Reasons for Becoming an Entrepreneur

Why did you become an entrepreneur? Or if you are just planning to become one, why be an entrepreneur?

Is it because:

• You love the idea of succeeding based on your own terms?
• You love the game and challenge of entrepreneurship?
• You want to become rich?
• You want to become financially secure?
• You know you can change the world with your business?
• You like to be financially secure?
• You enjoy giving back to the community?
• You feel you can do and gain so much more on your own outside the confines of employment?
• Or is it because you have no other option at this point but try to make it on your own?

Whatever reasons you have for becoming an entrepreneur, I'd love to hear it!

Young Entrepreneurs: Promoting Entrepreneurship in Universities

I envy the young would-be entrepreneurs in the universities today. A growing number of schools and universities are offering classes, mentorships and valuable support to students with entrepreneurial dreams.

First there's the business plan competition, where students' business plans are critiqued and judged and the best ones receive valuable startup capital ranging from $10,000 to $25,000. There are even stories of situations where students presenting in the business plan competition got funding for their fledging business ideas because some venture capitalists or investors heard about the business plan and want in on the action (case in point: how Jenny Lefcourt started WeddingChannel.com ).

Some schools with business plan competitions include:

• UC Berkeley http://bplan.berkeley.edu/
• Rice University http://alliance.rice.edu/alliance/RBPC.asp
• Pepperdine University http://bschool.pepperdine.edu/students/bplan/
• Johns Hopkins University http://www.jhu.edu/bpc/
• University of Texas at Austin http://www.mootcorp.org/
• University of Washington http://bschool.washington.edu/cie/bpc/
• University of San Francisco http://www.usfca.edu/sobam/nvc/bpc/index.html

Aside from business plan competitions, there's incubation assistance that some universities provide.

Belmont University , for example, runs a business hatchery program for students called Practicing Student Entrepreneur Program. Under this program, students can get access to an office space complete with desks, phones, fax machines, copier, etc. Students also get the chance to interact and get advice for seasoned entrepreneurs in the university.

The University of Central Florida offers a technology incubation program which offers mentorship and advice-giving in all aspects of business development, access to office space and office equipment, networking opportunities, marketing and PR support, among others.

The Rensselaer Polytechnic Institute in Troy, New Year offers one of the oldest incubation programs wholly owned by a learning institution.

How Important is College Education to Entrepreneurial Success?

How important is college education to entrepreneurial success? How much does educational background and knowledge contribute to success as a business owner? Do you have to enroll in an Ivy League school to be successful in business?

Colleges and universities offer solid education, social network and access to resources to complement your studies. They take pride in helping ensure their graduates land top jobs, and much of the focus seems to be grooming young people for the corporate world and climbing the proverbial corporate ladder.

BusinessWeek had an article ("Who Needs the Ivies?") that looked at the correlation of education and entrepreneurial success. One of the studies the article mentioned was that of Jim Duggan, a senior technology industry analyst. The article states that Duggan's findings was

"... Attendance at top-tier schools might even be inversely correlated with
entrepreneurial success. These schools often focus on producing the next generation of research scientists and academics—not entrepreneurs. He believes that the elitism and confidence these schools nurture may work well in large corporations, but not in tech startups."

Personally, I think deciding to be an entrepreneur instead of a corporate worker is an individual's choice, though enhanced by the environment including schools. A risk averse person will still find solace in the steady paycheck of a job, even after attending one or two entrepreneurial classes.

Family and how entrepreneurship is viewed by the parents is a better gauge of whether a person will want to start and grow their own ventures rather than be employed by someone else. Children who see their parents enjoying the challenge, excitement and disappointments of starting a business are more likely to become entrepreneurs themselves.

