Common risks entrepreneurs encounter
1) Financial Risk to personal savings, community money, family savings, loans from financial institutions, and others;
2) Career Risk may include risking the security of a job or career;
3) Family or Social Risk It takes many hours to make a venture succeed. Is family or friends supportive?
4) Emotional Risk may occur if a venture fails. Can the psychological price paid be endured?
Social Entrepreneurship
Need for social entrepreneurship:
1) Community needs are growing in size and diversity.
2) More nonprofits are competing for government and philanthropic funds.
3) Traditional forms of funding are becoming smaller and less reliable.
4) New for-profit businesses are competing with nonprofits to serve community needs.
5) Funders and donors are demanding more accountability
Social Enterprise - An organization or venture that advances its social mission through entrepreneurial, earned income strategies
Examples -
1) Maria Montessori, the first female physician in Italy, began working with children in 1906 and created a revolutionary education method that supports each individual child's unique development. Montessori schools allow each child to realize his or her full potential by fostering social skills, emotional growth and physical coordination, in addition to cognitive preparation.
2) Muhammad Yunus revolutionized economics by founding the “Grameen Bank” or "village bank," in Bangladesh in 1976 to offer "microloans" to help impoverished people attain economic self-sufficiency through self-employment, a model that has been replicated in 58 countries around the world
Characteristics of Social Entrepreneurs:
1) Ambitious: Social entrepreneurs tackle major social issues, from increasing the college enrollment rate of low-income students to fighting poverty in developing countries. These entrepreneurial leaders operate in all kinds of organizations: innovative nonprofits, social purpose ventures such as for-profit community development banks, and hybrid organizations that mix elements of nonprofit and for-profit organizations.
2) Mission Driven: Generating social value-not wealth-is the central criterion of a successful social entrepreneur. While wealth creation may be part of the process, it is not an end in itself. Promoting systemic social change is the real objective.
3) Strategic: Like business entrepreneurs, social entrepreneurs see and act upon what others miss: opportunities to improve systems, create solutions and invent new approaches that create social value. And like the best business entrepreneurs, social entrepreneurs are intensely focused and hard-driving-even relentless-in their pursuit of a social vision.
4) Resourceful: Because social entrepreneurs operate within a social context rather than the business world, they have limited access to capital and traditional market support systems. As a result, social entrepreneurs must be exceptionally skilled at mustering and mobilizing human, financial and political resources.
5) Results oriented: Ultimately, social entrepreneurs are driven to produce measurable returns. These results transform existing realities, open up new pathways for the marginalized and disadvantaged, and unlock society’s potential to effect social change.
Why business fails (10 reasons)
1) Inadequate capitalization or lack of funds
2) Lack of financial planning and review
3) Over dependence on specific individuals in the business
4) Poor market segmentation and strategy
5) Absence of standardized quality program
6) Lack of management systems
7) Lack of knowledge about the market and competition
8) Lack of vision and purpose by principles
9) Failure to establish or communicate company goals
10) Owners concentrating on the technical rather than strategic work at hand
Business Recovery Plan
1) BUSINESS BACKGROUND - Not everyone who will need to see your recovery plan will be intimately familiar with your business. Be sure to include how your business was formed, what it does (in some detail), who owns it, what your role is in the business. This portion of the plan will, of course, remain constant as you frequently update your plan.
2) CRISIS BACKGROUND - You need to acknowledge exactly what your crisis is and how it developed. If you were in charge when it happened, you need to be honest about your role in your business when the crisis started. This portion of the plan will also remain constant as you update your plan.
3) CASH CONTROL - Every business in crisis has, or will have, a cash crisis. Therefore, it will be necessary for you to take extreme measures to control and maximize cash as it flows through your business. The readers of your recovery plan will want to know how you are going to do this.
4) BUSINESS EQUILIBRIUM - This is very important to turnaround crisis management and is the key section in your business recovery plan. For the business in crisis, this refers to the condition where cash-in equals cash-out. In other words, you need to halt any further decline of your business and stop the cash hemorrhaging. This is the area that requires the most analysis and planning and also the area where the reader of your recovery plan will have the most interest.
