It All Starts with an Idea

EntrepreneursA person who has an idea and takes on the risk of bringing the concept to market. have started all different kinds of businesses from overnight shipping to electronics, music, skin-care products, to retail stores, because each saw an unmet need in the market. Fred Smith started FedEx in 1971 based on a paper he wrote for a Yale University economics class and used his $4 million to start the company.Funding Universe, http://www.fundinguniverse.com/company-histories/FedEx-Corporation-Company-History.html (accessed September 21, 2009). Sam Walton founded Wal-Mart in 1962 because he was convinced that Americans wanted a new type of store, a discount store, so he and his wife put up 95 percent of the money to build the first Wal-Mart store in Rodgers, Arizona.Wal-Mart Stores, Inc., About Us, http://walmartstores.com/AboutUs/297.aspx (accessed September 21, 2009). In 1930, Colonel Harland Sanders started cooking for weary travelers who stopped by his gas station; they ate at his own dining table because he didn’t have a restaurant.“Colonel Harland Sanders: From Young Cook to KFC’s Famous Colonel,” KFC.com, http://www.kfc.com/about/colonel.asp (accessed January 3, 2010). William Hewlett and David Packard decided to start a business and “make a run for it themselves” in 1939; their first product was an audio oscillator, an electronic instrument used to test sound equipment. They decided the name of their company on the toss of a coin.HP, “HP Timeline—1930s,” http://www.hp.com/hpinfo/abouthp/histnfacts/timeline/hist_30s.html (accessed September 21, 2009). Jay-Z saw hip-hop music as a way to get out of the projects in Brooklyn and parlayed his passion and business prowess into a net worth of over $350 million. He is CEO of Def Jam Recordings and Roc-a-Fella Records, part-owner of the New Jersey Nets, and co-owner of the 40/40 Club, among other things.Black Entrepreneur Profile, “Shawn ‘Jay Z’ Carter,” http://www.blackentrepreneurprofile.com/profile-full/article/shawn-jay-z-carter/ (accessed September 21, 2009). Estée Lauder started selling creams that were created by her uncle and founded Estée Lauder in 1946 “with four products and the belief that every woman can be beautiful.”“Famous Women Entrepreneurs,” About.com, http://entrepreneurs.about.com/ (accessed September 21, 2009).^,Estée Lauder, “About Estée Lauder,” http://www.esteelauder.com/about/index.tmpl (accessed September 21, 2009). Walt Disney, a cartoonist, saw the opportunity to entertain as his driving force when he founded Walt Disney Company in 1923.The Walt Disney Company, “Corporate Information,” http://corporate.disney.go.com/corporate/overview.html (accessed September 21, 2009). His passion for his craft led to the creation of the company when he said, “I am interested in entertaining people, in bringing pleasure, particularly laughter, to others, rather than being concerned with ‘expressing’ myself with obscure creative impressions.”“Quotes,” JustDisney.com, http://www.justdisney.com/walt_disney/quotes/quotes01.html (accessed September 21, 2009).

EntrepreneurshipStarting a new concept as a result of an idea that fills a need and taking the risk to bring the idea to market. is about helping people see the benefit of a new way of doing things; it’s about having an idea and having the passion and perseverance to make it come alive. What sets an entrepreneur apart from any other businessperson is that fact that she is willing to assume risk to make a profit.“What Is an Entrepreneur?” ZeroMillion.com, http://www.zeromillion.com/business/starting/entrepreneur.html (accessed September 21, 2009). An entrepreneur is not only open to new ways of thinking and of doing things, but he also has the vision, drive, energy, and optimism to bring an idea from concept to reality. Generally, an entrepreneur is someone who says, “There’s a better way, and I will find it.” Entrepreneurs are willing to take risks to make things better.Federal Reserve Bank of Dallas, “Everyday Economics,” http://www.dallasfed.org/educate/everyday/ev3.html (accessed September 19, 2009).

Guy Kawasaki, famous entrepreneur, venture capitalist, speaker, and author of several books on entrepreneurialism including The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything, provides a holistic way of viewing entrepreneurship.

Entrepreneurialism and the Economy

Figure 15.1

Approximately 75 percent of new jobs added in America are from small businesses according to the U.S. Department of State.U.S. Department of State’s Bureau of International Information Programs, “Entrepreneurship Aids the Economy: Most Economists Agree that Entrepreneurship Is Essential to Any Economy,” May 12, 2008, http://www.america.gov/st/business-english/2008/May/20080603233010eaifas0.8230554.html (accessed September 19, 2009).

