Management test 2 Chapter 7 review material Frink

Software entrepreneur Dan Bricklin advises that the most important thing to remember is this:

"You are not your business. On those darkest days when things aren't going so well—and trust me, you will have them—try to remember that your company's failures don't make you an awful person. Likewise, your company's successes don't make you a genius or superhuman."

The business plan

(1) helps determine the viability of your enterprise, (2) guides you as you plan and organize, and (3) helps you obtain financing. It is read by potential investors, suppliers, customers, and others

People often assume that buying a franchise is less risky than starting a business from scratch, but the evidence is

- mixed One study that followed businesses for six years found the opposite of the popular assumption: 65 percent of the franchises studied were operating at the end of the period, whereas 72 percent of independent businesses were still operating.36 - One reason may be that the franchises involved mostly a few, possibly riskier, industries. A study that compared only restaurants over a three-year period found that 43 percent of the franchises and 39 percent of independent restaurants remained in business

Common Management Challenges

1. You might not enjoy it 2. Survival is difficult 3. Growth creates new challenges 4. It's hard to delegate 5. Misuse of funds 6. Poor controls 7. Mortality and succession

The heyday of business incubators came in the

1990s, when around 700 of them were financing start-ups, mainly emphasizing technology.

small business

A business having fewer than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices.

opportunity analysis

A description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur, specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital.

business plan

A formal planning step that focuses on the entire venture and describes all the elements involved in starting it.

Building Support for Your Idea

A manager who has a new idea to capitalize on a market opportunity will need to get others in the organization to buy in or sign on. In other words, you need to build a network of allies who support and will help implement the idea

entrepreneurial venture

A new business having growth and high profitability as primary objectives.

skunkworks

A project team designated to produce a new, innovative product.

How does entrepreneurship differ from managing a small business?

A small business is often defined as having fewer than 100 employees, being independently owned and operated, not dominant in its field, and not characterized by many innovative practices. Small-business owners tend not to manage particularly aggressively, and they expect normal, moderate sales, profits, and growth.

Key Planning Elements

A successful business needs enough cash to cover start-up expenses and keep the company running during slow periods. The initial budget should cover one-time costs, such as the fee to form a corporation, and ongoing expenses such as supplies and rent for the first few months. The company's founders may start the business with their own money, or they may seek financing in the form of debt (taking out a loan from family, friends, or a bank) or equity (taking money in exchange for an ownership share in the company).

Demographic changes.

All kinds of health care organizations have sprung up to serve an aging population, from exercise studios to assisted-living facilities. One business that targets the aging American population is fitness center company, Welcyon, which provides senior-friendly low-impact cardio machines, background music at lower volumes, and some fitness classes that can be taken while seated. The service assists those who are pressed for time or have difficulty getting around

Nonfinancial Resources

Also crucial to the success of a new business are nonfi-nancial resources, including legitimacy in the minds of the public and the various ways in which other people can help. employing multiple generations

franchising

An entrepreneurial alliance between a franchisor (an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location).

Here are some areas in which Boomers can help startups achieve scalability and success:

Angel investors and advisers. Boomers can bring much needed funding and advice with regard to business plan development and marketing strategies. Partnership or executive positions. Boomers may be willing to work with founders for an equity stake in the business. This can create a win-win for the cash- starved start-up that needs experienced personnel. Talent management issues. Boomers have decades of experience dealing with talent management issues such as hiring, firing, training, compensation, and performance evaluation. This can free up the founders to focus on the core activity of the start-up.

Myth 2

Anyone can start a business. Reality—Entrepreneurs who recognize the difference between an idea and an opportunity, and who think big enough, start businesses that have a better chance of succeeding. And the easiest part is starting. What is hardest is surviving, sustaining, and building a venture so its founders can realize a harvest. Perhaps only 1 in 10 to 20 new businesses that survive five years or more results in a capital gain for the founders.

Successful Entrepreneurs Who Started in Their 20s

Apple -Steve Jobs and Steve Wozniak Facebook- Mark Zuckerberg Sun Media- Yang Lan Google -Sergey Brin and Larry Page Instagram -Kevin Systrom Microsoft -Bill Gates and Paul Allen Pinterest- Ben Sllbermann and Evan Sharp The Hufflngton Post- Arlanna Hufflngton Spotlfy -Daniel Ek Zero Waste Solutions- Shavlla Singh Wal-Mart Sam Walton

It's Hard to Delegate

As the business grows, entrepreneurs often hesitate to delegate to other people work that they are used to doing. Leadership deteriorates into micromanagement, in which managers monitor too strictly, to the minutest detail. For example, during the Internet craze, many company founders with great technical knowledge but little experience became instant experts in every phase of business, including branding and advertising.78 Turns out, they didn't know as much as they thought, and their companies crashed. Fortunately, many entrepreneurs observe the consequences of their behavior and figure out how to manage more effectively.

Here is another myth, not in the exhibit:

Being an entrepreneur is great because you can get rich quick and enjoy a lot of leisure time while your employees run the company. But the reality is much more difficult. During the start-up period, you are likely to have a lot of bad days. It's exhausting. Even if you don't have employees, you should expect communications breakdowns and other people problems with agents, vendors, distributors, family, subcontractors, lenders, and whomever.

transaction fee model

Charging fees for goods anc services.

subscription model

Charging fees for site visits.

advertising support model

Charging fees to advertise on a site. At least five successful business models have proven successful in the e-commerce market: transaction fee, advertising support, intermediary, affiliate, and subscription models.

intermediary model

Charging fees to bring buyers and sellers together.

affiliate model

Charging fees to direct site visitors to other companies' sites.

Survival is Difficult

Companies without much of a track record tend to have more trouble lining up lenders, investors, and customers. When economic conditions cool or competition heats up, a small start-up serving a niche market may have limited options for survival. Failure can be devastating.

The Excitement of Entrepreneurship

Consider these words from Jeffry Timmons, a leading entrepreneurship scholar and author: "During the past 30 years, America has unleashed the most revolutionary generation the nation has experienced since its founding in 1776. This new generation of entrepreneurs has altered permanently the economic and social structure of this nation and the world.... It will determine more than any other single impetus how the nation and the world will live, work, learn, and lead in this century and beyond."

Government initiatives and rule changes.

Deregulation spawned new airlines and trucking companies. Whenever the government tightens energy efficiency requirements, opportunities become available for entrepreneurs developing ideas for cutting energy use.

