkages, SRDC 21stst Century Series) Century Series)

Innovative infrastructureInnovative infrastructure– Basics plus items such as a visionary Basics plus items such as a visionary

government, day care, & technology government, day care, & technology

Creating an Entrepreneurial Creating an Entrepreneurial ClimateClimate

1.1. Entrepreneurship must be an explicit economic Entrepreneurship must be an explicit economic development strategydevelopment strategy

2.2. Community must embrace and nurture Community must embrace and nurture entrepreneurs entrepreneurs

– Goal - A continuous pipeline of entrepreneursGoal - A continuous pipeline of entrepreneurs

a.a. Supportive public policiesSupportive public policies

b.b. Balances regulations with business needsBalances regulations with business needs

c.c. Education – early & on-going, formal and nonformalEducation – early & on-going, formal and nonformal

3.3. Access to capital – banks, investment, angelsAccess to capital – banks, investment, angels

4.4. Access to quality workersAccess to quality workers

5.5. Recognize entrepreneurial effortsRecognize entrepreneurial efforts

Enterprise DevelopmentEnterprise Development

““Assistance to entrepreneurs in support Assistance to entrepreneurs in support of the creation, growth, and survival of of the creation, growth, and survival of their businesses”their businesses” Koven & Lyons (2003)Koven & Lyons (2003)

nonprofit, private, public service providersyouth entrepreneurship programsmicro enterprise programsbusiness incubatorsmanufacturing networksmall business development centersangel capital networksrevolving loan fundstechnology transfer programs

Nurturing of EntrepreneursNurturing of Entrepreneurs

Mentors and coachesMentors and coaches Business/management assistance & Business/management assistance &

supportsupport– Coordinated, seamless, and localCoordinated, seamless, and local

Access to technologyAccess to technology Technical assistance Technical assistance Inclusion of all into events, programs, Inclusion of all into events, programs,

& groups& groups

Other Examples:Other Examples:How Communities Can HelpHow Communities Can Help

Purchase locallyPurchase locally

Help create new Help create new local businesseslocal businesses

Develop human Develop human resourcesresources

Free-up potentially Free-up potentially productive spaceproductive space

Initiate local investment Initiate local investment strategies strategies (endowments, (endowments, fundraising, micro-loan fundraising, micro-loan programs)programs)

Mobilize external Mobilize external resourcesresources

Challenges for Sustainable Challenges for Sustainable Rural Economic DevelopmentRural Economic Development1.1. Translating models to place- Translating models to place-

based strategiesbased strategies

- no silver bullet- no silver bullet

2.2. Implement strategy with tangible Implement strategy with tangible benefitsbenefits

- taxpayers see return on - taxpayers see return on investmentinvestment

3.3. Need to create good jobsNeed to create good jobs

- self-sustaining wages- self-sustaining wages

Challenges for Sustainable Challenges for Sustainable Rural Economic DevelopmentRural Economic Development

(cont.)(cont.)

4.4. Need for strategies that build on Need for strategies that build on all assetsall assets

- young, old, men, women, - young, old, men, women, ethnicitiesethnicities

5.5. Shortage of resources in most Shortage of resources in most small towns.small towns.

SOURCE: Emery, Wall, Macke, 2004SOURCE: Emery, Wall, Macke, 2004

Shortcomings of Enterprise Shortcomings of Enterprise DevelopmentDevelopment

#1 Tool-Driven-Not Needs-Focused#1 Tool-Driven-Not Needs-FocusedWorked one-place and one-timeWorked one-place and one-timeSolutions in search of a client baseSolutions in search of a client baseVoice of the customer-the entrepreneur-is Voice of the customer-the entrepreneur-is missingmissing

Entrepreneurial NeedsEntrepreneurial NeedsHard for entrepreneurs to articulateHard for entrepreneurs to articulateEntrepreneurs may not trust those asking the Entrepreneurs may not trust those asking the questionsquestionsEntrepreneurs difficult to identify and reachEntrepreneurs difficult to identify and reach

SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004SOURCE: Lichtenstein, Lyons, Kutzhanova, 2004

Shortcomings of Enterprise Shortcomings of Enterprise Development Development (continued)(continued)

#2 Fragmented and Categorical#2 Fragmented and Categorical““Creaming” – we need more than a Creaming” – we need more than a quarterbackquarterback

#3 Too Little Focus on Execution#3 Too Little Focus on ExecutionVarious gurus crisscross the country – then go Various gurus crisscross the country – then go homehomeGap between ideas and educationGap between ideas and education

#4 The Broken Learning Cycle#4 The Broken Learning CycleBest practices vs. successful practicesBest practices vs. successful practices


Shortcomings of Enterprise Shortcomings of Enterprise Development Development (continued)(continued)

#5 Focus on the Business, not the Entrepreneur#5 Focus on the Business, not the Entrepreneur

#6 Missing Function: Responsibility for the #6 Missing Function: Responsibility for the Community’s Supply of EntrepreneursCommunity’s Supply of Entrepreneurs

#7 Funders, not Clients, Drive the Program#7 Funders, not Clients, Drive the Program

#8 Impact is not Scalable#8 Impact is not ScalableCommunity-wide impactCommunity-wide impact


Successful Entrepreneurial(?) Successful Entrepreneurial(?) CommunitiesCommunities

1.1. Acceptance of ControversyAcceptance of Controversy

2.2. Ability to Depersonalize PoliticsAbility to Depersonalize Politics

3.3. Surplus Income to InvestSurplus Income to Invest

4.4. Willingness to Take RisksWillingness to Take Risks

5.5. Ability to Define Community More BroadlyAbility to Define Community More Broadly

6.6. Networking AbilityNetworking Ability

7.7. Emphasis on AcademicsEmphasis on Academics

8.8. Flexible, Dispersed LeadershipFlexible, Dispersed Leadership

SOURCE: Flora and FloraSOURCE: Flora and Flora

SOURCES FOR THIS SOURCES FOR THIS PRESENTATIONPRESENTATION

Lichtenstein, Lyons, KutzhanovaLichtenstein, Lyons, Kutzhanova““Building Entrepreneurial Communities: Building Entrepreneurial Communities:

The Appropriate Role of Enterprise The Appropriate Role of Enterprise Development Activities” Development Activities” Journal of the Journal of the Community Development SocietyCommunity Development Society, 2004, 2004

Emery, Wall, MackeEmery, Wall, Macke““From Theory to Action: Energizing From Theory to Action: Energizing

Entrepreneurship (E2), Strategies to Aid Entrepreneurship (E2), Strategies to Aid Distressed Communities Grow Their Distressed Communities Grow Their Own” Own” Journal of the Community SocietyJournal of the Community Society, , 20042004

Entrepreneurs We Entrepreneurs We KnowKnow

Do you know who they are?Do you know who they are?

Stan ClarkStan ClarkFrank EppersonFrank EppersonFred SmithFred SmithBill Bowerman & Philip KnightBill Bowerman & Philip KnightDr. John Pemberton & Asa Dr. John Pemberton & Asa

ChandlerChandler

Do you know who they are?Do you know who they are?

Jeff BezosJeff BezosCohen and GreenfieldCohen and GreenfieldRay KrocRay KrocTom MonaghanTom MonaghanBill GatesBill GatesHoward SchultzHoward Schultz


All are not equal, All are not equal,

nor do they want to be!!nor do they want to be!!