But my hats off to the rare breed of entrepreneurs, who made it really big without college education. For these individuals, college education is not a prerequisite for attaining success. Here are some people from Forbes' list of the richest in the world who never completed their college education:

• Sheldon Anderson dropped out of City College in New York City to become court reporter.
• Lawrence Ellison is a drop out at the University of Illinois
• Bill Gates dropped out of Harvard
• Kirk Kerkorian is an 8th grade dropout
• Michael Dell dropped out from University of Texas
• Steve Jobs dropped out of Reed College
• Roman Abramovich is also a college drop out
• Amancio Ortega is also a self made man and dropped out of high school
• Li Ka-shing is also a high school drop out

Their stories can inspire you and give you confidence that you don't really need a degree to succeed in life -- as long as you are willing to work hard to make your business a success.

Money vs. Control: What Do Entrepreneurs Want

What is your goal as an entrepreneur? Do you want to get rich, even if that means getting investors on board? Or do you want control, meaning you grow your business by yourself albeit slowly as long as you control the business? Or do you want a little of both?

This is a dilemma often faced by business owners. I know of entrepreneurs who welcome investors, even actively seek them, because they have grand plans for their business and know that they can only grow the business faster if they get outside help. There are also people who prefer their businesses to be small as long as they remain "masters of the ship."

Harvard professor Noam Wasserman explores this question in his papers, the most notable of which is "Rich vs. King: The Entrepreneur's Dilemma" . Wasserman recognizes that entrepreneurs are motivated by the profit potential in starting a business, but the profit motive often runs counter to other motives particularly the issue of control.

According to Wasserman's research, this dilemma typically happens when the business reaches the point where external resources may be needed to help push it to the new level. Getting outside funding from investors will help the entrepreneur build a more valuable business. Alas, the infusion of capital from investors is never free: often, the entrepreneur has to give up control in the company to get the funds.

The paper is relatively easy to chew (there's no regression or any mathematical formula). If you have nothing better to do this weekend, check out the paper. Also visit Wasserman's blog for updates on his study http://founderresearch.blogspot.com/

How to Make the Jump from Employee To Business Owner

I've posted a new article at PowerHomeBiz.com on how to make the transition from being an employee to a business owner successful and pain-free.

If you've been an employee all your life, the move to becoming an entrepreneur can be very daunting, even scary. You will lose the steady paycheck. You will make your own decisions and steer your own business. And unlike being an employee where you can be physically present but mentally absent (and still get paid for just showing up to work), as an entrepreneur you will have to work. If you don't work, you may not earn anything!

I've listed some tips on how to make the transition easier and listed the concerns and issues you need to deal with before making the jump. Read the article How to Make the Jump from Employee To Business Owner: Checklist for Starting a Business

The Changing Face of Entrepreneurship

The Intuit Future of Small Business Report authored by the Institute for the Future has come up with an interesting study on the changing faces of entrepreneurship. According to the study, gone are the stereotypes of long ago when people associate entrepreneurship with middle of the age folks.

The study sees three trends affecting small business formation in the coming future:

1. Entrepreneurs will become more diverse in terms of age, origin and gender:

- those nearing retirement (and looking for a way to sustain income, pursue their interests, or just keep busy and involved) as well as those who are entering the workforce will become the most entrepreneurial ever.
- women limited by their corporate career path will choose to go to entrepreneurship
- immigrant entrepreneurs will drive a new wave of globalization

2. One person businesses with no employees (or personal business) will rise with the growth of the number of freelancers, contract business, social entrepreneurs and accidental entrpreneurs

3. Rapid growth of university-level entrepreneurial training

You can read the full study at Intuit

Kiva: Lending to the World's Poor

The Internet is really reshaping lending as we know it. I just learned of a fantastic site that allows investors to lend to entrepreneurs from poor countries, where $325 can mean the fulfillment of a life long dream to start a business and hopefully alleviate one's family from poverty. The site is called Kiva http://www.kiva.org

Kiva works with microfinance organizations in third world countries such as Honduras, Tanzania, Azerbaijan, Samoa, Tajikistan and others. You as an investor can look at the profiles of these entrepreneurs needing financial support -- such as Lucia of Tanzania who needs $1,000 to purchase a deep freezer for her fish selling business to Adil of Ajerbaijan who needs $750 to buy a milk cow for her animal breeding business. The stories are varied, the businesses are different , but all are looking for mini-Bill Gates who can give them as low as $25 in loan.