Outline of a Business Plan

EXECUTIVE SUMMARY Description of the Business Concept and the Business Opportunity and Strategy Target Market and Projections Competitive Advantages Costs Sustainability The Team The Offering THE INDUSTRY AND THE COMPANY AND ITS PRODUCT(S) OR SERVICE(S) The Industry The Company and the Concept The Product(s) or service(s) Entry and Growth Strategy MARKET RESEARCH AND Analysis Customers Market Size and Trends Competition and Competitive Edges Estimated Market Share and Sales Ongoing Market Evaluation THE ECONOMICS OF THE BUSINESS Gross and Operating Margins Profit Potential and Durability Fixed, Variable, and Semivariable Costs Months to Breakeven Months to Reach Positive Cash Flow MARKETING PLAN Overall Marketing Strategy Pricing Sales Tactics Service and Warranty Policies Advertising and Promotion Distribution DESIGN AND DEVELOPMENT PLANS Development Status and Tasks Difficulties and Risks Product Improvement and New Products Costs Proprietary Issues MANUFACTURING AND OPERATIONS PLAN Operating Cycle Geographical Location Facilities and Improvements Strategy and Plans Regulatory and Legal Issues MANAGEMENT TEAM Organization Key Management Personnel Management Compensation and Ownership Other Investors Employment and Other Agreements and Stock Option and Bonus Plans Board of Directors Other Shareholders, Rights, and Restrictions Supporting Professional Advisers and Services OVERALL SCHEDULE CRITICAL RisKS, PROBLEMS, AND ASSUMPTIONS THE FINANCIAL PLAN Actual Income Statements and Balance Sheets Pro Forma Income Statements Pro Forma Balance Sheets Pro Forma Cash Flow Analysis Breakeven Chart and Calculation Cost Control Highlights PROPOSED COMPANY OFFERING Desired Financing Offering Capitalization Use of Funds Investor's Return APPENDIXES

Entrepreneurial Orientation

Earlier in this chapter, we described the characteristics of individual entrepreneurs. To conclude the chapter, we do the same for companies: we describe how companies that are highly entrepreneurial differ from those that are not. CEOs play a crucial role in promoting entrepreneurship within large corporations

Myth 1

Entrepreneurs are born, not made. Reality—Although entrepreneurs are born with certain native intelligence, a flair for creating, and energy, these talents by themselves do not guarantee success. Adaptive entrepreneurs accumulate the relevant skills, know-how, experiences, and contacts over a period of years. The creative capacity to envision and then pursue an opportunity is earned from at least 10 or more years of experience that lead to pattern recognition.

Myth 9

Entrepreneurs are lone wolves and cannot work with others. Reality—The most successful entrepreneurs are leaders who build great teams and effective relationships working with peers, directors, investors, key customers, key suppliers, and the like.

Myth 7

Entrepreneurs experience a great deal of stress and pay a high price. Reality—Being an entrepreneur is stressful and demanding. But there is no evidence that it is any more stressful than numerous other highly demanding professional roles, and entrepreneurs find their jobs very satisfying. They have a high sense of accomplishment, are healthier, and are much less likely to retire than those who work for others.

Myth 6

Entrepreneurs work longer and harder than managers in big companies. Reality—There is no evidence that all entrepreneurs work more than their corporate counterparts. Some do, some do not. Some actually report that they work less.

Poor Controls

Entrepreneurs, in part because they are very busy, often fail to use formal control systems. One common entrepreneurial malady is an aversion to record keeping. Expenses mount, but records do not keep pace. Pricing decisions are based on intuition without adequate reference to costs. As a result, the company earns inadequate margins to support growth.

Management guru Peter Drucker offered the following advice to help family-managed businesses survive and prosper.

Family members working in the business must be at least as capable and hard-working as other employees; at least one key position should be filled by a nonfamily member; and someone outside the family and the business should help plan succession

social capital

Goodwill stemming from your social relationships; a competitive advantage in the form of relationships with other people and the image other people have of you.

Who is the Entrepreneur

Growth creates new challenges, including reluctance to delegate work to others. Funds may be put to improper use, and financial controls may be inadequate. Many entrepreneurs fall to plan well for succession. When needing or wanting new funds, initial public offerings provide an option, but they represent an important and difficult decision that must be considered carefully.

Myth 8

If an entrepreneur is talented, success will happen in a year or two. Reality—An old maxim among venture capitalists says it all: The lemons ripen in two and a half years, but the pearls take seven or eight. Rarely is a new business established solidly in less than three or four years.

summary

In Chapter 7, you learned that people become entrepreneurs for a variety of reasons. Successful entrepreneurs are innovators, but also possess management, business, and networking skills. While there is no single entrepreneurial personality, certain characteristics contribute to their success. To start a new business, it is important to monitor the current business environment and other indicators. Choosing a business idea to pursue should be based on planning, trial and error, and fit with risk preferences and personal interests. Effective planning and getting advice from experienced experts are helpful in preventing failure. Common challenges include getting started, warding off competitors, managing growth, and controlling finances. Developing and executing a comprehensive business plan will increase the chances of the venture being successful. Successful entrepreneurs develop social capital and a network of customers, partners, boards, and other talented people. Managers of large companies can encourage intrapreneurship by using skunkworks and allowing bootlegging. A portfolio of projects should be chosen carefully and funded appropriately. An entrepreneurial orientation in a company comes from encouraging independent action, innovativeness, risk taking, proactive behavior, and competitive aggressiveness.

entrepreneur

Individual who establishes a new organization without the benefit of corporate sponsorship.

bootlegging

Informal work on projects, other than those officially assigned, of employees' own choosing and initiative.

Eight out of 10 shut down following the collapse of the

Internet bubble, but the idea of nurturing new businesses persists

Describe how managers of large companies can foster entrepreneurship.

Intrapreneurs work within established companies to develop new goods or services that allow the corporation to reap the benefits of innovation. To facilitate intrapreneurship, organization's use skunkworks—special project teams designated to develop a new product—and allow bootlegging- informal efforts beyond formal job assignments in which employees pursue their own pet projects. Organization's should select projects carefully, have an ongoing portfolio of projects, and fund them appropriately. Ultimately, a true entrepreneurial orientation in a company comes from encouraging independent action, innovativeness, risk taking, proactive behavior, and competitive aggressiveness.

How is this matrix useful?

It helps entrepreneurs think about their ventures and decide whether they suit their particular objectives. It also helps identify effective and ineffective strategies.

