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Thursday, Jun 8, 2023

Who is the Real Entrepreneur?

Nature or nurture: Increasingly, events and experts are challenging the traditional notion that entrepreneurs are born, not bred. More and more universities are adding entrepreneurial programs to their offerings, suggesting that the skills needed to start and run a business can be learned. Venture capitalists and others involved in financing new businesses are seeking seasoned managers to run them. And entrepreneurs themselves are signing up for management networks that allow them to air their problems and learn from their counterparts. So will the real entrepreneur please stand up? Is he or she a born risk-taker, fiercely independent with creativity and charisma to spare or can an entrepreneur succeed with little more than a set of managerial skills, a willingness to sweat the details and dogged determination to overcome obstacles? Part of the problem is there are different types of entrepreneurs. Those who are most well-known, the Bill Gates and Michael Dells of the world are not representative of the vast majority of entrepreneurs. “The common ones, the businesses that most people start, are all their jobs basically,” said Bill Yost, an adjunct professor who focuses on startups and turnaround management at UCLA’s Anderson School of Management. “They don’t require anything except being able to make that job work, and that’s what most people do. You can make a job out of it and sustain it for 30 years and you’re not going to make any serious money but you’re going to be okay.” A study of entrepreneurship just released by the Entrepreneurship Research Institute at the Eugenio Pino and Family Global Entrepreneurship Center at Florida International University found that only 2 percent of those starting businesses or operating new businesses expect to have a major impact on the markets where they operate or on the broader economy. Most entrepreneurs, some, 91 percent, say they are copying existing business activity. There’s growing evidence that in other respects too, the romantic notion of the entrepreneur as an individualistic innovator does not match up with reality. For one thing, a large majority of entrepreneurs don’t start their businesses alone. At the very least they have silent partners who supply a good portion of the financing, but many also begin with one or more partners who are actively involved in the business as well. “The biggest fallacy is that it’s all done by one person,” said Prof. Paul D. Reynolds, director of FIU’s Entrepreneurship Research Institute. “It’s really done by teams, 60 percent are started by teams, and the more they grow and the more innovative they are the more they have teams.” Nor are entrepreneurs necessarily fierce risk takers. “Entrepreneurs, the successful ones, are risk-averse up the wazoo,” said Yost. “Why? It’s their money. We’re not talking about the ones that get venture capital backing. That only constitutes 4 percent or 5 percent of total startups. Most are individuals who don’t have a lot of money, and it’s their money and the way they got the money is by saving it.” While it may look to the outside world like the entrepreneur who puts up his house as collateral to start a business is a risk-taker, these business folks see it differently. Confidence level “I remember thinking I have no money,” said David J. DiTomaso of the first Subway franchise he opened in 1986 he is now one of the largest Subway franchisees in California with 19 stores. “I put my house payment on a credit card. I couldn’t afford a candy bar. And never for a second did I doubt I would make it.” DiTomaso believes it’s that confidence level that is often seen as willingness to risk it all. “I don’t look at it as a risk. I don’t do anything that I don’t calculate out. It’s not risk, it’s a different avenue that I take, and life is a risk,” he said. Ask other entrepreneurs if the skills they required can be learned and, like DiTomaso, they will insist they are born to it. But just as quickly they will point out that they could not have developed their businesses without the skill sets others have brought to the table. “At the beginning when IS West was just a baby, myself and my partner (Robert Johnson), we wore every hat,” said Drew J. Kaplan, CEO at Internet Specialties West, an internet service provider. “As you get bigger, you bring in key people who can do these things. You start hiring managers so you can continue to look at the bigger picture.” It may take a healthy dose of chutzpah to start a business, but keeping it going is another matter. “An entrepreneur’s willingness and capacity to follow a strategic approach turns on a broader set of skills and traits than are necessary in the start-up stage,” wrote Amar Bhide, a Lawrence D. Glaubinger Professor of Business at Columbia University in the oft-quoted book, “The Origin and Evolution of New Business.” “For instance entrepreneurs usually have little to lose when they start a business; the willingness to bear personal risk often becomes a significant factor, however, in building and growing one.” Some believe that today’s business environment also requires a different set of skills than may have been necessary years back. For one thing, the advent of the Internet has brought far more competition than entrepreneurs once had to face. “The reason the business field is more saturated is because the barriers to entry are less,” said Scott Hindell, an instructor at UCLA Extension who teaches budding entrepreneurs how to start a business. “Some guy can pop up online and operate virtually and make it much more difficult for you to compete. Before you were only competing with the neighborhood. Now you’re competing with surrounding areas and nationally.” Business savvy Most entrepreneurs start up their businesses with money from friends and family or their own investments or a combination of both. But those who seek outside, professional financing find they have to present the kind of business savvy that will instill investors’ confidence. “The expectations by investors seem to have increased,” said Eric Speer, managing director of VenCore Solutions LLC, a venture lessor that provides entrepreneurial companies with lines of credit for equipment acquisition. “You have to have someone capable of raising money, someone who is good at business development and customer relationships. The further along you get, you need professional management rather than inspiration and passion.” Experts say that the greatest evidence of the need for startups to shift into professional management mode is the huge failure rate of these businesses at least 50 percent of businesses fail within the first two years, more when they are tracked over a five-year or 10-year period. “It’s only 20 percent or 25 percent idea. It’s 75 percent business,” said Hindell. “There’s a saying that you may have the greatest recipe, but baking cookies is not going to make you a successful business person. At the end of the day, the money has to be flowing in a way that’s sustainable.”

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