Archive for December, 2011
Many people have asked if the time is right to start a new business. No better time exists than at present to launch a business. The reason is clear. Entrepreneurs attract capital to new ideas. Investments in new ventures stimulate economic conditions, create jobs, and fill market gaps to improve consumerism. Relying on existing companies does little to address emerging consumer needs. Existing companies are not investing because they want to preserve what they have and not run out of cash.
When market gaps exist consumer prices go up because of a lack of competition. Established companies simply raise prices to generate more cash to survive. Any unused cash sits idle earning a minimal return. Do these conditions sound familiar?
At some point a business started under present conditions will need additional capital. Starting now will put a business in a more favorable position when it needs cash later on, and when investors start to use idle cash to restore their investments. Starting a business now allows a founder to gauge the ability to generate cash flows. Investors want to invest in companies with a clear picture of potential cash flows. Why would an entrepreneur not want to gain a first mover status to fill a gap?
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A recent study dispels the notion that most failures of business launches come from novice entrepreneurs who end up exiting from their business. The study develops the theory of the serial entrepreneur who instead of exiting from entrepreneurship shuts down unsuccessful businesses and moves on to new ventures. A highly skilled entrepreneur can transfer the startup cost for a venture closed down to a new venture of higher quality. Alternatively, a less skilled entrepreneur might close down a venture to return to the labor market (Plehn-Dujowich, 2010).
This theory suggests skilled entrepreneurs may have many failures before finding a success. Successful entrepreneurs continue their pursuit for success by failing many times. Each time a small business entrepreneur fails the experience improves his or her skills. An entrepreneur does not look at failed business attempts negatively, but as a stepping stone to achieve success. Entrepreneurs develop skills and valuable experience as suggested by the theory of the serial entrepreneur
High failure rates are misleading because small failures are natural and can lead to a huge success. Are you afraid of failure or do you learn from your mistakes? Do you want to find out more? Click here.
Plehn-Dujowich, J. (2010). A theory of serial entrepreneurship. Small Business Economics, 35(4), 377-398. doi: 10.1oo7/s11187-008-9171-5.
In today’s global setting, an entrepreneur needs certain leadership skills. Good leadership skills for an entrepreneur include the ability to communicate, show self-confidence, solve problems, give and receive feedback, and negotiate. A good entrepreneurial leader compassionately listens to problems posed by his or her team. The entrepreneur uses both logic and compassion to solve problems (Abbasi, Siddiqi, & Azim, 2011).
Todorovic and Schlosser (2007) suggested the entrepreneurial leadership orientation is effective when the entrepreneur exhibits charismatic organizational characteristics coupled with good citizenship. Leader-follower relations under such conditions promotes agility, freedom, risk-taking, and innovation. Top-down autocratic leadership styles hinder performance. A good entrepreneurial leader has more characteristics attributable to a (bottoms up) servant-leadership style (Joseph & Winston, 2005).
What about you? Do you have what it takes? Click here if you do.
Abbasi, M. H., Siddiqi, A., & Azim, R. u. A. (2011). Role of effective communications for enhancing leadership and entrepreneurial skills in entrepreneurial skills in university students. International Journal of Business & Social Science, 2(10), 242-250. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=6478501&site=ehost-live
Joseph, E. E., & Winston, B. E. (2005). A correlation of servant leadership, leader trust, and organizational trust. Leadership & Organization Development Journal, 26(1), 6-22. doi: 10.110/01437730510575552
Todorovic, Z. W., & Schlosser, F. K. (2007). An entrepreneur and a leader!: A framework conceptualizing the influence of leadership style on a firm’s entrepreneurial orientation-performance relationship. Journal of Small Business and Entrepreneurship, 20(3), 289-308. doi: http://www.jsbe.com/
More evidence from China shows new entrepreneurs are educated, young, and experienced. These entrepreneurs have made full use of their abilities and resources to take advantage of opportunities. These entrepreneurs start small and develop capital sources through savings. The new breed of Chinese entrepreneurs take advantage of information gathered and can forecast financial risks. Very few of these entrepreneurs engage in high growth ventures and most are second movers targeting existing markets (Long, Yang, & Gao, 2010).
Anyone aspiring to engage in self-employment should have at least equivalent skills to this new breed of entrepreneur because Chinese entrepreneurs seek to do better what existing firms already do. The prime ingredients needed to compete in the global market are education and experience. New entrepreneurs should prepare to compete by doing something better than existing businesses especially if the intent is not to seek high growth from emerging innovations. Ask yourself if you have what it takes?
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Long, D., Yang, J., & Gao, J. (2010). Anatomy of nascent entrepreneurship in China: A preliminary study from CPSED project. Journal of Chinese Entrepreneurship, 2(2), 129-147. doi: 10.1108/17561391011051126
Entrepreneurs must lead change because the work setting changes rapidly where failure is the ordinary course of business. An entrepreneur that cannot lead change likely will end up a casualty and see his or her business fail. Entrepreneurs learn from their experience and failures. A person wishing to create must deal with frequent failure and adjust to the changing environment (Pitts, 2008). Passion to solve problems drives the entrepreneur and inspires others to work toward solutions. Entrepreneurs learn from small failures and succeed by leading change to enable the firm to adapt to what it learns.
An entrepreneur must enjoy learning to succeed because learning is what helps find the solutions to problems. The entrepreneur must transform his or her vision through leading the necessary changes to find the right solutions. Enthusiasm for working toward this goal is imperative and helps lead others working in the organization.
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Pitts, G. (2008). Life as an entrepreneur: Leadership and learning. Development and Learning in Organizations, 22(30), 16-17. doi: 10.1108/14777280810861776