Why Become an Entrepreneur? ( not really important just remember Jessica mah)

Jessica Mah was an entrepreneur before she even finished school. At the age of 13, she went into business using eBay to sell computer parts and templates for websites. While in college at the University of California-Berkeley, she and another student, Andy Su, founded a business they called InternshipIN, which provided information about internship opportunities. When she graduated, Mah was ready to launch another venture. With support from Y page Combinator, which provides funds and advice to selected start-ups, Mah again partnered with Su, this time founding inDinero, a company that helps small-business owners manage their money. Customers give inDinero their bank and credit card account numbers, and inDinero keeps track of transactions and analyzes where their money is going. The idea for inDinero came from Mah's own experience that for some people excited about starting a new business, working with customers and products is more exciting and easier to learn than handling money

Growth Creates New Challenges

Just one in three Inc. 500 companies keeps growing fast enough to make this list of fastest-growing companies two years running. The reason: They are facing bigger challenges, competing with bigger firms, stretching the founders' capacities, and probably burning cash. Consultant Doug Tatum calls this phase of a company's growth "no man's land." It's a difficult transition.

Peer-to-peer loans are an alternative to using a bank. Using online platforms like

Lending Club or Prosper, individual investors loan up to $35,000 to small businesses

social entrepreneurship

Leveraging resources to address social problems.

Misuse of Funds

Many unsuccessful entrepreneurs blame their failure on inadequate financial resources. Yet failure due to a lack of financial resources doesn't necessarily indicate a real lack of money; it could mean a failure to use the available money properly. A lot of start-up capital may be wasted—on expensive locations, great furniture, and fancy stationery. This problem may be more likely when a lucky entrepreneur gets a big infusion of cash from a venture capital firm or an initial offering of stock.

Musk also founded SpaceX which shuttles supplies to the International Space Station. What's next for this serial entrepreneur?

Musk plans to build a new form of transportation called a "hyperloop" connecting Los Angeles and San Francisco. He envisions people traveling through tubes at speeds greater than 700 miles per hour

Years ago, Philip Catron became disillusioned with his job as a manager at ChemLawn because he concluded that the lawn care company's reliance on pesticides contributed to illness in its employees, its customers' pets, and even in the lawns themselves. Catron left the company to start

NaturaLawn of America, based on the practice of integrated pest management, which uses natural and nontoxic products as much as possible, reducing pesticide use on lawns by 85 percent. Catron built NaturaLawn into 64 franchises worth $46 million—and helped integrated pest management become mainstream, as even his former employer, now part of TruGreen, has changed many

intrapreneurs

New venture creators working inside big companies. entrepreneur

Identify common causes of success and failure.

New ventures are inherently risky. The economic environment plays an important role in the success or failure of the business, and the entrepreneur should anticipate and be prepared to adapt in the face of changing economic conditions. How you handle a variety of common management challenges also can mean the difference between success and failure, as can the effectiveness of your planning and your ability to mobilize nonflnanclal resources, including other people who can help.

Partners

Often two people go into business together as partners. Partners can help one another access capital, spread the workload, share the risk, and share expertise

Mortality and Succession

One long-term measure of an entrepreneur's success is the fate of the venture after the founder's death. Founding entrepreneurs often fail to plan for succession. When death occurs, estate tax problems or the lack of a skilled replacement for the founder can lead to business failure. In the United States and around the world, the large majority of family-owned businesses fail before the founder's grandchildren have taken charge

social enterprise

Organization that applies business models and leverages resources in ways that address social problems.

business accelerator

Organization that provides support and advice to help young businesses grow.

Describe why people become entrepreneurs and what it takes, personally.

People become entrepreneurs because of the profit potential, the challenge, and the satisfaction they anticipate (and often receive) from participating in the process, and sometimes because they are blocked from more traditional avenues of career advancement. As shown in Exhibit 7.3 (on the next page), successful entrepreneurs are innovators, and they have good knowledge and skills in management, business, and networking. Although there is no single entrepreneurial personality, certain characteristics are helpful: commitment and determination; leadership skills; opportunity obsession; tolerance of risk, ambiguity, and uncertainty; creativity; self-reliance; the ability to adapt; and motivation to excel.

legitimacy

People's judgment of a company's acceptance, appropriateness, and desirability, generally stemming from company goals and methods that are consistent with societal values.

business incubators

Protected environments for new, small businesses.

initial public offering (IPO)

Sale to the public, for the first time, of federally registered and underwritten shares of stock in the company.

Myths about Entrepreneurship

Simply put, entrepreneurs generate new ideas and turn them into business ventures. But entrepreneurship is not simple, and it is frequently misunderstood

What about businesses whose primary focus is not e-commerce?

Start-ups and established small companies can create attractive websites that add to their professionalism, give them access to more customers, and bring them closer to suppliers, investors, and service providers.

Lifestyle and taste changes.

Start-ups have capitalized on new clothing and music trends, desire for fast food, and growing interest in sports. In recent years, more consumers want to help take care of the environment, and more businesses are concerned about showing consumers that they care, too.

Technological discoveries.

Start-ups in biotechnology, microcomputers, artificial intelligence, robotics, and nanotechnology followed technological advances. Johnson & Johnson will collaborate with Google to develop advanced robots to aid in surgeries

Building Intrapreneurship

Success in fostering a culture in which intrapreneurs flourish comes from making an intentional decision to foster entrepreneurial thinking and behavior, creating new venture teams, and changing the compensation system so that it encourages, supports, and rewards creative and innovative behaviors. in other words, building intrapreneurship derives from careful and deliberate strategy.

Commitment and determination:

Successful entrepreneurs are decisive, tenacious, disciplined, willing to sacrifice, and able to immerse themselves in their enterprises. Entrepreneurial passion61 can play an important role in all of these things.

What can we learn from the people who start their own companies and succeed? What enables entrepreneurs to succeed?

Successful entrepreneurs are innovators who also have good knowledge and skills in management, business, and networking

Two young entrepreneurs who started a highly successful business are Tony Hsieh and Nick Swinmurn. In 1999,

Swinmurn had the then-new idea to sell shoes online, but he needed money to get started. Hsieh, who at age 24 had already just sold his first start-up, agreed to take a chance on the new venture. It was a smart decision. Ten years later, Amazon purchased Zappos for $1.2 billion.

o spot opportunities, think carefully about events and trends as they unfold. Consider, for example, the following possibilities:

Technological discoveries. Demographic changes. Lifestyle and taste changes. Economic dislocation Calamities Government initiatives

So you think you have identified a business opportunity. And you have the personal drive to make it a success. Now what? Where should you begin?

The Business Plan Your excitement and intuition may convince you that you are on to something. But they might not convince anyone else. You need more thorough planning and analysis. This effort will help convince other people to get on board and help you avoid costly mistakes.

Explain how to increase your chances of success, including good business planning.

