Starting a new business myths and realities
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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

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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


Starting a new business myths and realities

  • 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.


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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!


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • The typical entrepreneur is married, white, and in his forties

  • Demographics are more important than psychology

  • Pretty much anyone can become an entrepreneur


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • Only 1/3 of people who initiate the start-up process had positive cash flow after seven years

  • Starting a business is easy


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • The median startup required ~$25-$30K

  • You need a lot of money to start (or buy) a business


Starting a new business myths and realities

  • 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”


Starting a new business myths and realities

  • VCs funded only 0.03% of all new businesses in a given year

  • 92% in IT and healthcare

  • Venture capitalists fund new ventures


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • Around 25% fail in a year, about 50% in five years, and 70% in ten.

  • Most businesses fail within a year!


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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


Starting a new business myths and realities

  • 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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