Top Ten Myths of Entrepreneurship

Top Ten Myths of Entrepreneurship


This is a guest post by Scott Shane as a follow up to his entrepreneurship test. He is the A. Malachi Mixon Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of seven books, the latest of which is The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. Many entrepreneurs believe a bunch of myths about entrepreneurship, so here are ten of the most common and the realities that bust them:

It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.

Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.

Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.

Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.

Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.

Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are mostlikely to fail.

The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.

Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.

Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.

Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.

http://blog.guykawasaki.com/2008/01/top-ten-myths-o.html#axzz1QKfnf1W3

7 Ways Kids Can Earn Money

7 Ways Kids Can Earn Money

Sometimes, the things you want cost more money than you have. What do you do? You can either save up by not spending on other items, or you can try to earn some extra money.

With a little work, a little creativity and an okay from your parents, you can start adding to your piggy bank.. Here are a few ideas to get you started:

1)Help out more at home.
Ask your parents if you can help with any big projects around the house: cleaning or organizing the garage, basement, or attic. Or you can help tidy closets, straighten up the laundry area. You can think of more.

2)Help people take care of their yards.
Tell your neighbors that you would like to be their helping hand. Offer to help with grass-cutting, snow shoveling or leaf-raking. You can pull weeds, water lawns, or pick up branches during spring clean-up. Make flyers and drop them off at houses in your neighborhood.

3)Wash cars.
Turn your driveway into a neighborhood car wash.

4)Babysit little kids.
Once you’re legally old enough, take a babysitting class. Local hospitals usually
offer these classes. Parents are always looking for a good sitter.

5) Start a dog-walking service.
Feed, watch or walk dogs. If you’re really responsible, you might offer to care for other people’s pets — like lizards and birds —while they’re busy or away from home.

6) Sell unwanted items.
Set up a “rummage sale.” Some parks and schools hold big rummage sales. You could be a part of them. Some stores sell “used” toys and clothes. Ask your parents about this idea. They can help you find a store in your neighborhood.

7) Sell candy or bakery.
Bake some cookies and brownies and sell them at events.

http://www.themint.org/kids/ways-kids-can-earn-money.html

10 Leadership Principles from the Top

10 Leadership Principles from the Top
Posted on June 16, 2011 by BDS


Last weekend I was at a conference in Utah listening to some very influential and successful people. Among them were self-made multi-millionaires, founders of an Inc. 500 company and people so inspiring movies were made about them (one of them, Chris Gardner from the movie “The Pursuit of Happyness”). A topic that stood out from the conference was the leadership principles it took these people to become successful.

Here are the 10 Principles of a Leader:

Leaders dream big dreams
Leaders never quit, they adjust
Leaders understand the value of work and focus
Leaders chase their passion, not their pension
Leaders are risk takers, they are willing to fail in order to succeed
Leaders master the art of communication
Leaders improve themselves continually
Leaders are willing to make difficult decisions decisively
Leaders can be lonely
Leaders move from success to significance

Please comment and share.

Bryan Sommer

http://kidsmoneymanagement.com/2011/06/16/10-leadership-principles-from-the-top/

Have you been looking for a better way to organize your money? Try the “Jars System”

Money Management Jars System
Posted on January 14, 2011 by BDS
Have you been looking for a better way to organize your money? Try the “Jars System”.

The biggest difference between the wealthier and the poorer is their ability and willingness to “manage” their money. There’s a proven formula for dividing and managing your money that can make THE difference in your financial life.

Every time you get paid your money should be sorted into six categories, accounts, or “jars”. This not only keeps you aware of budgeting, it also focuses you on creating for all areas of your life.


1.Necessity - This is what you need to pay your basic bills – rent/mortgage, utilities, car, insurance, food, etc. You want to get to a point where this is no more than 55% of your income.

2.Financial Freedom Account – This is your golden goose, the money you put away, invest and allow to grow. Eventually the interest, investment yields/passive income is what you will use to become financially free. 10% of every check should be put into this account.

3.Long Term Savings – this is where you put money to save up for something big you’d like to purchase or do, i.e. a vacation, a new computer, a special piece of furniture, etc. 10% goes in here.

4.Play – This is money you must use every month to do something fun, something just for the sheer pleasure of it. It’s money you must spend every month on something that you regularly would think twice about because you may think of it as splurging. Splurge. If you only have a few dollars in this account (10% goes here as well), get creative on what you can do with those few dollars that would be a splurge.

5.Education - Your education is vital to your growth. Ten percent of your money goes toward this fund for taking a class, workshop or seminar that you’ve always wanted to take or one that’s necessary for your professional expansion.

6.Give – Philanthropy is an acknowledgement that you’re part of a greater whole. We would encourage that 10% go here. However, for some people, beginning with 5% allows them to get comfortable and grow into a larger sum.

Getting into the habit of managing your money in this way is a critical first step toward wealth building. Congratulations on taking the journey!