The business plan helps you think through your idea thoroughly and determine its viability. It also convinces (or fails to convince) others to participate. The plan describes the venture and its future, provides financial projections, and includes plans for marketing, manufacturing, and other business functions. The plan should describe the people involved in the venture, a full assessment of the opportunity (including customers and competitors), the environmental context (including regulatory and economic issues), and the risk (including future risks and how you intend to deal with them). Successful entrepreneurs also understand how to develop social capital, which enhances legitimacy and helps develop a network of others including customers, talented people, partners, and boards.

Networks

The entrepreneur is aided greatly by having a strong network of people. Social capital—being part of a social network and having a good reputation—helps entrepreneurs gain access to useful information, gain trust and cooperation from others, recruit employees, form successful business alliances, receive funding from venture capitalists, and become more successful.

Management Challenges

The most dangerous risk in corporate entrepreneurship is the risk of overreliance on a single project.

entrepreneurship

The pursuit of lucrative opportunities by enterprising individuals.

entrepreneurial orientation

The tendency of an organization to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services.

Top Management Teams

The top management team is another crucial resource Also, in companies that have incorporated, a board of directors improves the company's image, develops longer-term plans for expansion, supports day-to-day activities, and develops a network of information sources.

Entrepreneurial Strategy Matrix

The upper-left quadrant, high innovation/low risk, depicts ventures of truly novel ideas with little risk. As examples, the inventors of Lego building blocks and Velcro fasteners could build their products by hand at little expense. A pioneering product idea from Google might fit here if there are no current competitors and because, for a company of that size, the financial risks of new product investments can seem relatively small. In the upper-right quadrant, high innovation/high risk, novel product ideas are accompanied by high risk because the financial investments are high and the competition is great. A new drug or a new automobile would likely fall into this category. Most small-business ventures are in the low innovation/high risk cell (lower right). They are fairly conventional entries in well-established fields. New restaurants, retail shops, and commercial outfits involve high investment for the small-business entrepreneur and face direct competition from similar businesses. Finally, the low innovation/low risk category includes ventures that require minimal investment and/or face minimal competition for strong market demand. Examples are some service businesses having low start-up costs and those involving entry into small towns if there is no competitor and demand is adequate.

Entrepreneurs who fail to use their resources wisely usually make one of two mistakes:

They apply financial resources to the wrong uses, or they maintain inadequate control over their resources

Tolerance of risk, ambiguity, and uncertainty:

They are calculated risk takers and risk managers, tolerant of stress, and able to resolve problems.

Creativity, self-reliance, and ability to adapt:

They are open-minded, restless with the status quo, able to learn quickly, highly adaptable, creative, skilled at conceptualizing, and attentive to details.

Leadership:

They are self-starters, team builders, superior learners, and teachers. Communicating a vision for the future of the company—an essential component of leadership that you'll learn more about in Chapter 12—has a direct impact on venture growth

Motivation to excel:

They have a clear results orientation, set high but realistic goals, have a strong drive to achieve, know their own weaknesses and strengths, and focus on what can be done rather than on the reasons things can't be done.

Opportunity obsession:

They have an intimate knowledge of customers' needs, are market driven, and are obsessed with value creation and enhancement.

The next frontiers for entrepreneurship—where do they lie?

Throughout history, aspiring entrepreneurs have asked this question. The editors of Entrepreneur magazine recently identified opportunities arising from new technology and changing consumer tastes.

Opportunity Analysis

What market need does my idea fill? What personal observations have I experienced or recorded with regard to that market need? What social condition underlies this market need? What market research data can be marshaled to describe this market need? What patents might be available to fulfill this need? What competition exists in this market? How would I describe the behavior of this competition? What does the international market look like? What does the international competition look like? Where is the money to be made in this activity?

Discuss common management challenges.

When new businesses fall, the causes often can be traced to some common challenges that entrepreneurs face and must manage well. You might not enjoy the entrepreneurial process. Survival—including getting started and fending off competitors—is difficult.

Advisory Boards

Whether or not the company has a formal board of directors, entrepreneurs can assemble a group of people willing to serve as an advisory board. Board members with business experience can help an entrepreneur learn basics such as how to do cash flow analysis; identify needed strategic changes; and build relationships with bankers, accountants, and attorneys.

The opportunity should provide a competitive advantage that can be defended. Customers are the focus here:

Who is the customer? How does the customer make decisions? How will the product be priced? How will the venture reach all customer segments? How much does it cost to acquire and support a customer and to produce and deliver the product? How easy or difficult is it to retain a customer?

Summarize how to assess opportunities to start new businesses.

You should always be on the lookout for new ideas, monitoring the current business environment and other indicators of opportunity. Franchising offers an interesting opportunity, and the potential of the internet is being tapped (after entrepreneurs learned some tough lessons from the dot- bomb era). Trial and error and preparation play important roles. Assessing the business concept on the basis of how innovative and risky it is, combined with your personal interests and tendencies, will also help you make good choices. Ideas should be carefully assessed via opportunity analysis and a thorough business plan.

Selling the Plan

Your goal is to get investors to support the plan, so the elements of a great plan, as just described, are essential. It's also important whom you decide to try to convince to back your plan.

Swinmurn has moved on, but Hsieh remains at the helm of the company as the CEO of

Zappos.com.

The opportunity should provide

a competitive advantage that can be defended.

Regarding smallness, the odds of surviving improve if the venture reaches

a critical mass of at least 10 or 20 people, has revenues of $2 million or $3 million, and is pursuing opportunities with growth potential

The first formal planning step is to do an opportunity analysis. An opportunity analysis includes

a description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur (you), a specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital

Promoters have

a different set of marketing and selling skills—useful for entrepreneurs, but those skills can be hired, whereas innovativeness and business management skills remain the essential combination for successful entrepreneurs.

Finally, you should get the blessing of relevant higher-level officials. This usually involves

a formal presentation. You will need to guarantee the project's technical and political feasibility. Higher management's endorsement of the project and promises of resources help convert potential supporters into an enthusiastic team. At this point, you can go back to your boss and make specific plans for going ahead with the project. Along the way, expect resistance and frustration—and use passion and persistence, as well as business logic, to persuade others to get on board.

Social capital provides

a lasting source of competitive advantage

Although some people think success with a franchise is a no-brainer, would-be franchisees have

a lot to consider

To be successful, partners need to

acknowledge one another's talents, let each other do what they do best, communicate honestly, and listen to one another. Partners also must learn to trust each other by making and keeping agreements. If they must break an agreement, it is crucial that they give early notice and clean up after their mistakes.