As an investor, you can choose to give as little as the minimum loan investment of $25 or the total amount requested. You can lend them the money through your credit card or Paypal. But you will not be lending the money directly to the investor, but through the microfinance organization that are working with these entrepreneurs in their countries. Have no fear: the money will still be given to the entrepreneur 100%; it's just that the conduit of funds have to pass through the microfinance organization.

You will be paid back in about 6-18 months. As the investor, you will not be paid any interest to your money, but Kiva and the microfinance organization typically charges the entrepreneur some interest rates (no wonder there are reports that many microfinance organizations are becoming very profitable).

If you are looking for an opportunity to do your part in making the world a better place, consider extending your philantrophy to the entrepreneurs of poor countries. And if you are living in one of these poor areas, check if there are microfinance organizations that can help get your story in Kiva.org so you may be able to tap lenders from around the world.

Is There a Right Personality for Entrepreneurship?

Someone asked a question today on whether there are personality types that are not suited for entrepreneurship. Immediately, one can rattle off some characteristics that may not suit an ideal entrepreneur and these are:

• Those who are better off following directions, instead of creating their directions
• Those who are too risk averse and loves/needs the security of a salaried life
• Those who have problems seeing through to what they started
• Those who have no long term vision of what they want to accomplish
• Those who cannot handle the pressure of trying to make it on their own
• Does not persevere and immediately gets discouraged
• Lack of drive to accumulate wealth and earn more than working for others
• Lack of specialized business ability or skills that can be translated into a successful business

However, I am curious as to what empirical studies have noted. There's a new study by the Florida International University that looked at 830 entrepreneurs over four years to see which characteristics result in failure or success of the business. They looked at 130 different independent variables such as education, prior exposure to entrepreneurship, social outlook, among others and most of them don't seem to make a difference! MiamiHerald.com has a story on the study (unfortunately, I can't find any link to the study from the FIU website)

Energy Bus: 10 Rules to Fuel Your Life

The new book The Energy Bus: 10 Rules to Fuel Your Life, Work and Team with Positive Energy by Jon Gordon joins a long list of books that provides a road map to achieve success.

What sets the book apart and makes it interesting is its use of a business fable approach. The main character, George, is experiencing troubles in his personal and business life. To make matters worse, his car broke down. He was forced to commute and ride the bus. And the characters he met in the bus from the driver to other passengers showed him the techniques to cultivate positive energy he needs to steer his life to success.

The author calls his techniques "The Energy Bus Action Plan" and these are:

1. Create your vision: develop a vision for where you want your bus to go
2. Fuel your vision with purpose: associate your vision with bigger and larger purpose
3. Write down your vision/purpose statement
4. Focus on your vision: even visualize your vision
5. Zoom focus: write the action steps you need to achieve your vision
6. Get on the bus: identify who else can help you implement your action plans
7. Fuel the ride with positive energy and enthusiasm: cultivate a culture of positive energy
8. Post a sign that says "No energy vampires allowed": take out of the bus those who creates negative energy around you
9. Navigate adversity and potholes: there will be challenges and you need to be prepared to overcome them
10. Love your passengers: as you drive towards your vision and purpose, bring out the best in your employees and partners
11. Have fun and enjoy the ride: every journey should be fun

Will Your Business Fly? Getting Dynamic Feedback

The folks at WillItFly.com alerted me of the new wireless functionality of their website where you can afind out instantly if you’re up tothe latest standard for important business tasks. I've never visited the site before so I checked it out.

The site does a good job in letting an entrepreneur understand the thought process that should go through in various aspects of running a business -- from finding a business to knowing how to launch a viral marketing campaign. A user is presented with a list (ok, make that a LOOOONG list) of questions that needs to be answered. Some questions I find thought-provoking, while some questions don't really contribute much in helping a user understand the process involved.

