Coherence Session 2 Challenges Of The Entrepreneur

L'entrepreneur aujourd'hui: évolution, défis et opportunités ~~~~~~ Session 2

The Challenges of the Entrepreneur October 24, 2009 R a n d y M . A ta id e Pro fe sso r o f E n tre p re n e u rsh ip [email protected] Cohérence partenaires pour le développement

The Challenges of the Entrepreneur O v e rv ie w 1. The Illusions of Entrepreneurship 2. Entrepreneurship in France 3. The E-Myth and other challenges 4. Overcoming the challenges 5. 6. 7. 8.

The Challenges of the Entrepreneur T h e Illu sio n s o f E n tre p re n e u rsh ip R e ce n t d a ta sh o w s th a t p e rce p tio n s o f e n tre p re n e u rs a re o fte n co n sid e ra b ly d iffe re n t th a n th e re a lity. T h e se a re re fe rre d to a s “ e n tre p re n e u ria lillu sio n s.” C o m m o n illu sio n s a re : * That entrepreneurs are unique and rare . *That entrepreneurs are born and not made . *That entrepreneurs focus on high -

The Challenges of the Entrepreneur T h e Illu sio n s o f E n tre p re n e u rsh ip T h e illu sio n s h o ld s tru e fo r n e a rly a ll d e ve lo p e d e co n o m ie s. In th e U . S ., d a ta * sh o w s th a t: * America is declining in entrepreneurship. *The typical start-up has a single employee. *Start-up capital averages $25 , 000 . *Only about 4 % of start-ups survive 10 years.

The Challenges of the Entrepreneur E n tre p re n e u rsh ip in F ra n ce T h e re se a rch a lso sh o w s th a t e n tre p re n e u rsh ip in Fra n ce is e ve n m o re ch a lle n g in g th a n o th e r sim ila rly d e ve lo p e d W e ste rn ( O E C D ) e co n o m ie s. It h a s b e e n a rg u e d th a t a d istin ctive ch a lle n g e fo r Fre n ch e n tre p re n e u rs is attitudinal : Unlike “heroic” notions of entrepreneurs, many French view entrepreneurs as similar to “traditional” activities such as simple trades or crafts.*

The Challenges of the Entrepreneur E n tre p re n e u rsh ip in F ra n ce S e lf- E m p lo ym e n t R a te in O E C D C o u n trie s ( 2002 ) Country 2002 1992 Turkey 30.0 29.7 Portugal 24.5 26.5 Belgium 14.5 14.1 United Kingdom 11.2 12.9 Canada 9.7 9.2 France 8.8 12 . 3 United States 7.2 8.6 Luxembourg 6.1 8.4

The Challenges of the Entrepreneur Entrepreneurship in France New & Young Firm Ownership by Population % Country <1 yr.> <3 yr.> China 9.40 14.10 Switzerland 3.70 9.70 Ireland 4.70 8.10 Italy 2.30 6.40 United States 5.20 4.70 Germany 2.70 4.20 France 0 . 70 2 . 30 South Africa 1.70 1.30

The Challenges of the Entrepreneur Entrepreneurship in France What is going on here? What possible explanations do we have for the relatively low rates of entrepreneurship and young and new companies in France? While the answers are complicated there are some potential explanations. 1. 2. 3.

The Challenges of the Entrepreneur Entrepreneurship in France Challenge #1* – France is much more policy friendly towards large startups and existing businesses than the typical entrepreneur small business start-up. *”Entrepreneur Means Little In France.” Anu Partanen , Fortune Magazine, April 9, 2009.

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The Challenges of the Entrepreneur Entrepreneurship in France Challenge #2* – France is not very tolerant of business failures, and the stigma of bankruptcy is much more powerful in France than many other developed nations. *”Entrepreneur Means Little In France.” Anu Partanen , Fortune Magazine, April 9, 2009.

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The Challenges of the Entrepreneur Entrepreneurship in France Challenge #3*– French Universities generally lag behind other major Western Universities in entrepreneurship research, publishing and academic programs. *Lasch, Frank, and Yami, Said. The nature and focus of entrepreneurship research in France over the last decade: a French touch? Entrepreneurship Theory and Practice, March 2008.

