An introduction to entrepreneurship

This article is the first in a series focusing on entrepreneurship and the role of the management accountant. A primary objective is to help management accountants relate better to entrepreneurs and their needs. Consequently, they will be able to provide better service to this growing and important client group. For those management accountants who are entrepreneurs at heart, the series is also designed to be somewhat of a "how to" manual!

When we talk about entrepreneurship, we are generally talking about the creation of new ventures. These ventures have been conceived and created by individuals where nothing previously existed. Entrepreneurship is therefore very much focused on individuals rather than enterprises.

It is the individual who must have the vision of the venture and the energy to make it a reality. Besides possessing drive, motivation and commitment, he or she must we willing to make sacrifices and take calculated risks in the interest of the new venture.

It is the individual who must identify the opportunity, evaluate its feasibility, determine if it really is a viable business, and bring together the resources to make the vision a reality. This includes building the management team, preparing the plan, and seeking financing.

While an entrepreneurial venture will provide the founder with self-employment, all self-employment opportunities are not entrepreneurial opportunities. For example, if you buy a franchise, you will become self-employed. Operating a franchise, however, is often completely and fully specified in the franchise documents. Indeed, there is often little if any opportunity to be creative and entrepreneurial.

Franchises are well suited for individuals who do not want to create their own ventures and are not comfortable with the associated uncertainties. Many franchises provide an excellent return for the franchise owner. They will probably frustrate the true entrepreneur, however, as he or she must submit to the authority of the franchisor.

Self-employment may also be achieved by buying an existing business. While there is the opportunity to be entrepreneurial by developing new products or penetrating new markets, this action is not necessary. The owner of the business may choose to apply improved management skills to the existing business and concentrate on the bottom line.

Technical entrepreneurship is the creation of new technology-based ventures. Rather than starting a new barber shop or another hot dog stand, the focus is on ventures that involve technology, either the manufacture of a new product or the application of a new process.

The technical entrepreneur is therefore able to identify venture opportunities that take advantage of the benefits of some type of technology.

How can you prepare yourself to be a technical entrepreneur? As with any entrepreneurial venture, the key is experience in the industry. The more technologically or market-sophisticated the new venture, the more crucial is this experience. Indeed, most of the successful technology-based start-up ventures are launched by individuals who have "grown up" in their industries and with the associated technologies.

If you are thinking of becoming an entrepreneur, your first step is to examine yourself. Are you a person with vision? Are you comfortable with the level of risk starting a new venture will force upon you? Is your family supportive? Are you a creative and resourceful individual? Can you survive the start-up stage financially? Do you have the drive, motivation, commitment, and stamina required?

List your specific skills, your experience, your management skills, and any technologies with which you have some specialized or unique knowledge. If you do not have all the elements necessary for success and want to be an entrepreneur, start now to acquire the requisite experience, both technical and managerial. You will need it!

Every new idea that you think of will not be a viable opportunity for you. Only about 1% of the patents granted in Canada provide a commercial return to the inventor. This statistic supports the experience of the Canadian Industrial Innovation Centre/Waterloo, a private, not-for-profit corporation that helps individuals commercialize technological innovation. The centre has evaluated over 5,500 new product ideas and assisted more than 22,000 Canadian innovators. Over nine years of operation, the centre has seen a commercial success rate of 1 to 2%.

From reviewing case studies of successful clients, the Innovation Centre has recognized that, while the idea itself must have commercial merit, a key ingredient for commercial success is the skills of an entrepreneur who can identify a market niche and develop a venture to fill it.