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
Sources of New Product / Service Ideas

• Work experience
• Domestic experience
• Hobbies and leisure interests
• Market knowledge
• Business contacts

• Gap analysis
• Import substitution
• Foreign markets
• Competition
• Customers

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
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