Imagine that in 1899, the director of the United States Patent Office made the proclamation that everything that could be invented had already been invented. He certainly underestimated the power of the American entrepreneur. Everything from airplanes to telephones, computers to the Internet, not to mention the iPod and even skateboards, have all been products developed and marketed by entrepreneurs over the past 110 years.Guy Kawasaki, “The Art of the Start,” video, April 29, 2006, http://www.youtube.com/watch?v=L3xaeVXTSBg (accessed September 28, 2009).

Today, entrepreneurs literally power the country. There are twenty-seven million businesses in the United States; 99.7 percent of them are considered small businesses, according to David C. Dickson, district director for the Small Business Administration. That means that only 80,000 businesses are considered large businesses; the other 26.9 million are small businesses.District Director David C. Dickson, Philadelphia, Small Business Association, SCORE Open House, September 22, 2009, Valley Forge, PA. Small businesses provide approximately 75 percent of the new jobs added to the American economy every year.

Besides providing jobs, entrepreneurial businesses are more likely to provide specialty and custom goods and services to consumers and businesses. In fact, small businesses produce nearly thirteen times more patentsThe right of exclusivity to make and market a specific product or service granted by the United States government. (rights of exclusivity to make and market the product or service granted by the United States government) per employee than large firms.United States Patent and Trademark Office, “What Is a Patent?” http://www.uspto.gov/go/pac/doc/general/#patent (accessed September 28, 2009).^,U.S. Department of State’s Bureau of International Information Programs, “Entrepreneurship Aids the Economy: Most Economists Agree that Entrepreneurship Is Essential to Any Economy,” May 12, 2008, http://www.america.gov/st/business-english/2008/May/20080603233010eaifas0.8230554.html (accessed September 19, 2009). Small businesses represent one-third of all companies that have fifteen or more patents.U.S. Department of State’s Bureau of International Information Programs, “Entrepreneurship Aids the Economy: Most Economists Agree that Entrepreneurship Is Essential to Any Economy,” May 12, 2008, http://www.america.gov/st/business-english/2008/May/20080603233010eaifas0.8230554.html (accessed September 19, 2009).

Entrepreneurialism is critical not only for the growth of the economy in the United States but also globally. The Kauffman Foundation, in conjunction with researchers from Babson College and the London School of Business, found that the disparity in entrepreneurial activity in some countries is contributing to a gap in economic growth. “The Global Entrepreneurship Monitor (GEM) report provides conclusive evidence that promoting entrepreneurship and enhancing the entrepreneurial dynamic of a country should be an integral element of any government’s commitment to boosting economic well-being,” according to Paul Reynolds, GEM project coordinator at both Babson College and the London Business School.Small Business, “Entrepreneurs Add Vitality to the Economy,” http://www.smallbusinessnotes.com/aboutsb/vitality.html (accessed September 19, 2009). According to the study, Canada, Israel, and the United States are those countries that are experiencing the highest level of activity, while Denmark, Finland, France, Germany, and Japan have the lowest levels of activity. The GEM constructed a framework for countries to work within to encourage entrepreneurial activity that includes raising the participation level to those outside the core age group of twenty-five to forty-four and increasing the participation of women in the entrepreneurial process.Small Business, “Entrepreneurs Add Vitality to the Economy,” http://www.smallbusinessnotes.com/aboutsb/vitality.html (accessed September 19, 2009).

Entrepreneurship is rewarded in the United States because the economy is based on a free market systemAn economy in which an individual’s success is dictated by demand on the part of the consumer, not by the government.—one in which an individual’s success is dictated by demand on the part of the consumer, not by the government.Federal Reserve Bank of Dallas, “Everyday Economics,” http://www.dallasfed.org/educate/everyday/ev3.html (accessed September 19, 2009). Because entrepreneurial businesses are so important to the economy, free market governments not only support them, but they often encourage entrepreneurial business ventures. According to Harvard Business School professor Josh Lerner, the United States government played a key role in the early development of Silicon Valley. The government has also provided support for the growth of innovation in places such as Tel Aviv and Singapore.Sean Silverthorne, “Government’s Positive Role in Kick-Starting Entrepreneurship,” HBS Working Knowledge, December 7, 2009, http://hbswk.hbs.edu/item/6318.html (accessed January 3, 2010).

While statistics are no guarantee of success for the future, especially in today’s tough economy, you might find it interesting to know that small businesses employ a little more than half of all private sector workers, pay 44 percent of all private sector payroll, and have generated 64 percent of new jobs over the past fifteen years. In 2008, approximately 530,000 new businesses were created every month, which was a slight increase over 2007.Laura Petrecca, “Tough Times Drive Start-Ups,” USA Today, September 14, 2009, B2.

These facts reflect the importance of creativity, ideas, passion, drive, independence, and risk taking in the economy. Entrepreneurialism isn’t limited to a specific type of organization or business; it’s a state of mind, a way of thinking and behaving, a way of pushing for something better than the status quo. Entrepreneurs can be found in large multinational corporations as well as nonprofit organizations, and new business start-ups. Every large business or organization had to start small but think differently.