I was however disappointed in what you can get when you answer all those questions (they need to have a button that will allow you to check YES or NO to all). After answering most questions in the section on finding a business with YES with a few NOs, I was looking forward to what I will see when I click the button "Click for Dynamic Feedback: WILL IT FLY?" All I got was

Congratulations! You're good to go…
No educational briefs needed. Your answers indicate you are well prepared.

After spending 5 minutes reading and answering the questions, I was expecting that I would find some advice, tips or even recommended articles at the end of it all. Apparently, the site recommends some educational readings only when you answer most of the questions "NO."

But nonetheless, the site seems to be a good resource particularly if you are just thinking on embarking on starting a business. Check out the site WillItFly.com

Business Book: Know-How - The 8 Skills that Separate People Who Perform from Those Who Won't

To succeed in business, you need intelligence, vision and the ability to communicate. But according to Ram Charan in his new book "Know-How: The 8 Skills that Separate People Who Perform from Those Who Won't" there is another element that is critical to succeed in business: the know-how of running a business.

There are some people who may talk well and appear to possess great leadership skills -- but in reality, are nothing more but rhetoric and hot air. These are the people who dream big but always ends with nothing. A successful entrepreneur needs "the capacity to take it in the right direction, do the right things, make the right decisions, deliver the results, and leave the people and the business better off than they were before."

So what are the eight know-hows every business person must have to succeed? Here is the author's list:

1. Positioning and Repositioning. Getting into the right business that meets customer demands and that makes money.
2. Pinpointing extrenla change. Understanding what is happening in the business environment and competition to put the business on the defensive.
3. Leading the social system. Getting the right people with the right behaviors and right information working together for the business.
4. Judging people. Hiring the right people to do the job.
5. Molding a team. Getting all these talented individuals to work seamlessly together, never mind the egos
6. Setting goals. Determining the goals that the business can realistically achieve
7. Setting laser-sharp priorities. Defining the path and making sure all the resources, actions and energies are allocated to reach the priorities
8. Dealing with forces beyond the market. Knowing how to anticipate and respond to the market particularly to events and pressures you don't have control over but may affect the business

Is a Business Plan Really Necessary?

When we read books on starting a business, the advice is always to prepare a business plan. When we study entrepreneurship in schools, the advice again is to start with a business plan. So do government agencies, mentorship programs such as SCORE, and yes, even websites like PowerHomeBiz.

But is a business plan really necessary?

Wall Street Journal published an article questioning whether startups really need to prepare a business plan. From the article:

A study recently released by Babson College analyzed 116 businesses started by alumni who graduated between 1985 and 2003. Comparing success measures such as annual revenue, employee numbers and net income, the study found no statistical difference in success between those businesses started with formal written plans and those without them. The study concludes that "unless you need to raise external start-up capital from institutional sources or business angels, you do not need to write a formal business plan."

The same question was posed in the study called Pre-Startup Planning and the Survival of New Small Businesses: Theoretical Linkages that appeared in Journal of Management in 1996. The study raised the following real-life examples to support the assertion that business plans are not essential to the success of a small business:

• Apple Computer began as a mail-order business operated out of a garage. Business plans were not developed until after initial mail order successes encouraged the founders to expand operations.
• Fred Smith of Federal Express spent years developing and refining a business plan. But then implemention proved impossible because the Federal Reserve-i.e., the primary customer on which the plan hinged- decided not to go along with it. By then, Smith had already spent millions on aircraft and other plant and equipment. He had to scramble to find alternative ways of pursuing his vision of an overnight delivery service.
• Microsoft burst into prominence, not because of any planned actions, but because its founder, Bill Gates, seized an unexpected opportunity to develop the IBM PC’s operating system.
• A survey of 220 “INC 500” businesses (i.e., relatively small, but among the fastest growing businesses nationwide) revealed that 5 1% did not have formal business plans when they started (Shuman & Seeger, 1986; Shuman, Shaw & Sussman, 1985). Of the 49% that did have plans, an overwhelming majority (70%) generated them, for the most part, simply to get external financing. Furthermore, those businesses without formal plans tended to be more profitable.