People who create and grow People who create and grow enterprisesenterprises

Aspiring entrepreneursAspiring entrepreneurs Survival entrepreneursSurvival entrepreneurs Lifestyle entrepreneursLifestyle entrepreneurs Growth entrepreneursGrowth entrepreneurs Serial entrepreneursSerial entrepreneurs Social entrepreneursSocial entrepreneurs


Family Business NamesFamily Business Names

Wal-MartWal-Mart

FordFord

WeyerhaeuserWeyerhaeuser

MichelinMichelin

GapGap

Anheuser-BuschAnheuser-Busch

Tyson FoodsTyson Foods

DillardsDillards

CargillCargill

Koch IndustriesKoch Industries

IkeaIkea

Cox CommunicationCox Communication

Enterprise Rent-A-CarEnterprise Rent-A-Car

HallmarkHallmark

Levi StraussLevi Strauss

KohlerKohler

Family BusinessesFamily Businesses

Generate 62% of nonfarm business Generate 62% of nonfarm business receipts - $16.8 trillion in 1996receipts - $16.8 trillion in 1996– Even greater impact in midwest economyEven greater impact in midwest economy

Dominate form in agriculture, retail, Dominate form in agriculture, retail, wholesale, and distribution sectorswholesale, and distribution sectors

Employ 54.8% of workforce – 69.5 millionEmploy 54.8% of workforce – 69.5 million Provide higher than average household Provide higher than average household

income and net worthincome and net worth– Only 1% of households are poor vs. 11% Only 1% of households are poor vs. 11%

overalloverall

Available Resources and Constraints

PROCESSES

Time of StabilityInterpersonal Transactions

Resource Constraints

Times of ChangeInterpersonal Transactions

Resource Transactions

AchievementsObjective SuccessSubjective Success

BUSINESS

Disruptions in Family/Business

Transactions

Responses to

Disruptions in Family/Business

Transactions Sustainability

Available Resources and Constraints

PROCESSES

Time of StabilityInterpersonal Transactions

Resource Constraints

Time of ChangeInterpersonal Transactions

Resource Transactions

Achievements

Objective SuccessSubjective Success

Sustainable Family Business Model

More infoMore info

www.hce.osu.edu/fambuswww.hce.osu.edu/fambus http://www.human.cornell.edu/ne167/http://www.human.cornell.edu/ne167/

Home-based Business NamesHome-based Business Names

Hewlet-PackardHewlet-Packard NikeNike CokeCoke Mrs. Fields CookiesMrs. Fields Cookies MicrosoftMicrosoft DellDell

Home-based Business FactsHome-based Business Facts

Nine-state study (1988)Nine-state study (1988)– Typical home-based workerTypical home-based worker

44 year old male, married, with children, 14 yrs. 44 year old male, married, with children, 14 yrs. education, & a homeownereducation, & a homeowner

Mean gross business income - $53,164Mean gross business income - $53,164 Mean net business income - $15,628Mean net business income - $15,628 Mean household income - $42,263Mean household income - $42,263

– Had medical insurance from some other sourceHad medical insurance from some other source– As # children increased, number of work hours As # children increased, number of work hours

decreased (1 day per child on average)decreased (1 day per child on average)– Had greater longevity in the communityHad greater longevity in the community

CopreneursCopreneurs

Defined – Couples in business togetherDefined – Couples in business together– 31% of family businesses31% of family businesses– Have more children, lower educational levels, Have more children, lower educational levels,

rural location, business manager earns less per rural location, business manager earns less per year, more likely home-based, and have fewer year, more likely home-based, and have fewer employeesemployees

– Make significantly less business income and Make significantly less business income and business profits (by factor of 5) & feel business business profits (by factor of 5) & feel business is less successfulis less successful

– Copreneurs more likely to view business as a Copreneurs more likely to view business as a way of life as opposed to a way to earn incomeway of life as opposed to a way to earn income

Copreneurs cont.Copreneurs cont.– More likely to intermingle money between More likely to intermingle money between

business and family – More often family to business and family – More often family to businessbusiness

Also use more ways of interminglingAlso use more ways of intermingling

– Approximately 20% of couples discontinued Approximately 20% of couples discontinued the copreneurial relationship (but stayed the copreneurial relationship (but stayed together as a couple) in a 3-year periodtogether as a couple) in a 3-year period

Made less money & saw the business as less successful.Made less money & saw the business as less successful.