Getting Started

Being an entrepreneur can be exciting and invigorating. Having the vision to create products and services that can meet and exceed customers’ needs and imaginations and the passion to bring them to market can be exhilarating. Imagine having a hobby in college that turns into a multibillion-dollar business. That’s how Mark Zuckerberg created Facebook and Michael Dell created Dell. Both had a unique idea and vision and were willing to take the risk to make it a reality.

Where does it all start? The entrepreneurial drive starts early for most who have it. Think about when you were young. If you were the one in the neighborhood who set up a lemonade stand, went door-to-door selling products, or set up a lawn-mowing service in the neighborhood (and hired your friends), you may have the makings of an entrepreneur. While you and many of your friends (and perhaps your siblings) participated in activities like this when you were young, not everyone will grow up to be an entrepreneur. A recent study, which focused on the behaviors of identical twins, has found evidence that entrepreneurialism may be based on genetics, not environment.Nicos Nicolaou, Scott Shane, Lyn Cherkas, Janice Hunkin, and Tim D. Spector, “Is the Tendency to Engage in Entrepreneurship Genetic?” Management Science 54, no. 1 (January 2008): 167–79, http://mansci.journal.informs.org/cgi/content/abstract/54/1/167 (accessed September 21, 2009). In fact, the study found that a connection between different genes causing someone to be extroverted is important to salesmanship, which is also a strong trait in many entrepreneurs.Jim Hopkins, “Starting a Business: What It Takes,” USA Today, October 25, 2006, http://www.usatoday.com/money/smAllBusiness/2006-07-30-starting-your-business_x.htm (accessed September 19, 2009).

Genetics or not, the current state of the economy has forced many who are out of work to consider owning their own business. “These are people that two years ago did not aspire to own a business, but circumstances have dictated that they look at freelance opportunities,” says Ken Yancey, CEO of nonprofit entrepreneur-mentoring group Service Corps of Retired Executives (SCORE). In fact, Internal Revenue Service (IRS) data confirm that the number of nonemployer firms (those that have paid employees) is up 8.1 percent from 2007 to 2008.Laura Petrecca, “Tough Times Drive Start-Ups,” USA Today, September 14, 2009, B1. These “accidental entrepreneurs” have come of age due to a variety of circumstances. Some, like Maureen Rothman, president of Rothman Associates, started her business when her employer went out of business. Although she had over fifteen years of selling and sales management experience, when people encouraged her to start her own business her first thought was, “I’m not an entrepreneur.” After developing a business plan and getting input and direction from resources such as SCORE, she said that everyone told her to “just do it.” “On 09.06.05 [September 6, 2005],” as she likes to say, “I did it!” and launched Rothman Associates, a manufacturers’ representative for hospitality seating products.Maureen Rothman, SCORE Open House, September 22, 2009, Valley Forge, PA.

Leaving corporate life behind for a chance to build a business and chase a dream is a trend that is occurring across the country in industries of all kinds from technology to personal services. Ali Galgano recently traded in her high-powered job as corporate recruiter doing work for firms such as Goldman Sachs for her own jewelry company, Charm & Chain. Brent Bouchez, David Page, and Nancy McNally gave up their glitzy, perk-filled jobs at an advertising agency on Madison Avenue in New York to start their own marketing firm named Five-0, which is focused on marketing to baby boomers. Kelly Elvin gave up a lucrative career as a lawyer to become a dog trainer. All have learned that life as an entrepreneur is very different from life in the corporate world. The thrill of running your own show and making your dream come alive is a learning process. There are no bosses, no corporate initiatives, no departmental deadlines, and no performance reviews. Everything is all you, all the time. Skills such as time management, understanding financial statements, building a good support system, and overcoming the isolation of working alone are all challenges in the entrepreneurial world. “Entrepreneurs have to be willing to listen and learn and make judgments and be adaptive,” according to Monica Doss, director of the Kauffman Foundation’s FastTrac entrepreneur training programs.Laura Petrecca, “From Corporation to Start-up: Who Is Going to Fix the Printer?” USA Today, September 21, 2009, http://www.usatoday.com/money/smallbusiness/startup/week2-corporation-to-startup.htm (accessed September 21, 2009). As for the issue of timing, some ideas might not work in the current economic environment. Entrepreneurs have to understand when it’s no longer feasible to keep a business running.Laura Petrecca, “Leaving Corporate Life Behind,” USA Today, September 21, 2009, B1, 2.

What Does It Take?

Entrepreneurialism is based on dreams and risk. Not every idea is commercially viable or economically feasible, and not every dream comes true. But there are some common ingredients that are part of being an entrepreneur.