5) REORGANIZATION - A real crisis will require a serious reorganization of employees, because you simply cannot survive doing “business as usual.” You have to eliminate those management positions that were in place while the crisis developed. You then need to push responsibility down the organization.
6) FORECAST - In all the prior sections, you told the reader of your recovery plan what you were going to do, and how you were going to do it. Now, you need to explain to them what the effect of all these changes will be. You need to present a forecast of results in the form of short-term financial pro forma.
Managing family business
Key Issues
1) Sustaining a family business relationship
2) Managing conflicts between siblings
3) Planning for succession
4) Management and Control of the family
5) Communication in a family business
Observations
1) Family business is still a business
2) The thin line between business life and family life
3) Obligation : Love for the business vs. the love for the family
4) Emotion is involved with decision making
5) Job fit for relation, not the relation fit the job
6) Non-family turnover is relatively higher than family
7) Daughters are also part of the family
8) The "Boss" may not really be the person in charge
9) Promotion may not be based on meritocracy
10) The "First Born" in a family business has little choice
11) Succession planning from the day the successor is born
12) When do successor succeeds the business, NEVER
10 mistakes a new entrepreneur makes (Barbara Poole)
1. Getting into the business for the wrong reasons - Many people decide to start a business because they have become disillusioned with their current job or have lost their position due to a layoff or termination. While the entrepreneurial route is certainly one option to consider, it is often a reaction to what has felt like a negative situation, i.e., “If I start my own thing, no one can fire me!” There are a host of other factors to consider before starting your own business. Do due diligence before you leap into the deep end.
2. Quitting your day job too soon - Starting a business can be expensive, and it is rarely profitable in the beginning. Don’t cut off your source of income until you have yourself established with a game plan for a new one.
3. Postponing incorporation - It’s tempting to simply set up shop as a sole proprietor because it’s easy, but it’s also risky. All of your personal assets are at risk and there is no line of demarcation between you and your enterprise. Invest the time and resources necessary to create a business structure that stands separate and on its own
4. Thinking you can do it all yourself - When you work for an established organization in a “regular” job, you typically have a defined role with a limited scope. People setting up a new business are often tempted to try to do it all in order to cut costs and save time. Do the things you do well and hire out the rest.
5. Not having a well-defined target market - Make sure you are clear about who you will serve and how, or else you may end up serving no one.
6. Over-promising - In starting a business, many people are so eager to find customers that they create expectations that are impossible to fulfill. Make sure you are setting expectations that you can actually deliver.
7. Emphasizing packaging over substance - There’s something exciting about getting your first set of business cards and taking a Web site live for the first time that is exhilarating. On the other hand, many people invest big dollars on things that are just not necessary in the beginning. Consider where you want to invest your resources before mounting a glitz campaign that may be more than you need.
8. Working in the business instead of on the business - Many new business owners get so knee-deep in delivering products or services that they neglect to set up the management structures and systems that are necessary for sustaining a business. Take the time to create the container in which your products and services will reside and then manage that structure.
9. Incurring too much debt - It can be tricky to determine what constitutes a reasonable debt load in a new business. But it is important to have some personal answers. What is your own risk tolerance? How much debt can you take on before you begin losing sleep at night? How much (if any) of your own funds are you able or willing to use to seed the business? It will be hard for your new enterprise to flourish if you are overwhelmed by money worries.
Letting the business consume your life - One of the best reasons for becoming an entrepreneur is to add to your quality of life. Don’t allow the business that you worked so hard to establish to leech into your personal life. Build strong boundaries that will enable you to have a life that isn’t just about your work; both you and your business will be better served.
Why people seek to be entrepreneurs?
· Make more money
· Fulfill their dreams
· Prove that they are more capable
· Need for achievement
· Independence –Be their own Boss
· Create employment opportunity for self and others
Why do people NOT TAKE UP entrepreneurship?
· Fear of the Unknown
· Threats to status and to self esteem
· Threats to established skills and competencies
· Fear of Failure
· Lack of Perceived benefits
· History and Previous custom
· Fear of looking stupid
· Stress
· Worried about money
Why one should learn entrepreneurship?
