the seven myths of entrepreneurship 1...three rules of thumb 141 a final note on ideas 146 chapter...

Contents

List of figures and tables xiPreface xiiAcknowledgements xivIntroduction xv

CHAPTER 1The seven myths of entrepreneurship 1

Myth 1: You need a great idea 1

Myth 2: Entrepreneurs are born not made 2

Myth 3: Age matters 2

Myth 4: Entrepreneurs love risk 3

Myth 5: Nine out of ten businesses fail 4

Myth 6: Starting a business is straightforward 5

Myth 7: You need lots of money 6

The truth about entrepreneurship 6

Chapter summary 7

Useful resources 7

CHAPTER 2What is entrepreneurship? 9

A history of enterprise 9

What is entrepreneurship? 11

Chapter summary 11

Useful resources 12

Copyrighted material – 9781137493170


Contentsvi

PART 1: Mindset 13

CHAPTER 3Self-belief 15

Strangely confident 15

Origins of self-belief 17

What is self-belief? 19

Why you need to believe in yourself 20

How to develop self-belief 21

What comes after self-belief 25

Chapter summary 25

Useful resources 26

CHAPTER 4Passion 27

Fate works in mysterious ways 27

Understanding passion 29

Why passion matters 30

Finding your passion 32

Passion in entrepreneurship 34

The long road ahead 36

Chapter summary 37

Useful resources 38

CHAPTER 5Endurance 39

Obstacles are mandatory 39

The value of endurance 41

Preparing for obstacles 42

How to persevere 44

When to quit 48

More than effort 50



Contents vii

Chapter summary 50

Useful resources 52

CHAPTER 6Creativity 53

Wine and books 53

What is creativity? 54

Creativity in entrepreneurship 55

Nurturing creativity 56

How to generate creative ideas 58

A champion for your ideas 61

Chapter summary 61

Useful resources 63

CHAPTER 7Leadership 64

Quiet leadership 64

What is leadership? 66

Leadership in entrepreneurship 66

The three qualities of good leaders 67

Chapter summary 71

Useful resources 72

PART 2: Skill set 73

CHAPTER 8Strategy 75

The face that launched a thousand ships 75

What is strategy? 77

Strategy in entrepreneurship 77

Principles of strategy 80

Chapter summary 84

Useful resources 85



Contentsviii

CHAPTER 9Marketing 86

The world’s first road trip 86

What is marketing? 88

Effective marketing 88

Principles of marketing 89

Chapter summary 94

Useful resources 95

CHAPTER 10Sales 96

The sales interview question 96

What is sales? 97

Entrepreneurship and selling 99

Pre-requisites to selling 99

Principles of selling 101

Chapter summary 107

Useful resources 108

CHAPTER 11Branding 109

Why names matter in branding 109

Naming basics 110

The naming toolbox 112

Chapter summary 116


CHAPTER 12Finance 118

Knowing your numbers 118

Profit and loss 120



Contents ix

Balance sheet 123

Putting it all together 127

Chapter summary 128


PART 3: Process 131

CHAPTER 13Identifying opportunities 133

The nature of business ideas 133

Behaviours that inspire creative ideas 134

How to find business ideas 136

Chapter summary 139


CHAPTER 14Evaluating opportunities 141

Three rules of thumb 141

A final note on ideas 146

Chapter summary 146


CHAPTER 15Exploiting opportunities 148

Making your idea a reality 148

Step 1. Find a co-founder (or two) 149

Step 2. Identify your customer 153

Step 3. Identify your unique selling proposition/ point (USP) 157

Step 4. Design a minimum viable product (or service) 158

Step 5. Write a five-page business plan 160



Contentsx

Step 6. Launch, refine, pivot 163

Step 7. When to quit your day job 164

Chapter summary 166


Closing thoughts 167Notes 168Index 182



The seven myths of entrepreneurship

1Chapter

What you will gain from this chapter:

1. Learn about the realities of entrepreneurship.

2. Question the assumptions you may take for granted.

3. Eliminate fears about starting a business.

Myth 1: You need a great ideaEveryone has a business idea in them but they never think it’s good enough. This is because people often judge early ideas against already established businesses. However, no venture ever starts fully formed. Every successful idea starts small and over time can mature into greatness. Did you know, for example, that Sir Richard Branson’s Virgin Group started as a small mail-ordering business? The company would take orders through the post and mail music records to customers. In those early days it is doubtful Branson knew how big his venture would become.

