Entrepreneurial Pathways -- Overview Draft

ENTREPRENEURIAL PATHWAYS
An Overview
Introduction & Background
A fundamental key to building a first rate Entrepreneurial Development System (or EDS) centers on understanding the diversity of entrepreneurial talent within a community. By understanding the various types of entrepreneurs within a local area, development efforts can craft pathway strategies to enable their development and growth. By breaking out of the one-size fits all approach to business development we can build more effective and impacting entrepreneurship-based strategies. This paper Entrepreneurial Pathways, An Overview is the first in a series of strategy briefs developed specifically for community based development practitioners. This series is being developed in partnership with the Valley County Nebraska Economic Development Board. These pathway strategies are being developed and deployed in Valley County as part of their comprehensive EDS game plan. Special thanks are extended to Bethanne Kunz and Nancy Glaubke for their collaboration in this important work.

When it is all said and done there are five basic types of entrepreneurial talent; Limited Potential, Potential, Business Owners, Entrepreneurs and Civic Entrepreneurs. By understanding the entrepreneurial talent in your community more effective development strategies can be created to serve specific groups.

Five Types of E Talent

Entrepreneurial Market Segments

Any communitys population can be segmented into the following entrepreneurial groups: Type Type Type Type 1 2 3 4 Limited Potential Potential Entrepreneurs* Business Owners* Entrepreneurs*

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 1

Entrepreneurial Pathways -- Overview

Type 5 Civic Entrepreneurs**

* These three types all refer to for-profit business entrepreneurs. ** Civic entrepreneurs can include government officials, non-profit organizations, civic groups and others that focus on community betterment without a profit bottom line.

Type 1 Limited Potential

Ones seven year-old son may be very creative and ones 80 year-old mother may have a lifetime of wisdom but both are unlikely to engage in entrepreneurial pursuits. The fact is, the majority of residents of any community have limited potential for engaging in entrepreneurship. Many in our community Do not volunteer in our communities. They really do want to work 9 to 5 for someone else. They are unable because of age, disability or some other factor to actively engage.

Life changes and changed circumstances can alter a persons orientation towards entrepreneurship. Motivation is clearly the most important factor influencing entrepreneurial behavior. Dead end jobs, the desire to make more money or the opportunity to realize a dream can move someone into entrepreneurship.

Life Changes

While the vast majority of our residents fall into this Type 1 Category that does not mean that they will always have limited potential for entrepreneurship. For example, that seven year-old son will become a high schooler and can really get into their own business. Someone today who is content working for someone else may loose their job and be driven into entrepreneurship to make ends meet. Circumstances do change and can change peoples orientation towards entrepreneurship.

Type 2 Potential Entrepreneurs

Nearly everyone at one time or another has the potential to become entrepreneurial, if not an entrepreneur. There are basically three subtypes of potential entrepreneurs: Youth. Aspiring.

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 2

Entrepreneurial Pathways -- Overview

Startups.

Surveys of first graders generally document that anything is possible. At that age one can become President of the United States, a profootball player and even an entrepreneur. The United States of America is one of the most entrepreneurial nations on the earth. But still, only one in 10 American adults actually engage in this process of creating and growing a business. Research strongly suggests that places with higher startup entrepreneurship rates do better economically. By somehow inspiring and motivating individuals to consider entrepreneurship as a career track we fill the economic pipeline a bit fuller. As more youth consider entrepreneurship or there are more aspiring entrepreneurs, we can experience higher startup rates. Potential entrepreneurs have specific challenges and needs. Their pathway from dream to action is unique and requires a specific set of supports from our community.

Filling Up the Pipeline

In economic development terms, entrepreneurship is a bit of a numbers game. Generally speaking the more aspiring entrepreneurs in a community leads to more startups. The more startups can lead to more growth businesses and bottom line economic development impacts jobs, investment and tax base.

Type 3 Business Owners

The saying goes that anyone who is in business has some entrepreneurial traits but that not everyone in business is an entrepreneur. At first this is a hard concept to get but with a little digging it becomes clear and important. Entrepreneurship involves that creative process of dreaming, starting, growing, re-inventing or somehow evolving ones business. For most business owners they are more like workers in their business than entrepreneurs creating their business. There are three major subtypes of business owners: Survival. Lifestyle. Re-starts.

Even though most business owners are not entrepreneurial all the time or even some of the time. Because they are in business, chances are they have the necessity and opportunity to be more entrepreneurial.

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 3

Entrepreneurial Pathways -- Overview

Sooner or later, every business owner must evolve their business, and in doing so, they enter the ranks of entrepreneurs.

Type 4 Entrepreneurs
Entrepreneurs are actively engaged in the creative process of evolving their venture. Here we focus on three basic subtypes: Growth-Oriented. Serial. High Growth.