Business incubators hatch new businesses. Once a young business begins gaining a foothold and establishing itself, business accelerators can provide

additional support and advice. These still-young firms are more mature but still in their formative years, and they now face the challenges of sustaining growth and achieving their full market potential

Entrepreneurship occurs when

an enterprising individual pursues a lucrative opportunity. To be an entrepreneur is to initiate and build an organization rather than being only a passive part of one.

Although good economic times may make it easier to start a company and to survive, bad times can offer

an opportunity to expand

websites using the subscription model charge a monthly or

annual fee for site visits or access to site content. Newspapers and magazines are good examples.

. For many astute investors, the people

are the most important variable, more important even than the idea.

Manager-administrators may be great at ensuring efficient operations but

aren't necessarily innovators.

Risk taking comes from a willingness to commit significant resources, and perhaps borrow heavily, to venture into the unknown. The tendency to take risks can be

assessed by considering whether people are bold or cautious, whether they require high levels of certainty before taking or allowing action, and whether they tend to follow tried-and-true paths.

Entrepreneurial companies can explore domains that big companies

avoid and introduce goods or services that capture the market because they are simpler, cheaper, more accessible, or more convenient.

So you might place your new venture idea in the appropriate cell and determine whether that cell is the one in which you would prefer to operate. If it is, the venture is one that perhaps should

be pursued, pending fuller analysis. If it is not, you can reject the idea or take steps to move it toward a different cell.

Many now-great companies had early failures. But the founders persisted; they

believed in themselves and in their dreams of building great organizations. Be prepared to kill or revise an idea, but never give up on your company—this has been a prescription for success for many great entrepreneurs and business leaders. Think about Sony, Disney, Hewlett-Packard, Procter & Gamble, IBM, and Walmart: their founders' greatest achievements—their greatest ideas—are their organizations

The need to provide a nurturing environment for fledgling enterprises led to the creation of

business incubators.

the Federal Trade Commission investigates complaints of deceptive claims by franchisors and publishes information about those cases. Take your time in investigating

business opportunities, consulting with an accountant or lawyer who has experience.

Importantly, the plan should make clear that you know that the context inevitably will

change, forecast how the changes will affect the business, and describe how you will deal with the changes.

In the transaction fee model, companies

charge a fee for goods or services. Amazon.com and online travel agents are prime examples. In the advertising support model, advertisers pay the site operator to gain access to the demographic group that visits the operator's site.

Executing IPOs and other approaches to acquiring capital are

complex, legalistic, and beyond the scope of this chapter.

The risk must be understood and addressed as fully as possible. The future is always uncertain, and the elements described in the plan will change over time. Although you cannot predict the future, you must

contemplate head-on the possibilities of key people page leaving, interest rates changing, a key customer leaving, or a powerful competitor responding ferociously. Then describe what you will do to prevent, avoid, or cope with such possibilities. You should also speak to the end of the process: how to get money out of the business eventually. Will you go public? Will you sell or liquidate? What are the various possibilities for investors to realize their ultimate gains?

The Internet is a business frontier that

continues to expand. With Internet commerce, as with any start-up, entrepreneurs need sound business models and practices

Social entrepreneurship is not charity, and it is different from

corporate social responsibility (CSR), CSR is not necessarily practiced with profit as a guiding principle, and corporations often relegate it to a side activity.

Who is the Entrepreneur?

creativity and innovation is higher for inventors than promoters same shit for entr. vs manager

It is also essential to consider the competition fully. The plan must identify

current competitors and their strengths and weaknesses, predict how they will respond to the new venture, indicate how the new venture will respond to the competitors' responses, identify future potential competitors, and consider how to collaborate with or face off against actual or potential competitors.

Successful entrepreneurs are realistic about risk. They anticipate difficulties and

cushion their business to help it weather setbacks

Companies can move much more quickly than in the past and save money on activities including

customer service/support, technical support, data retrieval, public relations, investor relations, selling, requests for product literature, and purchasing. Setting up shop online costs less than it ever did.

Social entrepreneurship has been around for

decades, but is surging in popularity and impact and as a focus for academic research

Boomers can empower the founders and other employees to focus on

developing and improving products, sales and marketing (traditional and social media) to Millennial and Gen X customers

The entrepreneurial process involves

discovering, evaluating, and capitalizing on opportunities to create new and future goods and services

In the beginning, entrepreneurs keep their business afloat with

dogged determination to win customers and keep them happy. They work long hours at low pay, deliver great service, and get good word-of-mouth advertising, and their business grows. When keeping up with all the work becomes physically impossible, entrepreneurs feel they need to bring in help.

The intermediary model has

eBay as the premier example, bringing buyers and sellers together and charging a commission for each sale.

Another silver lining in difficult economic times is that it's

easier to recruit talent.

social entrepreneurship fully incorporates social as well as

economic value into mainstream thinking and decision making. It provides dual, shared value: creating economic value plus social or societal benefit simultaneously

Bootlegging refers to informal efforts—as opposed to official job assignments—in which

employees work to create new products and processes of their own choosing and initiative. Informal can mean secretive, such as when a bootlegger believes the company or the boss will frown on those activities. But companies should tolerate some bootlegging, and some even encourage it. To a limited extent, they allow people freedom to pursue pet projects without asking what they are or monitoring progress, figuring bootlegging will lead to some lost time but also to learning and to some profitable innovations.

The people should be

energetic and have skills and expertise directly relevant to the venture.

Entrepreneurial orientation is the tendency of an organization to

engage in activities designed to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services.

What makes a firm entrepreneurial is its

engagement in an effective combination of independent action, innovativeness, risk taking, proactiveness, and competitive aggressiveness

Entrepreneurial orientation should

enhance the likelihood of success and may be particularly important for conducting business internationally

Entrepreneurs start their own firms because of the challenge, the profit potential, and the

enormous satisfaction they hope lie ahead. People starting their own businesses are seeking a better quality of life than they might have at big companies. They seek independence and a feeling of being part of the action. They feel tremendous satisfaction in building something from nothing, seeing it succeed, and watching the market embrace their ideas and products.

The opportunity analysis, or opportunity assessment plan, focuses on the opportunity, not the

entire venture. It provides the basis for making a decision on whether to act.

the opposite profile—too many constraints on action, business as usual, extreme caution, passivity, and a lack of competitive fire—will undermine

entrepreneurial activities. And without entrepreneurship, how would firms survive and thrive in a constantly changing competitive environment? Thus management can create environments that foster more entrepreneurship

Franchising is an

entrepreneurial alliance between two organizations: the franchisor and the franchisee

Today's concern for sustainability presents a tremendous variety of opportunities to

entrepreneurs who care about the environment.