The reality of entrepreneurship is that an idea does not have to be perfect from the get-go; nor does it have to be extraordinary. For instance, in a survey that involved 100 highly revered start-ups only 12 percent of the founders attributed their success to an extraordinary or unusual



Graduate Entrepreneurship2

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idea. The other 88 percent attributed most of their success to the extraordinary execution of an ordinary idea.1

In light of the above, the pressure we place on ourselves to come up with a revolutionary idea is unjustified. Few successful businesses ever start that way and many great entrepreneurs simply execute an existing idea better than everyone else has done. In other words, you don’t need a great idea to start a business. You just need a reasonable concept to build upon.

Myth 2: Entrepreneurs are born not madeThe founder of Nike, Phil Knight, did not realise he wanted to be an entrepreneur until he got into business school for his master’s. It was during a class when a lecturer asked students to invent a new business that Phil realised that’s exactly what he wanted to do as a profession.2 Was Phil Knight born an entrepreneur? No. He didn’t pursue the craft until his later years. Moreover, this is just one example among many where someone becomes an entrepreneur but it wasn’t always something they had a natural inclination towards. And yet the myth that entrepreneurs are born lives on.

The truth is there’s no evidence that some people are natural-born entrepreneurs while others are not. Research indicates that entrepreneurs come from both entrepreneurial and non-entrepreneurial families. In one survey, which involved more than 500 company founders, more than half of the people surveyed (52 percent) were the first in their families to launch a business.3 If entrepreneurship is genetic you would not expect this percentage to be so high. And so the conclusion is clear: you aren’t born an entrepreneur; you become one.

Myth 3: Age mattersWeb entrepreneur and YouTube personality Zoe ‘Zoella’ Sugg was in her early twenties when she started to earn a reported £20,000 a month from her social media ventures.4 Fraser Doherty set up his jam-making business when he was just 14 and, by the time he was 18, he was supplying jam to the supermarket chain Waitrose. There’s no shortage of media coverage on young entrepreneurs because the



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younger they are, the more sensational the story. But these reports warp our view on the relationship between age and entrepreneurship. The reality is far more diverse.

Doris Fisher co-founded Gap when she was 37 years old. Ruth Handler launched the Barbie dolls business aged 42. Giorgio Armani didn’t start his company until he was 41. And a 55-year-old pharmacist invented Coca-Cola. Most entrepreneurs actually start a business in their late thirties to mid-forties. In fact, the average age for a first-time founder is 45.5 The media, however, finds younger entrepreneurs more newsworthy so you’ll always hear more about the twenty-something millionaire and less about the mature businessperson.

Does this mean that you should wait until you are 35–45 years old to start a business? Not necessarily. Starting a business when you are young has advantages. You have fewer responsibilities and can be more flexible. On the other hand, when you’re older you may have a mortgage and family to think about and that restricts the sort of risks you can take. The flipside, of course, is that you will have more experience, a better network of contacts, and perhaps even more cash to invest. Each age group has its pros and cons but a major advantage to starting now is the flexibility and energy that comes with youth.

Myth 4: Entrepreneurs love riskAnother common misconception is that entrepreneurs love risk and that you have to be a big risk-taker to become an entrepreneur. However, when it comes to risk preferences business owners aren’t that much different from the general public. If you asked an entrepreneur to leave their car unlocked while shopping they would view the risk of theft to be just as high as anyone else’s assessment. There’s a possible key difference, however: entrepreneurs are generally more confident and optimistic. When reviewing a business opportunity they have a strong belief in their ability to profit from a venture. In contrast, other people are likely to see threats where entrepreneurs see opportunity.6 On that account, entrepreneurs are not risk-taking enthusiasts. They simply believe that if they work effectively they can turn risk into reward.