Economic development reality can not be denied. The research is clear and compelling. A primary difference between growing, stagnating or declining regional economies is the presence of entrepreneurs. The more entrepreneurs (particularly high growth entrepreneurs) that are present the stronger will be the regional economic performance. Most rural communities will not have many serial or high growth entrepreneurs there may be some. But every rural landscape has growth-oriented entrepreneurs that hold the greatest immediate promise for economic development. Creating strong pathways of support for these entrepreneurs makes powerful strategic sense.

Low Hanging Fruit

Every rural community has some low hanging economic development fruit. These development opportunities center around successful existing businesses with growth orientations. Finding these growth entrepreneurs and supporting their development can result in the most immediate development outcomes.

Type 5 Civic Entrepreneurs

The creative process of visioning and growing for-profit businesses is not the sole domain of the business world. In fact, major parts of our community, society and economy do not have profit as their bottom line. Civic entrepreneurs engage in creating and growing ventures, services and programs important to a functioning community and our quality of life. They create great schools, wonderful recreation systems, social services for those in need and provide essential government services.

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 4

Entrepreneurial Pathways -- Overview

Like business entrepreneurs civic entrepreneurs are not born they are made. Communities should not take for granted that they have enough civic entrepreneurs to ensure their success. Like business entrepreneurs, civic entrepreneurs must be identified, supported and enabled to grow. Creating specific development pathways for civic entrepreneurs can ensure high quality functioning communities enabling a second to none environment for business entrepreneurs and all community residents.

Pathway Strategies
This overview strategy brief provides a comprehensive introduction and framework for building specific pathways for specific entrepreneurial talent. At this time, the RUPRI Center for Rural Entrepreneurship is developing specific entrepreneurial talent pathway strategies for the following groups: Growth Oriented Entrepreneurs. Aspiring & Startups. Business Transfers. Youth. Civic Entrepreneurs.

Why Pathways?
A pathway enables a person to move from where they are to where they want to be. We employ the idea of pathway strategies very strategically. Simply put, communities need to create pathways that support a startup entrepreneur as they launch a new venture or an existing business as its reaches for an expanded market. Creating specific pathways of support can stimulate, accelerate and increase the success of a communitys entrepreneurs.

Each pathway strategy includes the characteristics of the group, hands on stories about real entrepreneurs, information on their development needs and wants, a review of best practice associated with the group and specific strategy stories. Strategy protocols are also under development at this time for these five groups.

Questions & Additional Information

Don Macke Co-Director Center for Rural Entrepreneurship

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 5

Entrepreneurial Pathways -- Overview

A Rural Policy Research Institute national research and policy center with founding support from the Ewing Marion Kauffman Foundation. 317 South 12th Street Lincoln, NE 68508-2197 Voice 402.323.7339 Fax 402=323=7349 Email don@ruraleship.org -- Web -- www.ruraleship.org Taina Radenslaben Executive Assistant 402.323.7336 or taina@ruraleship.org
***END*** HTC:VC:Pathways-Overview

Concept Idea

The Touch/Cost Reality

Research on entrepreneurs clearly suggests that one-on-one specialized assistance is preferred to one-size-fits-all approaches. Economic realities however - has driven our business development programs to standardized approaches (e.g., workshops, seminars, computer business planning modules, etc.). A bit more digging into the research and field experience provides a more complicated and sophisticated reality. Figure One illustrates this relationship between the sophistication of help and the customization of help that different types of entrepreneurial talent need and want. Figure One Support Required by E Talent Type

The sophistication and customization of help increases exponentially as we move from the brand new aspiring entrepreneur and the seasoned serial entrepreneur. Someone thinking about starting a business for the first time is generally willing to be patient. For these folks, general information is helpful and appropriate. They are seeking basic information about business regulations, how to hire an employee, setting up books and how to price their product/service. As this end of the entrepreneurial talent continuum they are willing to participate and benefit from group activities such as multi-week long training classes. However, as we move up the continuum, both the sophistication of

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 6

Entrepreneurial Pathways -- Overview

help required and the desire for real time customized assistance increases. If a community wants to help an established business reach a new market they had better be prepared to work one-on-one with very specialized assistance meaningful to the needs of that entrepreneur. As noted earlier, there is a cost relationship between that corresponds with this continuum of support. As one might suspect, the cost of assistance goes up dramatically with the customized and highly sophisticated levels of assistance. But there is also a cost-benefit relationship as well. An aspiring entrepreneur who participates in a five- week business planning class may only cost the community a $500 and correspondingly creates a one-person micro enterprise (a relatively low quality job in terms of compensation & benefits). A great cost/benefit relationship (as benchmarked against the typical $20,000 per job creation standard). The existing business seeking to grow to a new market may require a community investment of $25,000 of intensive and very sophisticated assistance. A huge cost at first appearances. But if that entrepreneur creates five high quality jobs the cost benefit ratio is just $5,000 per job created. This is still a great bargain when benchmarked against our industrial development standard. Figure 2 illustrates this relationship. Figure 2 Cost Benefits by Level of Assistance.

RUPRI Center for Rural Entrepreneurship

December 7, 2004 Page 7