This “Jars System” for money management was first introduced at T. Harv Eker’s Millionaire Mind Intensive.

http://kidsmoneymanagement.com/2011/01/14/money-management-jars-system/

T. Harv Eker’s JARS Money Management System

T. Harv Eker’s JARS Money Management System

By Achiever on Dec 1, 2007 in Financial Success, Millionaire Mind Intensive, Millionaire Mindset, T. Harv Eker

During the 1st Millionaire Mind Intensive seminar in Singapore, Harv Eker introduced to people from all over Asia about the world’s simplest, easiest and most effective money management system.

Harv suggested that everyone can use the JARS system to better manage one’s money. The key between rich and poor or middle class people is their ability to manage their money. Rich people are excellent money managers and poor or middle class people are less-savvy when it comes to managing their money. And of course, there are many other distinctions that set the rich, poor and middle class people apart. I will go into that on my later blog post as I intend to discuss more about the JARS money management system in this post.

The most important part of money managing is separating your income into different accounts for specific purposes. I will outline the various accounts for the JARS system as well as their % breakdown of how one should divide their money to manage below:

Financial Freedom Account (FFA) = 10%

Long Term Savings For Spending (LTSS) = 10%

Education (EDUC) = 10%

Necessities (NEC) =55%

Play = 10%

Give = 5%

Anyone can start using this JARS method of managing their money even though if you think you do not have a lot of money to manage. The key is to develop a habit of managing your money, but not how much money you have available for you to manage. One must get into the habit of managing their own money, and you can start with as low as $1 to begin using this system.

Here are how the JARS system works:

Financial Freedom Account (10%) - Put 10% into your FFA whenever you receive money, such as your salary. You must NEVER, NEVER spend the money that you put inside your FFA account. Any money inside the FFA account can only be used to purchase or acquire passive income streams to grow your money. You may spend the interest acquired from the FFA if you choose to, although it is recommended that you do not. Keep the interest inside the FFA to grow your capital and interest faster. Think of your FFA as the golden mother goose that lays you golden eggs, if you spend the money inside the FFA, it is akin to killing your mother goose that will bring you golden eggs (your riches). Instead, keep the baby geese (FFA’s interest) that the mother goose is giving you, and you can grow more baby geese (your wealth) even faster. As you may already get it, the idea is to create a golden goose! You may prefer to think of the FFA as a legacy that you can leave behind for your future generations. If you are one who believes in the law of attraction, this FFA is actually your money magnet. Keep putting more money into your FFA and attract more $$$ into your life! Put $$$ into your FFA account everyday if you can, even if it is just a penny.

In summary, the time to spend your FFA capital is NEVER! When you stop working, you get to spend the eggs but never the goose!

Long Term Savings For Spending (10%) - Put 10% into your LTSS whenever you receive money, such as your salary. The money inside LTSS can be used for major expenditure such as savings for your children’s education, buying a house for yourself, keeping aside contingency funds.

Education (10%) - Put 10% into your EDUC whenever you receive money, such as your salary. You can use the EDUC funds for your self-education, for examples, books, seminars and events etc. Everyone needs to learn, especially in this changing world. Grow your comfort zone through learning and doing. If you are not growing, you are dying!

Take this quote from Ben Franklin:

“If you think education is expensive, try ignorance!”

Necessities (55%) - Put 55% into your NEC whenever you receive money, such as your salary. You should use the funds inside your Necessities account to settle all your essential bills such as phone bills, electricity, clothings, eating, driving, travelling, hair etc. If you cannot survive on 55%, simplify your lifestyle. Instead of driving a car, perhaps you can take public transport, or drive a Honda instead of a BMW. Buy Converse jeans instead of Armani. There are people who cannot live on 55% NEC when they started the JARS system but over time, these same group of people are able to simplify their lives and live on 50% or lesser!

When your usual needs for instant gratification kicks in, think this:

“Wealthy people think Long term. Poor people think Short term.”

Play (10%) - Put 10% into your Play account whenever you receive money, such as your salary. You are supposed to spend this money every month to pamper yourself. The key is to BLOW this Play money away every month so that you will feel good about having money and spending it! You should feel guilt-free when you spend this money every single month. Maybe you go for massages once every month, now you can use this money to really pamper yourself by going twice, thrice or as much as you want. Or you can try ordering champagne during dinner at a restaurant if you do not usually do. Or buy yourself a new gadget. Anything outrageous that you can do to pamper yourself and makes you feel really good. You are recommended to BLOW this money every month. However, if you need to save up for things such as short trips getaways that require a little more money, you can accumulate them up to a few months, say a quarter, before you use them.

Give (5%) - Put 5% into your Give account whenever you receive money, such as your salary. You can use the money for donations to charities, use it to help someone in need. Giving is important. If you choose to give 10%, take the extra 5% from your NEC and change the % allocated for NEC from 55% to 50%.

In my opinion, this is really a great Money Management System as it covers most aspects, if not all, on how one usually spend their money. It is so amazing simple, yet profound, method of better managing your money, regardless of how much money you already have! It can work for people who never save their $, or for people who needs to give to feel a sense of contribution to others/society, for those that need to learn and grow through learning, for anyone who just needs a little more help in managing their money.

http://secretsofachievers.com/financial-success/t-harv-ekers-jars-money-management-system/