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Myth 5: Nine out of ten businesses failOne of the most common myths in entrepreneurship is that nine out of ten businesses fail. Fortunately, the statistic is an exaggeration. It’s too simplistic and ignores a component that, if removed, leads us to forget an even more bizarre reality: over a long enough timeline all businesses come to an end. A vivid example of this phenomenon is that of the world’s oldest business, the Japanese company Kongo Gumi. After running for an impressive 1,400 years the company ended in 20067 – an impressive run, no doubt, since the average life span of a company is 40–50 years.8

The ultimate end of all businesses, which by the way should not worry you, given the timespans involved, highlights an important point: when we talk about business failure rates we also have to consider a time component. A more telling statistic should tell us how many businesses fail over a specified period of time. Fortunately, this data is available and it is more encouraging than the usual nine-out-of-ten-businesses-fail mantra (see Figure 1.1).

7,0006,247

5,192

17%

38%

3,87851%

3,0922,575

59%65%

2,181

70%

1,867

Survival of New Companies6,000

5,000

4,000

3,000

2,000

1,000

Start Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

80%

70%

60%

50%

40%

30%

20%

10%

0%–

Surviving Companies Proporation of Failures

Figure 1.1: Data from research on survival chances of new businesses.10

According to a study by researchers from the University of Sussex and Barclays Bank, only one in six businesses (16.98 percent) fail in the first year. Over time this proportion increases, but even after six years, 30 percent of the original companies are still running.9 So next time someone tells you that nine out of ten businesses fail, ask them, ‘after how many years?’

With that said, it’s worth acknowledging that statistics are informative but not always instructive. Taken alone, the above numbers tell you




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nothing about the kind of things you can do to enhance your chances of success (more on this in Part 3). The numbers reflect a select group of businesses that might be completely different from your venture. As such, don’t assume that your fate has already been sealed. Your chances are better than you think!

Investor’s Insight Vinod Kholsa, founder of Kholsa Ventures

The business of investing in companies is risky because only a few make it. But billionaire investor Vinod Kholsa sees it another way: a 90 percent failure rate is not discouraging if you have a 10 percent chance of making 100 times your money.11 Bold entrepreneurs don’t concern themselves with how poor the odds are. Instead, they envision success and focus on making it real.

Myth 6: Starting a business is straightforwardFew people believe that starting a business is easy but many underestimate the effort it takes. Entrepreneurs generally work longer hours and at the early stage of a venture don’t get paid much. According to research from the UK, entrepreneurs work an average of 52 hours a week. That’s 63 percent longer than traditional employees.12 In America the renowned investor David Rose says he has never met an entrepreneur who works fewer than 60 hours a week. He believes that starting a business is an ‘all-in sport’.13 You can’t do things half-heartedly. Once the engine gets going you have to commit fully (more on this in Chapter 15).

In addition to the long hours there’s usually little to no salary in the early stages of a venture. The founders of Innocent Drinks, for example, didn’t have any income for 12 months. It took them four years before they could earn a salary of £40,000, which was the same amount they had left at their corporate jobs.14

Paradoxically, entrepreneurs are happier than most people are. In a global survey of over 197,000 individuals, authors of the 2013 Global Entrepreneurship Monitor Report15 found that entrepreneurs score




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higher on ratings of happiness and life satisfaction when compared to non-entrepreneurs. So while it’s harder to start a business it’s also often more satisfying than regular employment. You enjoy more creative freedom and the hours fly by when you’re working on something you really care about.

Myth 7: You need lots of moneyYou don’t always need a lot of money to start. The amount of cash you will need depends on the type of business you hope to start. For instance, there are many examples of people who started an online business for less than £100 but went on to make six-figure incomes.16 On the other hand, a small coffee shop that seats about 20 people might cost you between £15,000 and £20,000 to set up.

The general pattern is that service companies have lower costs while product-based businesses (restaurants, manufacturers, retailers) tend to have higher costs. Regardless, in Chapter 15 we will look at some of the ways you can start with a minimal amount of resources.

As a side note it’s worth pointing out that there is a danger to having too much money at the start of a venture. You may be tempted to spend money on every problem. For example, if you aren’t generating enough sales you might be inclined to spend more money on marketing even if the product is not satisfying customers. In contrast, being short on resources instils a stricter discipline. You are forced to consider the underlying issues as to why something isn’t working, instead of using the brute force of cash to attack every problem.

