7 myths of entrepreneurship

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The 7 Myths of entrepreneurship

Bryan Cassady 08 www.leuvenresearch.be

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What is an Entrepreneur …

• French economist, J.B. Say (1767-1832), Entrepreneurs “shift economic resources out of an area of lower productivity into one of higher productivity and greater yield.”

• Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. “creative destruction”

• Cassady (2008), someone who has the courage, drive and talent to get something new started …


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Why is it important ?

• Critically important to society • Can be personally rewarding and lots of fun … • One of the best ways to build wealth

– Imagine a small business • built over 3 years • generating a profit of 100K per year • 40% taxes 60 K net • Sold at 10 X earnings € 600 K

– Versus a well paid job, earning 100 K / year

Question: How many years do you need to work ?

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The Answer: 33 Years…

Gross Salary 100,000

Taxes 45%

Net 55,000.00 €

Savings % 33%

Savings/Year 18,150.00 €

Years 33.05785124

Net 600,000.00 €

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Paradigms = models, patterns the basic way of perceiving, thinking valuing A dominant paradigm is seldom if ever stated explicitly; it exists unquestioned… transferred through culture and unspoken business practices William Harmon- An incomplete guide to the future

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A warm up exercise 1000

40 1000

30 1000

20 1000

10 5,000

90 % of business executives agree


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The Entrepreneurship paradigm

• It is all about big ideas • There are born Entrepreneurs • You gotta be first • It is all about money • Do something you love and the money will follow • Real entrepreneurs are risk takers • I can’t do it

Special people with big ideas, first in, taking huge risks and making tons of money

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These are comfortable,

logical business ideas and what we have been taught….

But, they are not the whole story

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It is all about big ideas

Usually it is small ideas with proven markets that work better


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90% of new business ventures fail

• Approximately 10% fail due to the product • Approximately 80% fail for lack of a market

Great product X ? Hot

OK Product X ? OK

Poor Product X X ?

Poor OK GreatMarketing Marketing Marketing


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The Facts (USA)

• Business start-ups last year: 590,000 • Venture Capital funding: 3,000 • Companies expected to go public: 300

That is 1 in 2,000 like we think about it.. But 1/3 home businesses work…

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There are born Entrepreneurs

Anyone can be a successful entrepreneur


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A non-scientific study

• A Belgian belief – It in their genes, families of entrepreneurs

• Belgian students

– 5% have run their own business

• American students – 60% have run their own business

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2 people calling home

Two shoe salesmen... find themselves in backward part of Africa. The first salesman wires back to the head office.... there is no prospect of sales.. Natives do not wear shoes. The second wires "No one wears shoes here. We can dominate the market. Send all available stock

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You gotta be first

Fast seconds win just as often

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PRODUCT INNOVATOR FOLLOWER WINNER Aspirin Bayer many companies Leader Breakfast Cereal Kelloggs Quaker Leader Diet Cola R.C. Cola Coca Cola Follower Discount retailing K-Mart Walmart Follower Disposable Diapers Chux Pampers Follower Fiber Optic Cable Corning many companies Leader Float glass Pilkington Corning Leader Instant Cameras Polaroid Kodak Leader Jet Airliners De Havilland Boeing (707) Follower Light Bulbs General Electric Sylvania Leader Microwave Oven Raytheon Samsung Follower MP3 music players Diamond Sony (&others) Follower Office P.C. Xerox IBM Follower PDA Psion, Apple Palm Follower Plain Paper Copiers Xerox Canon Not clear Pocket Calculator Bowmar Texas Instruments Follower Soft Drinks Coca Cola Pepsi LeaderVideo Games Players Atari Nintendo//Sony Followers Web browser Netscape Microsoft Follower X-Ray Scanner EMI General Electric Follower

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A classic example of a fast second Who needed a new search engine in 1998. No one Who is the leader now. Google

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It is all about money

Successful entrepreneurs: do it cause they want to


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Why do people start a new business ?

Bad news: Average Salary 39 K

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Do something you love and the money will follow

Don’t be silly. Do something you love and people will pay for…

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Magic

What you are Good at

What are you Made to do

What will people pay for

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Real entrepreneurs are risk takers

Successful entrepreneurs are risk removers


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A personal opinion…

• I think there are 2 types of entrepreneurs – Risk takers (they like the macho bit) – Risk reducers (they like getting house odds)

• A successful entrepreneur will build a strategy that increases odds of success from – 10% – to 20% – to 50%


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What is the real risk ???

• An MBA vs. an MBA in life

• 2 years doing an MBA = a good investment

• 2 years doing a business start-up – A chance of real success – You can learn more than doing an MBA

Sideline: the millionaire next door The sons and daughters of entrepreneurs… doctors, lawyers, Businesspeople… but significantly less financially successful

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I can’t do it

You probably can …


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Conclusions

• There is no guarantee that Entrepreneurship will bring you great riches

• But the ride can be a lot of fun

• Sometimes it’s fun not to know what’s going to happen

7 myths of entrepreneurship

Business

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