Immigrants also may find conventional paths to economic success closed to them and turn to

entrepreneurship

Estimated failure rates for start-ups vary. Most indicate that failure is more the rule than the

exception.

Disadvantages of going public include the

expense, time, and effort involved; the tendency to become more interested in the stock price and capital gains than in running the company properly; and the creation of a long-term relationship with an investment banking firm that won't necessarily always be a good one

Entrepreneurs spot, create, and

exploit opportunities in a variety of ways

Economic cycles can quickly change

favorable conditions into downturns.

View the plan as a way for you to

figure out how to reduce risk, maximize reward, and convince others that you understand the entire new venture process. Don't put together a plan built on naïveté or overconfidence or one that cleverly hides major flaws. You might not fool others, and you certainly would be fooling yourself.

Many entrepreneurs prefer to avoid

going public, feeling they'll lose control if they do.

Many entrepreneurs and observers say that in contemplating your business, you must start with a great idea. A great product, a viable market, and

good timing are essential ingredients in any recipe for success.

Under these circumstances, raising money to start a business can be one of the entrepreneur's

greatest challenges. Since the Great Recession, some entrepreneurs and small-business owners have had a difficult time convincing banks to loan them funds

Other founders pursue slow growth. Jason Fried, cofounder of Basecamp (formerly known as 37signals), refuses to

grow so fast that the workload and stress would push employees to the point of quitting: "I like the people who work here too much. I don't want them to burn out." With a relatively small staff of 43 people, Basecamp is successful with nearly 15 million individual and 7,000 company subscribers

In contrast, an entrepreneurial venture has

growth and high profitability as primary objectives. Entrepreneurs manage aggressively and develop innovative strategies, practices, and products. They and their financial backers usually seek rapid growth, immediate and high profits, and sometimes a quick sellout with large capital gains.

Combining social and commercial goals isn't new; consider

hospitals, universities, and arts organizations

In a three-year study tracking business start-ups, the likelihood that a company would succeed at selling products, hiring employees, and attracting investors depended most on

how skillfully entrepreneurs demonstrated that their business was legitimate

Large corporations are more than passive bystanders in the entrepreneurial explosion. Even established companies try to find and pursue new and profitable ideas—and they need

in-house entrepreneurs (sometimes called intrapreneurs) to do so.

two primary sources of new venture creation:

independent entrepreneurship and intrapreneurship. Entrepreneurs are individuals who establish a new organization without the benefit of corporate support. Intrapreneurs are new venture creators working inside big companies; they are corporate entrepreneurs, using their company's resources to build a profitable line of business based on a fresh new idea

To understand further the factors that influence success and failure, we'll consider risk, the economic environment, various management-related hazards, and

initial public stock offerings (IPOs).

ventures along two dimensions:

innovation and risk. The new venture may involve high or low levels of innovation or the creation of something new and different. It can also be characterized by low or high risk.

Entrepreneurship is inherently about

innovation—creating a new venture where one didn't exist before.

Creating value

is a central objective of entrepreneurship, just as it is in strategic management. Wealth may be an entrepreneur's ultimate goal, but it won't come without providing value for other individuals, organizations, and/or society

Finally, competitive aggressiveness is the tendency of the firm to challenge competitors directly and intensely to achieve entry or improve its position. In other words,

it is a competitive tendency to outperform one's rivals in the marketplace. This might take the form of striking fast to beat competitors to the punch, to tackle them head-to-head, and to analyze and target competitors' weaknesses.

A business is legitimate if

its goals and methods are consistent with societal values

The business plan describes the venture and

its market, strategies, and future directions. It often has functional plans for marketing, finance, manufacturing, and human resources.

New companies are relatively unknown and need to

learn how to be better than established competitors at something that customers value.

An important resource for the new venture is

legitimacy—people's judgment of a company's acceptance, appropriateness, and desirability

Social entrepreneurship has been defined in many ways, but most fundamentally it refers to

leveraging resources to address social problems.

failing to foster intrapreneurship may represent a subtler but greater risk than encouraging it. The organization that resists entrepreneurial initiative may

lose its ability to adapt when conditions dictate change.

Incubators offer benefits such as

low rents and shared costs. Shared staff costs, such as for receptionists and secretaries, avoid the expense of a full-time employee but still provide convenient access to services. The staff manager is usually an experienced businessperson or consultant who advises the new business owners.

They have built companies, thrived personally, created jobs, and

made positive contributions to their communities through their businesses. Or they're just starting out.

Success is a function not only of personal approaches but also of

making good choices about the business you start

If you are contemplating a franchise, consider its

market presence (local, regional, or national), market share and profit margins, national programs for marketing and purchasing, the nature of the business, including required training and degree of field support, terms of the license agreement (e.g., 20 years with automatic renewal versus less than 10 years or no renewal), capital required, and franchise fees and royalties

Partnerships are not always

marriages made in heaven

One of the best-known examples of social entrepreneurship is the Nobel Prize-winning work of Dr. Muhammad Yunus, formerly of Grameen Bank, which began helping women in South Asia obtain

microloans

Many entrepreneurs want passive investors who will give them money and let them do what they want. Doctors and dentists generally fit this image. Professional venture capitalists do not—they demand

more control and more of the returns. But when a business goes wrong—and chances are, it will—nonprofessional investors are less helpful and less likely to advance more (needed) money.

Family members who are mediocre performers are resented by others; outsiders can be

more objective and contribute expertise the family might not have. Issues of management succession are often the most difficult of all, causing serious conflict and possible breakup of the firm.

Growth seems to be a consuming goal for

most entrepreneurs. But some company founders reach the size where they're happy and don't want to grow any further. Reaching a golden mean is possible.

Most business plans devote so much attention to financial projections that they

neglect other important information—information that matters greatly to astute investors. In fact, financial projections tend to be overly optimistic. Investors know this and discount the figures.

You probably will pay close attention to costs at the beginning, but success sometimes brings

neglect. Don't fall into that trap.

Start-ups have at least two major liabilities:

newness and smallness.

To be proactive is to act in anticipation of future problems and opportunities. A proactive firm changes the competitive landscape;

other firms merely react. Proactive firms are forward thinking and fast to act and are leaders rather than followers. Similarly, some individuals are more likely to be proactive, to shape and create their own environments, than others who more passively cope with the situations in which they find themselves Proactive firms encourage and allow individuals and teams to be proactive. nah shit

One fascinating opportunity for entrepreneurs is

outer space. Historically, the space market was driven by the government and was dominated by big defense contractors such as Boeing and Lockheed Martin. But now, with demand for satellite launches and potential profits skyrocketing, smaller entrepreneurs are entering the field

When the market confers legitimacy, it helps

overcome the liability of newness that creates a high percentage of new venture failure

Many companies fail while awaiting the completion of one large, innovative project.110 The successful entrepreneurial organization avoids

overcommitment to a single project and relies on its entrepreneurial spirit to produce at least one winner from among several projects.