1. To stimulate new business and the economy – new jobs and opportunities
2. To move to an information society where strategic resources are information, knowledge and creativity
3. To adjust to an increasingly global, competitive economy
4. To find solutions to problems and needs
5. To improve performance
6. To help number of failed business
7. To find new ways to solve social problems
8. To inspire and enhance opportunities for women, youth and elderly
9. To accept and respond to change
10. To help shift workers from a manufacturing / industrial base to a “service oriented industry”
Traits of an entrepreneur
· Tolerance for uncertainty and change
· Ability to create the illusion of stability
· Ability to deal with the unexpected
· Attention to detail
· Desire to go against the status quo (how things have always been done)
· Creative and innovative
· Endurance
· Long-term perspective
· Optimistic
· Fun-loving
· Independent
Introduction to Entrepreneurship
Characteristics:
ü Entrepreneurship is about seeing opportunities and bringing about changes
ü Entrepreneurship is a skill - Can be learned
ü Difficult to teach – Need to practice
According to Webster dictionary, entrepreneurship is defined as "the process of organizing a commercial undertaking".
"It is identifying an opportunity and executing on that opportunity for the purpose of wealth creation.
An entrepreneur sees, evaluates and exploits opportunities, whereas a manager concentrates on the effective use of available resources to achieve optimum results".
-SM Lee KuanYew, Feb 2002
Entrepreneurship is a behavior that includes:
§ Initiative taking
§ The organizing and harnessing of social and economic factors for wealth creation
§ The acceptance of risk or failure
Why is entrepreneurship important?
§ Entrepreneurship contributes to job creation and growth. Example - Tata Steel 70,000 employee
§ Entrepreneurship is crucial to competitiveness. Example - Café coffee day, Starbuck, Coffee Bean
§ Entrepreneurship helps to unlock personal potential. Example - Air Asia - Fernandez
§ Entrepreneurship aids in societal interests. Example - Bill and Melinda Foundation
5 Myths about Entrepreneurs
Dr. Peter Strachan “The 5 Myths about Entrepreneurs
1) The Risk Taking Myth: “Most successful entrepreneurs take wild, uncalculated risks in starting their companies”
True Facts -
a. Risk is part of doing business
b. Professional risk —Most entrepreneurs are not well-established
c. Financial risk —Most entrepreneurs have few if any financial assets
d. Highest risk often comes later in the business, not at the start
e. Most risk is carried by employees, suppliers, customers
2) The High-Tech Myth: “Most successful entrepreneurs start their companies with a breakthrough invention, usually technological in nature”
True Facts - While many of us think of the technology boom and high tech start-ups, the Fortune 500 lists a variety of types of companies. Many successful new businesses found a way to market an existing product in a new fashion or to a new customer base. Think of:
a. Starbucks
b. McDonalds
c. Dell
d. Pantaloon
e. Shopper’s Stop
The key is having the right product at the right time.
3) The Expert Myth: “Most successful entrepreneurs have strong track records and years of experience in their industries”
True Facts -
a. 40% of Inc. 500 founders had no prior industry experience;
b. One-third of Inc. 500 founders were out of work when they started their companies.
Examples:
1. Dato Tony Fernandes and Air Asia
2. Steve Wozniak was an ―undistinguished‖ engineer at HP
3. Donald Trump and the Taj Casino
4. George Quek of Break Talk has no bakery qualification
4) The Strategic Vision Myth: “Most successful entrepreneurs have a well developed business plan and have researched their ideas before taking action”
True Facts -
a. Only 4% of Inc. 500 companies used any sort of system research to develop their business ideas;
b. First attempt is often not the product that eventually brings success (but developing the entrepreneurial mindset at the beginning is the most important)
5) The Venture Capital Myth: “Most successful entrepreneurs start their companies with millions in venture capital to develop their idea, buy supplies and hire employees”
True facts -
ü Only 4% of Inc. 500 companies, and less than 1% of all start-up companies in the US, used venture capital;
ü Founders of Hotmail failed to secure venture capital despite more than 20 attempts;
ü Bill Gates and Paul Allen failed to receive venture capital for Microsoft;
ü Venture capital is dominant in some industries, such as biotechnology