The truth about entrepreneurshipYou may have never considered entrepreneurship until now. You may still be at university, or you may be a graduate. Regardless of your current position it’s never too late to start a business. The odds of success – especially if you are educated – are better than most people think; you don’t need a million dollar idea; your age hardly matters; and it’s possible to attain the business skills necessary to become an effective entrepreneur. We will return




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to what these skills are in later chapters but first we need to define entrepreneurship.

Chapter summary

� The statistic that ‘nine out of ten businesses fail’ is inaccurate. So don’t let it put you off.

� You don’t need a grand idea to start a business. Many entrepreneurs started with less-sophisticated concepts but went on to develop fantastic businesses.

� The average age for first-time entrepreneurs is 45. But if you start sooner you can take advantage of the flexibility and energy that youth usually brings.

� Starting a business is harder than doing a normal job but entrepreneurs enjoy what they do and many are happier than most people are.

� You don’t have to be a big risk taker to be an entrepreneur but you do need to have confidence in your abilities to succeed.

� You don’t need lots of money to start a business. In fact, not having a lot of cash will make you more disciplined and frugal.

� Entrepreneurs are made, not born. So you can always cultivate what it takes to become an enterprising individual.

Reflection

What other impressions do you have about entrepreneurship? What gave you those impressions? How true are they? Are there counterexamples? How have these impressions influenced your thinking?

Spend some time reflecting on the answers to these questions. You might find that some of the ideas you have about entrepreneurship are true, while others are unfounded and are holding you back.

Useful resources

� Video: The 10 Myths of Entrepreneurship (2012) by University of St. Gallen (HSG)https://youtu.be/G8gRkJ9cnzo




Chapter 1

Why is it worth watching?It highlights additional myths about entrepreneurship and introduces the entrepreneurial method, a theory about entrepreneurship that focuses on entrepreneurs starting with what they already have; choosing business ideas based on what is an acceptable loss; making the most of surprises and uncertainty; and forming partnerships. You can learn more about the entrepreneurial method here: http://www.effectuation.org/learn/effectuation-101

� Book: The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By (2009) by Scott Shane

Why is it worth reading?This book debunks more than 60 myths about entrepreneurship. It’s somewhat academic but worth reading if you’d like to learn more about the economics of self-employment.



Index

Age, in entrepreneurship, 2–3Assets, 124–5

Balance sheet, 123–5Brainstorm, 58Business plans, 160–3

Cash management, 120Co-founders, 149–153Comfort Zone, 44Communication, 70Competition, 78–81, 142Confidence, 15–6Convergent thinking, 58Cost management, 123Customers, 153–7

Decision-making, 70Differentiation, 113Divergent thinking, 58, 75–6

Education, 19, 42, 57Employability, xviiEncouragement, 18, 24Equity, 124–5Experience, 17–8, 21–2

Failure, 4, 16, 20fear of, 56

Focus, 70, 82–3, 93

Goals, 20Graduate advantage, xvi

Happiness, 5–6

Ideas, generation of, 59evaluation of, 141–5finding business, 133–8myth of, 1

Influence, 31Insight, 80–1Inspiration, 60–1Intellectual property, 145

Liabilities, 124–5Limited Liability, 10Luck, xvi, 36

Metis, 82Minimum viable product, 158–160Motivation, 30, 46, 50

Networking, 136Niche markets, 90–1

Optimism, 44–6, 100

Passion, theories of, 33entrepreneurial, 35–6

Perseverance, 30, 44–48Pivot, 163–4Pre-Mortem, 42–3Problem-solving, 47, 134, 137–8Profit,

gross, 122net, 122

Profit and loss statement, 120–3Purple cows, 92



Index 183

Rapport, 106–7Relationships, 48Remarkability, 92–3Resourcefulness, 78Revenue, 121Risk, 3

Start-up capital, 6, 126–8Success, 41–2

Tactics, 77, 83–4Team, see co-founders

Unique selling point (‘USP’), 144–5, 157–8

Values, 68–9Versatility, 83–4Viral marketing, 94Virtuosity, 69Vision, 67–8

Word-of-mouth, 90



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