With the affiliate model, sites

pay commissions to other sites to drive business to their own sites. ex) Zazzle.com, Spreadshirt. com, and CafePress.com are variations on this model. They sell custom-decorated gift items such as mugs and T-shirts. Designers are the affiliates; they choose basic, undecorated products (such as a plain shirt) and add their own designs, creating the customized products offered to consumers

The self-employed love the entrepreneurial process, and they report the highest levels of

pride, satisfaction, and income. Importantly, entrepreneurship is not about the privileged descendants of the Rockefellers and the Vanderbilts—it provides opportunity and upward mobility for anyone who performs well

Skunkworks are project teams designated to

produce a new product. A team is formed with a specific goal within a specified time frame. A respected person is chosen to be manager of the skunkworks. In this approach to corporate innovation, risk takers are not punished for taking risks and failing—their former jobs are held for them. The risk takers also have the opportunity to earn large rewards.

. Business incubators, often located in industrial parks or abandoned factories, are

protected environments for new, small businesses.

Organization's also court failure when they spread their entrepreneurial efforts over

r too many projects. If there are many projects, each effort may be too small in scale. Managers will consider the projects unattractive because of their small size. Or those recruited to manage the projects may have difficulty building power and status within the organization.

Sometimes companies reach a point at which the owners want to go public. Initial public stock offerings (IPOs) offer a way to

raise capital through federally registered and underwritten sales of shares in the company.84 You need lawyers and accountants who know current regulations.

The reasons for going public include

raising more capital, reducing debt or improving the balance sheet and enhancing net worth, pursuing otherwise unaffordable opportunities, and improving credibility with customers and other stakeholders—you're in the big leagues now

In turn, the prospects and the capital increase the

rate of business formation. Under favorable conditions, many aspiring entrepreneurs find early success. But economic cycles can quickly change favorable conditions into downturns. To succeed, entrepreneurs must have the foresight and talent to survive when the environment becomes more hostile.

The failure rate is high for certain businesses such as

restaurants and lower for successful franchises

In addition, rising costs for health care and health insurance create opportunities for entrepreneurs with ideas for

restraining those costs.

page 219During the heady days of the Internet rush, many entrepreneurs and investors thought

revenues and profits were unimportant and all that mattered was to attract visitors to their websites (capture eyeballs). But you need to watch costs carefully, and you want to break even and achieve profitability as soon as possible

The hazards in intrapreneurship, then, are related to

scale. One large project is a threat, as are too many underfunded projects. But a carefully managed approach to this strategically important process will upgrade an organization's chances for long-term survival and success.

Two common approaches used to stimulate intrapreneurial activity are

skunkworks and bootlegging.

Overhype? Well, partly, because the rate of new business formation may be

slowing down. Given that 99 percent of companies in the United States are small businesses, a slowdown could lower employment rates

In the United States in the quarter century since 1980, more than 95 percent of the wealth was created by entrepreneurs.12 It's been estimated that since World War II,

small entrepreneurial firms have generated 95 percent of all radical innovation in the United States. The Small Business Administration has found that in states with more small-business start-ups, statewide economies tend to grow faster, and employment levels tend to be higher than in states with less entrepreneurship

Changes have been coming fast in the health care sector in the United States, and where there is change,

smart entrepreneurs spot opportunities. Driven by advances in technology coupled with incentives in the Affordable Care Act, health care providers have been digitizing their data for patient care, medication management, and treatment outcomes—a trend that yields opportunities for hardware and software businesses that understand the needs of these clients. ( dads comp.)

It does so by using market-based methods. organizations that do this are social enterprises. Social entrepreneurship creates

social value by stimulating social change or meeting social needs

Success or failure lies ahead for entrepreneurs starting their own companies as well as for those

starting new businesses within bigger corporations. Entrepreneurs succeed or fail in private, public, and not-for-profit sectors; in nations at all stages of development; and in all nations, regardless of their politics

Then the business plan describes all the elements involved in

starting the new venture.

Entrepreneurs can stabilize their companies' size, but they

still have to keep a high-value business model and provide great customer service.

The matrix also can help entrepreneurs remember a useful point:

successful companies do not always require a cutting-edge technology or an exciting new product. Even companies offering the most mundane products—the type that might reside in the lower-left cell—can gain competitive advantage by doing basic things differently from and better than competitors.

the Cuban community in Miami has produced many

successful entrepreneurs, as has the Vietnamese community throughout the United States. Sometimes the immigrant's experience gives him or her useful knowledge about foreign suppliers or markets that present an attractive business opportunity. Elon Musk grew up in Pretoria, South Africa. At age 20, he immigrated to the United States to study at the University of Pennsylvania. After graduation, Musk cofounded an online payments company, X.com (renamed PayPal), acquired for $1.5 billion by eBay.

Economic dislocations,

such as booms or failures. Rising oil prices spurred a variety of developments related to alternative energy or energy efficiency.

Calamities

such as wars and natural disasters. The terrorist attacks of September 2001 spurred concern about security, and entrepreneurs today are still pursuing ideas to help government agencies prevent future attacks. Destructive hurricanes, floods, and tornadoes raised awareness of the importance of preparing for emergencies.

To allow independent action is to grant to individuals and teams the freedom to exercise their creativity, champion promising ideas, and carry them through to completion. Innovativeness requires the firm to

support new ideas, experimentation, and creative processes that can lead to new products or processes; it requires a willingness to depart from existing practices and venture beyond the status quo.

Next, horse trading begins. You can offer promises of payoffs from the project in return for

support, time, money, and other resources that peers and others contribute.

The environmental context should be a favorable one from regulatory and economic perspectives. Such factors as

tax policies, rules about raising capital, interest rates, inflation, and exchange rates will affect the viability of the new venture. The context can make it easier or harder to get backing and to succeed.

Even in high-growth companies, great numbers can mask brewing problems. In the absence of controls,

the business veers out of control.

