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STARTING A NEW BUSINESS: MYTHS AND REALITIES. A Presentation by Steven E. Phelan Director, UNLV Center for Entrepreneurship. WHO AM I?. An aussie A pracademic Professor & PhD Executive & MBA Consultant Director, UNLV Center for Entrepreneurship Teaching Research Outreach. Steve.

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starting a new business myths and realities
STARTING A NEW BUSINESS: MYTHS AND REALITIES

A Presentation by Steven E. Phelan

Director, UNLV Center for Entrepreneurship

who am i
WHO AM I?
  • An aussie
  • A pracademic
    • Professor & PhD
    • Executive & MBA
    • Consultant
  • Director, UNLV Center forEntrepreneurship
    • Teaching
    • Research
    • Outreach

Steve

why am i here
WHY AM I HERE?
  • To dispel the myths about starting a business based on recent data
  • To obtain a realistic portrait of the life of an entrepreneur
  • To help you make an informed decision about starting a business
  • To improve your chances of success
    • Successful entrepreneurs do a lot of things differently than failed entrepreneurs
sources
Sources
  • Global Entrepreneurship Monitor (GEM)
    • An annual survey of national entrepreneurial activity in 42 countries
  • Panel Study of Entrepreneurial Dynamics (PSED)
    • Longitudinal studies of people intending to start a business
      • An initial sample of 64,000 people in 1998 (PSED I)
      • A sample of 34,000 people in 2005-6 (PSED II)
  • Kauffman Firm Survey (KFS)
    • A longitudinal survey of ~5,000 businesses started in 2004
  • Scott Shane, Illusions of Entrepreneurship
slide5
Up to 40% of the US population will be self-employed at some stage in their career
  • About 1 in 10 are self-employed at any given time
  • I will never start a business.
slide6
The proportion of American households owning a business has declined
  • Self employment is only 58% of what it was in 1948 (the Wal*Mart effect?)
  • There has been significant growth in startups and small business in the last 50 years
slide7
Turks and Thais are three times as likely to be self employed
  • Richer countries have lower self employment
  • The US is the most entrepreneurial country on the planet!
slide8
Entrepreneurs select industries with the highest failure rates because they are familiar and easy to enter (e.g. personal services)
  • Entrepreneurs choose the most profitable industries
slide9
Ideas are a dime a dozen
  • Investors will laugh if you want an NDA
  • Execution is what counts
  • Build a better mousetrap and the world will beat a path to your door
slide10
The typical entrepreneur starts a business because he doesn’t like working for someone else
  • Making a living is more important than striking it rich
  • Entrepreneurs start businesses to get rich
slide11
People are statistically more likely to become self employed if they are unemployed, change jobs often, or earn less money
  • Entrepreneurs have a record of success
slide12
The typical entrepreneur is married, white, and in his forties
  • Demographics are more important than psychology
  • Pretty much anyone can become an entrepreneur
slide13
92% of owners have prior experience in the industry (10+ years on average)
  • Certain industries generate more self-employment (think plumber vs. librarian)
  • Pretty much anyone can become an entrepreneur
slide14
Most are home-based businesses with a well-known product or service
  • Most startups don’t have a business plan
  • Teams are rare (more likely to be mom and pop)
  • Most startups are innovative hi-tech teams chasing profitable opportunities
slide15
Only 1/3 of people who initiate the start-up process had positive cash flow after seven years
  • Starting a business is easy
slide16
75% of startups do not employ anyone
  • Only 10% have more than 5 employees
  • 81% of startups have no desire to grow
  • Startups create employment
slide17
The median startup required ~$25-$30K
  • You need a lot of money to start (or buy) a business
slide18
Half receive no external financing at all
  • Money tends to come from personal savings and personal debt
  • Only 1 in 12 startups received equity from family & friends
  • Entrepreneurs use “other people’s money”
slide19
VCs funded only 0.03% of all new businesses in a given year
  • 92% in IT and healthcare
  • Venture capitalists fund new ventures
slide20
Angels contribute twice as much as VCs
  • Other informal investors fund seven times as much but are less wealthy, make smaller investments, and expect lower returns
  • Angel investors fund new ventures
slide21
Around 25% fail in a year, about 50% in five years, and 70% in ten.
  • Most businesses fail within a year!
slide22
One study found entrepreneurs earn 35% less over ten years with more uncertainty and lower benefits (18% if matched)
  • They also work 13+ more hours a week on average but are more satisfied
  • You earn more working for yourself and work less
slide23
On average, business owners have 5x the net worth of non-owners
  • The wealthiest 10% have 75% of all business wealth
  • Most founders are over-optimistic about their prospects
  • Starting a business can make you wealthy
slide24
An IT firm is 600 times more likely to be in the Inc 500 than a restaurant firm
  • Survival rates vary by industry too
  • Work hard and you can be successful
secrets to success
Secrets to success
  • Get some education
  • Get experience in your industry
  • Start marketing early
  • Work with a team
  • Get external financing
  • Form a corporation
  • Enter an attractive industry
  • Seek a competitive advantage
  • Write a plan
  • Do something
  • Persevere!
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