Entrepreneurship Department of Horticulture and Food Technology

1
EntrepreneurshipDepartment of Horticulture and
Food Technology
Nazier Paulsen e-mail Paulsen_at_pentech.ac.za C
ell 083 235 6628 Work 021 9596817
2
Outline for Today

• Entrepreneurship in South Africa
• Changing South Africa
• Traits of an Entrepreneur
• Risk Analysis
• Selecting a Project

3
Entrepreneurship? Its importance

• What is it?
• Many different definitions
• Rapidly changing World
• 21st Century realities
• - SA economy growth
• - Corporates
• - Job losses, re-structuring
• - Modernisation, e-commerce
• Vital for job creation

4
Entrepreneurial RevolutionSAs Entrepreneurial
Revolution

• High potential revolution
• Small business revolution
• Barefoot revolution

5
Entrepreneurship

• Born or made?

6
Some vexing questions about the entrepreneur
herself

• Are entrepreneurs born?
• Is there a prototype of the entrepreneur?
• Are all small business owners entrepreneurs?
• Are entrepreneurs different from managers?
• Can people be taught to be entrepreneurs?
• Is there a better time to pursue
  entrepreneurship?
• What makes for a successful entrepreneur?

7
Some vexing questions

• Are entrepreneurs born? no
• Is there a prototype of the entrepreneur? no
• Are all small business owners entrepreneurs?
  yes and no
• Are entrepreneurs different from managers? Yes
  no
• Can people be taught to be entrepreneurs? no
• Is there a better time to pursue
  entrepreneurship? no
• What makes for a successful entrepreneur?
  ?????

8
Some Common Traits and Characteristics Associated
with the Entrepreneurial Individual
Achievement Motivation Internal Locus of
Control Calculated Risk-taking Tolerance of
Ambiguity Independence Persistence/Perseverance/Te
nacity Self-confidence Dedication/Strong Work
Ethic Organizational Skills Sense of humour
Opportunistic Adaptability/Versatility Initiative/
Energetic Resourcefulness Creativity Perceptivenes
s Assertiveness Persuasiveness Passionate Problem
Solver
9
Entrepreneurs

• Predisposing factors
• Role model
• Early sales experience
• Early P L responsibility
• Experience in the industry
• Ability to see patterns where others see chaos
  disorder
• Education

• Aptitude
• Its possible
• Interpersonal skills
• Team building maintenance
• Ideas
• Opportunities
• Analytical

10
Non Entrepreneurial Attitudes

• Trait
• Invulnerability
• Macho
• Anti-authority
• Impulsiveness
• Perfectionist
• Know-all

• Action
• Unnecessary risk taker
• Irrational battling to prove oneself
• Doesnt listen to advisors, clients
• No analysis
• Paralysis misses the opportunity
• Turns off the team

11
OPPORTUNITY IS .
a set of forces that come together in the
external environment to create a need (market
opening) for a new business concept from which
profit or returns can be realised
12
Pursuit of opportunity

• Ideas are not the same as opportunities
• Opportunities are perishable
• -----Ideas last forever
• Ideas are free
• ----Opportunities require work
• Window of opportunity depends on changes with
  shifts in Technology
• Demographics
• Competitors
• Consumer

13
Sources of Opportunity

• Industry and market changes
• Changes in perception, mood or meaning
• The unexpected e.g.. War, floods, epidemics
• Demographic changes
• Technologies disruptive continuous

14
Entrepreneurial triggers

• NEGATIVE TRIGGERS
• Survival
• Job dissatisfaction
• Lay offs/ retrenchments
• Business in trouble
• Divorce
• Death

• POSITIVE TRIGGERS
• Fresh start
• Opportunity knocks
• Curiosity
• Desire to improve ones lot
• Now or never
• Windfall
• Deliberate search

15
Risk
RISK
Actual outcome
Expected outcome
RISK magnitude of loss x probability of loss
16
The Odds

• Study of 218 Ventures over 10 year
• Total loss 15
• Partial loss 25
• 5-10 x original investment after tax 8
• gt10 x original investment 4
• Modest return 48

17
The Odds

• Study of 218 Ventures over 10 year
• Total loss 15
• Partial loss 25
• 5-10 x original investment after tax 8
• gt10 x original investment 4
• Modest return 48

18
Risk in a new venture

• The risk in a new venture will be higher if
• Amount of capital is high
• Investment in fixed assets is high
• Payback period is long
• Product is totally new
• Product is the only one produced by the venture
• No alternative uses for product
• Product can easily be copied

19
Most common causes of failure

• Managerial incompetence
• Lack of experience
• Poor financial control
• Failure to plan
• Inappropriate location
• Lack of inventory control
• Improper attitudes
• Inability to make the entrepreneurial transition

20
Managing risk

• Renting rather than owning equipment facilities
• Using multiple sources of financing
• Building an entrepreneurial team whose members
  have different but compatible skills
• Undertaking multiple ventures simultaneously with
  varying degrees of risk

21
Why products fail

• Market too small
• Poor match for company
• Not new/ not differentiated
• No real benefit
• Poor positioning
• Inadequate support
• Competitive response
• Changes in consumer tastes

22
Global Entrepreneurship Monitor South
Africa 2002 and 2003 John Orford, Mary Lynn
Foxcroft, Eric Wood Carina Fischer, Mike
Herrington, Nick Segal
23
What is GEM

• International study of entrepreneurship
• It includes
• an annual adult population survey
• interviews with experts on entrepreneurship
• Additional country specific research
• Its purpose is to understand
• International variation in entrepreneurial
  activity
• Is entrepreneurship is associated with growth
• What factors are associated with entrepreneurship

24
(No Transcript)
25
TEA 2003 (persons per 100, 18-64)
26
TEA 2001 to 2003
27
Start-ups / new firms(2002)
Salaries 0 3 months
Salaries 3 42 months
15th
29th
0.55 m
1.3 m
28
Job creation potential ( 2002 )

• Start-ups
• 1m entrepreneurs
• 0.13 ave jobs

• New Firms
• 0.46m entrepreneurs
• 2.17 ave jobs

• 140,000 jobs
• Share of employment
• 4

• 1m jobs
• Share of employment
• 28

1/3 of all jobs in privately owned firms
29
Start-ups / new firms(2002)

• Start-Up New Firm
• All GEM countries 1.3 1
• Developing countries 1.7 1
• South Africa 2.4 1

Low success rate of start-ups
30
Project Ideas

• Group size
• Project ideas