Entrepreneurship and Small Business

1. Entrepreneurship and Small Business Chapter 13

2. Defining Entrepreneurship • The text associates ‘entrepreneurship’ with enterprise, small business and job creation but goes on to suggest that it is difficult to define the term. The following definitions are offered; • “Entrepreneurship is the dynamic process of creating increased wealth” (Hisrich, 1986) • “Entrepreneurs are people who have the ability to see and evaluate business opportunities; to gather the necessary resources to take advantage of them, and to initiate appropriate action to ensure success.” (Meredith et al, 1982)

3. Entrepreneurship • Entrepreneurs are people that notice opportunities and take the initiative to mobilize resources to make new goods and services. • Many entrepreneurs work for themselves and start new firms. • Intrapreneurs: work in large companies and contribute to innovation in the firm. • Intrapreneurs that become frustrated with the lack of opportunity at some large firms often leave and form their own business called a new venture.

4. Traits of the Entrepreneur • The most common personal traits found by O Connor and Lyons (1983) were; • The need for control and independence • The need for achievement • Calculated risk taking • Seeing money as a tool • A strong sense of social responsibility • A major emphasis on feedback on and measurement of performance • Self confidence and a positive self image

5. Innovation and Entrepreneurship • An entrepreneur must have the; • Ability to recognise an opportunity • Ability to marshal resources in response to an opportunity • Ability to undertake risk, which by its nature implies being willing to live with the consequences of failure • (Morley et al 1996)

6. Entrepreneurship and New Ventures • Characteristics of entrepreneurs--most share these common traits: • Open to experience: they are original thinkers and take risks. • Internal locus of control: they take responsibility for their own actions. • High self-esteem: they feel competent and capable. • High need for achievement: they set high goals and enjoy working toward them.

7. Entrepreneurship and Management • To become involved in an entrepreneurial firm: • Start your own business as an entrepreneur. • Work for a growing entrepreneur in their firm. • Many entrepreneurs enjoy starting a business, but not running it. • Develop a plan for the new business • Design a plan to guide the business similar to a product development plan. • The Stage-funnel concept can work well here. • Firms with no plan usually fail • Franchising allows you to purchase a plan and experience of existing firm to reduce risk.

8. Intrapreneurship • A learning organization encourages employees to act as intrapreneurs. To help, form: • Product Champions: person that takes ownership of a product from concept to market. • Skunkworks: group of intrapreneurs kept separate from the rest of the firm. • Allows workers total flexibility and innovation. • New Venture Division: allows a division to act as its own smaller company. • Rewards for Innovation: link innovation by workers to valued rewards.

9. Climate for Enterprise • Task Force on Small Business • Innovation • Irish Industrial Policy • The Culliton Report • Aim was to formulate and evaluate policy for industry and employment • Recommendations covered areas such as; barriers to achieving potential, the role of industrial promotion areas, the setting up of clusters of related industries, changes in support for indigenous industries

10. Response to the Culliton Report • Task Force established • Dept of Enterprise and Employment set up • County Enterprise Boards started • Reorganisation of IDA • Setting up of Bord Bia • Emphasis on link between enterprise and education

11. State Support for Enterprise • Government supported agencies • Forbairt • Objective is to assist Irish firms in becoming more competitive and achieve growth • FAS • Responsible for industrial training • County Enterprise Boards • 36 boards nationwide who work closely with other state bodies and local businesses

12. Small Business • The Task Force on Small Business (1994) defined a small business as one employing fifty people or less or where annual turnover is less than £3 mn. • 90% of all companies employ less than 10 people. • There is no particular agency registering small businesses so estimates have to be made of the size of the sector. • Services are the largest group of firms consisting mainly of retailing and construction firms

13. The Future for Small Business • Vast changes since 1994 Task Force on Small Business Report • Proposed enlargement of the EU • Introduction of the Euro • Labour market pressures • Transportation and infrastructural constraints • Property market values • Greater consumer spending • Inflationary pressures

14. The Small Business Sector • The generally favourable economic environment has seen the sector continue to grow and generate additional jobs • In 1999 84,000 new jobs were created by small businesses • Since 1996 the total of new jobs created by the sector is almost 235,000 • The annual number of new VAT registrations has increased by almost 50% in the period 1994 – 1998. Most of these new companies are small businesses

15. Sources of New Product / Service Ideas

16. Work experience Domestic experience Hobbies and leisure interests Market knowledge Business contacts Gap analysis Import substitution Foreign markets Competition Customers Sources of New Product / Service Ideas

17. Screening New Venture Proposals • Ideas may be assessed from two angles • The acceptability of the concept itself in the market place • Technical feasibility • P 292 in text offers a checklist to evaluate the business potential of an idea

18. Ways of Entering Business • Sole Trader • Partnership • Limited Company • Buying an existing business • Franchise • Licences • Joint ventures

19. Feasibility Studies • A feasibility study examines all the factors relevant to starting or expanding a business • Description of the business • The market • The manufacturing plant or service operation • Finance • Staff • Suppliers • Key assumptions and timetable of events

20. The Business Plan • Sets out the detail of the proposal for the establishment and management of the business • May be for a number of audiences • Should answer three main questions • Where is the company now? • Where is it going? • How is it going to get there? • P 299 in text contains the headings of a typical business plan

21. Notice Product opportunity and develop a basic business idea: What Goods/services to produce and who are the Customers/Markets? Step 1 Step 2 Conduct Strategic Analysis (SWOT) to identify: Strengths, weakness, opportunities, threats. Step 3 Is the Business opportunity feasible? Prepare a detailed Business Plan including Mission, goals, strategic and financial objectives, resources required, and a timeline of events. Step 4 Steps in Developing a Business Plan

22. Building up the Business • Kieran McGowan (former head of IDA) • Industry experience • Being market driven • Team building • Small firm experience • International experience • Single mindedness • Other factors • Reputation for quality • Good design • New product / service development

23. Reasons for Business Failure • Overtrading • Inadequate capital structure • Inadequate managerial skills • Poor research • Many if not all of these can be linked to a lack of planning

24. Summary • What is an entrepreneur? • What is an intrapreneur? • Innovation and Enterprise • Industrial policy • Small Business