The Challenges of the Entrepreneur Entrepreneurship in France However, the primary reason that entrepreneurship has declined in France is the same reason that the same trend has developed in other developed economies, although at a lesser rate than in France. 1. 2. 3.

The Challenges of the Entrepreneur Entrepreneurship in France “When countries get wealthier and real wages (wages net of the effects of inflation) rise, the opportunity cost of running your own business goes up because the amount of money that you could have earned working for someone else increases. As a result, the proportion of the population starting companies decreases.” *Shane, Scott. The Illusions of Entrepreneurship (2008); Yale University Press.

The Challenges of the Entrepreneur Entrepreneurship in France Thus, it is important for us to realize that the challenges that the entrepreneur in France faces has more in common with other developed economies than is often believed. And the “ E - Myth ” is universal in serving as a formidable challenge to the entrepreneur. 1. 2.

The Challenges of the Entrepreneur The E - Myth “The problem is not that the owners of small businesses in this country don’t work; the problem is that they’re doing the wrong work.” The “E-Myth” is the contention of author Michael Gerber who states that most entrepreneurs are not actually entrepreneurs. He believes that many supposed entrepreneurs do not properly understand the actual business that they are engaged in.

The Challenges of the Entrepreneur The E - Myth For example, simply because one is a good cook, or is a competent house painter, or a physician, does not mean that they are competent to own a restaurant, own a house painting business, or operate a medical practice. Gerber’s point is that these are two completely separate competencies and is a leading factor of the failure of entrepreneurs.

The Challenges of the Entrepreneur

The E - Myth Gerber claims that the typical small business owner is actually: *10 % Entrepreneur * 20 % Manager * 70 % Technician Technical superiority is rarely a primary driver of entrepreneurial success. This is because such superiority is usually very short - lived .

The Challenges of the Entrepreneur The E - Myth

While there are a few businesses that may need this high combination of technical skills, Gerber argues that the more valuable skills are entrepreneurial passion and managerial competencies , and less technical expertise. And research and experience shows that even vast amounts of capital cannot ensure entrepreneurial success. Let’s look at a “sure-thing” business of online grocery shopping and the company known as Webvan.

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The Story of Webvan

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Auction puts the gavel down on a dotbomb Kathleen Pender, Chronicle Staff Writer

Wednesday, October 31, 2001

“Some people came out of curiosity -- to see how dot-coms lived back in the glory days before investors shut off the money spigot. "We wanted to see what it takes to blow 850 million bucks," said Randy Ataide of Mountain View Cold Storage, a produce distributor in Fresno County that used to do business with Webvan. "It's just a

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“Ataide and his colleague Tom

Bruner came to the auction hoping to pick up a few PCs, laser printers and servers for their firm. "These guys had the opposite of our business plan," Ataide said. Their business plan was "field of dreams: Build it and they will come," Bruner said. " Our business plan : Start small and get bigger ," Ataide added.” 

The Challenges of the Entrepreneur Overcoming the Challenges

$82 , 500 , 000 

Webvan Was Not Alone

$250 , 000 , 000 $50 , 000 , 00 0

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What is the lesson of Webvan? It is very simple.“Don’t spend a dollar (or Euro) when a dime (10 cents) will do” This starting small and getting bigger is known in the U.S. as “ boot strapping .”

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Starting small helps you by: *Limiting your risk .

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*Learning resource discipline early.

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*Helps you to be able to fail fast.

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Entrepreneurs need to remember a useful rule of thumb with their capitalization:

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Expect your business idea to do the following:

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*Cost twice as much to start than you estimate.

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*Have half the revenue that you hope for.

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*Take twice as long as you plan to turn a profit.

The Challenges of the Entrepreneur O v e rco m in g th e C h a lle n g e s Coupling boot-strapping with the proper identification of your own unique mix of entrepreneur, manager and technician will increase your chances of succeeding as an entrepreneur, regardless of the country in which you do business. 1. 2.

The Challenges of the Entrepreneur O v e rco m in g th e C h a lle n g e s My goal is very simple for you in addressing the challenges of being an entrepreneur. I do not want to see you be just one more person or company who does: 1. 2. 3.

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