Entrepreneurial activity stems from

the economic environment as well as the behavior of individuals. For example, money is a critical resource for all new businesses. Increases in the money supply and the supply of bank loans, real economic growth, and improved stock market performance lead to both improved prospects and increased sources of capital.

people tend to think of new, young ventures when they consider entrepreneurship, really it is an activity that should contribute to mature organizations as well. Entrepreneurship is vitally important across

the entire life cycle of an organization

If you need to build support for a project idea,

the first step involves clearing the investment with your immediate boss or bosses. At this stage, you explain the idea and seek approval to look for wider support

Many great organizations have been built on a different kind of idea:

the founder's desire to build a great organization rather than to offer a particular product

Until recently, crowdfunding was mostly limited to small contributions from people who gave in exchange for a company-provided experience, discount, or product sample;

the funders don't receive equity in the business. The main reason is that the Securities and Exchange Commission, which regulates investing, needs to ensure that investors on these sites have the same protections available to traditional investors. In 2012, however, Congress passed the lumpstart Our Business Startups Act (IOBS Act), which makes it easier for start-ups to receive funding from online investors (crowdfunding) and to go public. Early results are promising. In 2014, the number of IPOs increased by 70 percent over the previous year and high-tech company IPOs are expected to reach their highest level in over 10 years

The franchisor is

the innovator who has created at least one successful store and seeks partners to operate the same concept in other local markets.

not all social problems can be solved by entrepreneurial solutions. But pursuing the dual goal of both economic and social value may be developing as

the new norm, with positive social outcomes as key to long-term success

Typically, start-ups get most of their money from

the owners, their families, and loans and credit lines from banks. Other kinds of investors, such as venture capital firms, generate a lot of publicity for splashy deals but provide a very small share of start-up funds

In addition to the numbers, the best plans convey—and make certain that the entrepreneurs have carefully thought through—five key factors:

the people, the opportunity, the competition, the context, and risk and reward

Entrepreneurs should carefully consider the five key factors when developing a business plan:

the people, the opportunity, the competition, the context, and risk and reward. Typically, financial projections dominate the plan while these other important factors are overlooked or undervalued.

Risk refers primarily to

the probability of major financial loss. But it also is more than that; it is psychological risk as perceived by the entrepreneur, including risk to reputation and ego

In the advertising support model, advertisers pay

the site operator to gain access to the demographic group that visits the operator's site

inventors may be highly creative but often lack

the skills to turn their ideas into a successful business

The higher risk/return tradeoffs are in other cells, especially

the upper right.

Just as the Internet has transformed every other aspect of business, it is poised to remake the challenge of raising start-up money. This trend started with

the use of social media tools to link would-be entrepreneurs with people who want to make great ideas happen. At crowdfunding websites, such as AngelList, Crowdfunder.com, FundersClub, and Kickstarter, the entrepreneurs post their ideas, and anyone can donate to the cause.

Recall from Chapter 3 that creativity spawns good new ideas, but innovation requires actually Implementing those ideas so

they become realities. If you work in an organization and have a good idea, you must convince other people to get on board.

People also start their own companies when

they see their progress or ideas blocked at big corporations. When people are laid off, they often try to start businesses of their own. And when employed people believe they will not receive a promotion or are frustrated by bureaucracy or other features of corporate life, they may quit and become entrepreneurs.

Entrepreneurs need to

think through their business idea carefully to help ensure its success. We discuss here the importance of good planning and a variety of resources.

Entrepreneurial orientation is determined by five tendencies:

to allow independent action, innovate, take risks, be proactive, and be competitively aggressive

Sometimes an economic slowdown provides a necessary alarm, warning business owners

to pay attention to controls

The lower-left cell is likely to have relatively low payoffs but

to provide more security

Sophisticated investors have seen sinking ships before and know how to help. They are more likely

to solve problems, provide more money, and navigate financial and legal waters.

Legitimacy helps a firm acquire other resources such as

top managers, good employees, financial resources, and government support.

The powerful potential of big data to improve decision making is opening up

tremendous opportunities for businesses that can help their clients collect, store, manage, and analyze data. Sectors and product categories that have recently enjoyed huge growth are health care, education, and, of course, mobile apps

Incubators often are associated with

universities, which provide technical and business services for the new companies.

Blinded by the light of growing sales, many entrepreneurs fail to maintain

vigilance over other aspects of the business.

Opportunities exist to make substantial positive impact on

virtually every societal need and to make a profit doing so. Profit is likely to make societal value creation more sustainable over the long run.

You can generate legitimacy by

visibly conforming to rules and expectations created by governments, credentialing associations, and professional organization's; by visibly endorsing widely held values; and by visibly practicing widely held beliefs

Higher executives often

want evidence that the project is backed by your peers before committing to it. This involves making cheerleaders—people who will support the manager before formal approval from higher levels.

For the franchisor, the opportunity is

wealth creation through growth. The partnership is manifest in a trademark or brand, and together the partners' mission is to maintain and build the brand.

For the franchisee, the opportunity is

wealth creation via a proven (but not failureproof) business concept, with the added advantage of the franchisor's expertise

Many people assume that there is an entrepreneurial personality. No single personality type predicts entrepreneurial success, but

you are more likely to succeed as an entrepreneur if you exhibit certain characteristics: 1. commitment and determination 2. leadership 3. opportunity obsession 4. tolerance of risk, ambiguity, and uncertainty 5. creativity, self-reliance, and ability to adapt 6. motivation to excel

The real, more complete story of entrepreneurship is not about the famous people it's mostly about people you've probably never heard of. Often it's about

young people, and definitely it's about people of all ages and ethnic groups

myth 3

—Entrepreneurs are gamblers. Reality—Successful entrepreneurs take very careful, calculated risks. They try to influence the odds, often by getting others to share risk with them and by avoiding or minimizing risks if they have the choice. Often they slice up the risk into smaller, quite digestible pieces; only then do they commit the time or resources to determine whether that piece will work.

Myth 5

—Entrepreneurs are their own bosses and completely independent. Reality—Entrepreneurs are far from independent and have to serve many constituencies, including partners, investors, customers, suppliers, creditors, employees, families, and those involved in social and community obligations. Entrepreneurs, however, can make free choices of whether, when, and what they care to respond to.

Myth 4

—Entrepreneurs want the whole show to themselves. Reality—Owning and running the whole show effectively puts a ceiling on growth. Solo entrepreneurs usually make a living. It is extremely difficult to grow a higher-potential venture by working single-handedly. Higher-potential entrepreneurs build a team, an organization, and a company.

Myth 10

—Unless you attained 600 or higher on your GMATs, you'll never be a successful entrepreneur. Reality—Entrepreneurial IQ is a unique combination of creativity, motivation, integrity, leadership, team building, analytical ability, and ability to deal with ambiguity and adversity.