This debate is likely to continue. All you can do is to think long and hard whether a business plan is really needed (e.g. the lender requires a business plan) or whether you can think about your business strategy without going through the business planning process.

Doing Business in Other Countries

If you are thinking of starting a business in another country, a resource that I highly recommend is World Bank's DoingBusiness.org website.

Being from the premier international organization, the site has loads of economic information and studies on business environments including taxes as well as an extensive collection of business laws. More importantly to entrepreneurs, the site specifies the requirements asked in that country when you start or even close a business.

If you are looking to expand globally, make DoingBusiness.org your first stop.

Entrepreneurship Around the World

If you want a comparison of entrepreneurial activities across countries, the best resource is the Global Entrepreneurship Monitor [GEM] study. Conducted by Babson College and the London Business School, the study surveyed over 100,000 people in 42 countries.

The latest study released this January 9 finds that the percentage of nascent entrepreneurs in the US [those who were thinking of or have recently initiated an entrepreneurial venture] fell from 12.4% in 2006 to 10%. However, the number of established entrepreneurs is slightly up indicating that entrepreneurial activity is alive and well in the United States.

Entrepreneurship is also going strong in countries such as China and Argentina. In China, early-stage entrepreneurship increased to 16.2%, from 13.7% from in 2005, and in Argentina, the number rose to 10.2%, from 9.9%.

Read the full GEM study

Are You Cut Out to be an Entrepreneur?

If starting a business is part of your plans for next year, you need to be sure that you are ready for entrepreneurship and all the ups and downs that goes with it. There are a million and one things that can happen -- from hitting on a winning business idea to finding a dud; or from earning a million in a year or finding yourself in the unemployment line asking for doleouts.

Ask yourself the following questions to see if you are ready for all the challenges of starting a business:

• In the event the business fails, am I willing to lose out all the money I invested? If I borrowed the money from family and friends, will I be able to face them and tell them I lost their money? If I wiped out my family's bank account, can I face my children at the dinner table and explain to them that all they're having for Christmas is a loaf of bread? Will I lose the house if the bank asks for the money they loaned to me?
  
• Am I willing to work longer days (and nights), even seven days a week if needed? Do I have the motivation and stamina to go beyond the 9-to-5 working hours of a corporate employee?
  
• Can I handle pressure and make fast decisions if needed? Can I be calm, cool and collected when things go haywire? How can I let off steam? What can I do to relax and focus on the tasks at hand?
  
• How long am I willing to wait for the business to succeed? Do I bail out in six months if it is not showing the kind of profit I was hoping? Or can I stick to the business for two years and hope that it will turn in the profit I need by then? When do I throw in the towel and admit that I can't get it to work?
  
• Do I have the skills, know how and talent to make the business work? Can I sell? What are my best traits, and if I don't possess the skills I need, where and how will I get them?

The Joys of Self Employment

Happy Thanksgiving to everyone!

In this day of giving thanks, spending time with family and yes, eating, it has made me think of all the benefits and joys having my own business has given me and my family. Entrepreneurship has given me so much, and I am a better person because of it.

Here's my list of the joys and benefits of self employment:

1. The freedom to pursue your own vision
2. The control and flexibility you have over your own time.
3. The opportunity to learn and gain knowledge.
4. The highs and lows of self-employment.
5. The sense of pride and fulfillment in accomplishing things.
6. The confidence you gain in knowing that you can do it.
7. Potential earnings exceed a salaried employee.
8. Business owner reaps the full rewards
9. Each new day is a challenge.
10. The chance to share your learning.

Read the full article "The Joys of Self-Employment"