– Another 20% started a copreneurial Another 20% started a copreneurial relationshiprelationship

Made most money of all 3 groups, run by older men with Made most money of all 3 groups, run by older men with more education, had fewer dependents, and spouse worked more education, had fewer dependents, and spouse worked fewer hours in business.fewer hours in business.

Value-Added Value-Added OpportunitiesOpportunities

Value-AddedValue-Added

Defined: Adding consumer-desired features Defined: Adding consumer-desired features to raw materialsto raw materials

Done by:Done by:

1.1. Additional processing Additional processing

2.2. Marketing - change from the current Marketing - change from the current method of distributionmethod of distribution

3.3. Use existing resources to produce a new, Use existing resources to produce a new, more valued product/servicemore valued product/service

4.4. Some combinationSome combination

Marketing Marketing

StrategiesStrategies

for for Farmers Farmers

& Ranchers& Ranchers

Reap New ProfitsReap New Profits::

Farmers Farmers MarketsMarkets

“People don’t come all the way out here to get cheap food. They come because it’s fun and theberries are absolutely fresh.” -- Earnie Bohner, Persimmon Hill Berry Farm

Pick Your Own

ENTERTAINMENT

FARMING

Farm Stands Community supported agriculture (CSA)

Cooperatives

Restaurant sales

Mail order/ Internet/ Direct marketing

OTHER

OPTIONS

Resources:Resources: USDA Sustainable Agriculture Research and USDA Sustainable Agriculture Research and

Education (SARE) – www.sare.org Education (SARE) – www.sare.org

Farmers Markets - Farmers Markets - www.ams.usda.gov/farmersmarketswww.ams.usda.gov/farmersmarkets

Alternative Farming Systems Info CtrAlternative Farming Systems Info Ctr

www.nal.usda.gov/afsicwww.nal.usda.gov/afsic

USDA Farmer Direct MarketingUSDA Farmer Direct Marketing

www.ams.usda.gov/directmarketingwww.ams.usda.gov/directmarketing

North American Direct Marketing Assn.North American Direct Marketing Assn.

www.familyfarms.comwww.familyfarms.com

Minorities and WomenMinorities and Women

General InformationGeneral Information Small business ownership rates for women Small business ownership rates for women

and minorities are increasing faster than and minorities are increasing faster than for white males – Still men start new for white males – Still men start new businesses at twice the rate of womenbusinesses at twice the rate of women– Women – 9.8% own businessesWomen – 9.8% own businesses

Translates to over 50% of all businessesTranslates to over 50% of all businesses– Minorities – Ranges from 5% (Blacks) to 10.4% Minorities – Ranges from 5% (Blacks) to 10.4%

(Asian)(Asian) Firm receipts average about 2/3 of all bus.Firm receipts average about 2/3 of all bus. Proprietor income averages about 50% of Proprietor income averages about 50% of

all other businessesall other businesses Firms employee fewer peopleFirms employee fewer people

Special IssuesSpecial Issues

Access to capitalAccess to capital Acceptance by business communityAcceptance by business community Acceptance by family and friendsAcceptance by family and friends Networks are smaller and more family-Networks are smaller and more family-

focusedfocused Most often in retail or service Most often in retail or service

industriesindustries– Industries with highest failure rates and Industries with highest failure rates and

lowest profitslowest profits

Barriers to Barriers to EntrepreneurshipEntrepreneurship

A lack of:A lack of:1.1. Steady stream of “want-a-be’s”Steady stream of “want-a-be’s”2.2. ““Can-do” attitude held by the Can-do” attitude held by the

entrepreneur and the communityentrepreneur and the community3.3. Coordinated, accessible, long-term Coordinated, accessible, long-term

support networksupport network4.4. Coaches and mentorsCoaches and mentors5.5. CapitalCapital6.6. Available human capitalAvailable human capital7.7. Multi-faceted healthy communityMulti-faceted healthy community8.8. Supportive regulatory environmentSupportive regulatory environment

The man who makes no The man who makes no mistakes does not usually mistakes does not usually make anything." make anything."

Edward John Phelps, American lawyer and diplomat (1822-1900)Edward John Phelps, American lawyer and diplomat (1822-1900)

"Nothing great was ever "Nothing great was ever achieved without achieved without enthusiasm."enthusiasm." Ralph Waldo EmersonRalph Waldo Emerson

HighlightsHighlights

HighlightsHighlights Entrepreneurship is an ever-continuing, Entrepreneurship is an ever-continuing,

growing trendgrowing trend Entrepreneurs contribute to their Entrepreneurs contribute to their

household and to their communityhousehold and to their community Entrepreneurship is a learned talentEntrepreneurship is a learned talent Entrepreneurs form our economic baseEntrepreneurs form our economic base Entrepreneurship allows people to remain Entrepreneurship allows people to remain

in a communityin a community Communities can encourage Communities can encourage

entrepreneurshipentrepreneurship

Entrepreneurs:Entrepreneurs:- See opportunity- See opportunity- Are innovative in developing - Are innovative in developing

that that opportunity through opportunity through

creativitycreativityand resource gatheringand resource gathering

- Seek gain while accepting risk- Seek gain while accepting riskand and uncertaintyuncertainty

One Last MythOne Last MythThe key to success is a great ideaThe key to success is a great idea

Good ideaGood idea

Great planGreat plan

Passion!Passion!

The keys are:

How Extension can help?How Extension can help?

One-on-oneOne-on-oneMentoringMentoringAdvocatingAdvocatingPartneringPartnering

Community supportCommunity supportAwareness of other programsAwareness of other programs

EducationEducation

1. Awareness of owner’s priorities 2. Comfort with subject matter

ResourcesResources Southern Rural Development CenterSouthern Rural Development Center

http://srdc.msstate.edu/http://srdc.msstate.edu/

Kansas City Federal Reserve BankKansas City Federal Reserve Bank– Center for the Study of Rural AmericaCenter for the Study of Rural America

http://www.kc.frb.org/RuralCenter/RuralMain.htmhttp://www.kc.frb.org/RuralCenter/RuralMain.htm

Rural Policy Research Institute (RUPRI)Rural Policy Research Institute (RUPRI)http://www.rupri.org/http://www.rupri.org/

Resources cont.Resources cont. AdultAdult

– Cashing In On Business OpportunitiesCashing In On Business Opportunities– NeXt Level/Fasttrac/other commercialNeXt Level/Fasttrac/other commercial– OSUOSU

Putting It All Together Putting It All Together Food Based Business: The Owner’s GuideFood Based Business: The Owner’s GuideAn Exploration of EntrepreneurshipAn Exploration of EntrepreneurshipVisual MerchandisingVisual Merchandising

– Educational programEducational program– Demonstration programDemonstration program

Mapping Your Marketing FutureMapping Your Marketing Future

– Magazines, i.e. EntrepreneurMagazines, i.e. Entrepreneur

Resources cont. Resources cont. YouthYouth

– Mini-SocietyMini-Society– Be the E: Entrepreneurship Be the E: Entrepreneurship (4-H CCS)(4-H CCS)

– http://youngbiz.com/http://youngbiz.com/– http://www.celcee.edu/ http://www.celcee.edu/ - clearinghouse- clearinghouse

GeneralGeneral– http://www.entre-ed.org/index.htmhttp://www.entre-ed.org/index.htm


Glenn MuskeGlenn MuskeMicro Business SpecialistMicro Business SpecialistOklahoma State UniversityOklahoma State University

Documents

Entrepreneurship Entrepreneurship Glenn Muske Micro Business Specialist Oklahoma State University