Money doesn’t start businesses, people do. But people often need money for two things to complete the start-up process. The first are the living expenses of the start-up team; everybody needs to eat and a place to sleep. The second is for resources to implement the new venture. There is substantial variation in both the amount of funds required and when financial support is needed during the start-up process. There are, of course, a wide range of solutions developed for these challenges. New solutions for acquiring financing are constantly being invented—internet based crowdsourcing being one of the more recent.1 The major strategy for covering living expenses is to continue working while developing the new business. More than four in five nascent entrepreneurs are working or managing another business while they develop the new venture. The importance of attending to their day jobs is reflected by how long it takes to begin devoting full-time to the start-up initiative. As shown in Figure 7.1, for about two-fifths (41%) full-time attention generally occurs about eight months after beginning the business creation process. Others may have working spouses, be living with parents or relatives or, for older nascent entrepreneurs, relying on retirement income.
Paul D. Reynolds
Paul D. Reynolds
Being a successful entrepreneur is very satisfying—that is the good news. But effective business creation often involves adjustments in the initial business idea. Some change the business plan as the venture is being implemented. More problematic is that most that enter the start-up process never reach initial profitability. When a nascent venture is abandoned, the individuals involved usually find other ways to participate in the economy. Many, to be sure, are still interested in becoming involved as nascent entrepreneurs. About one in 25 (4%) report making an adjustment to the original business plan.1 About half are considered major variations that may involve dramatic shifts in the products or services; the other half are considered minor shifts in activity. As shown in Table 11.1, almost half (47%) make changes in response to new information about customer preferences or as a reaction to the competition. About one in six (16%) mention financial issues, such as lower revenue, higher expenses, or issues with access to capital. About one in ten (10%) are responding to regulations or other contextual factors. A smaller proportion mention the loss of a critical individual (partner, employee, or contact), unexpected time constraints or other issues.
Paul D. Reynolds
Committed nascent entrepreneurs, those serious about seeing if they can create a new business, are the majority of those pursuing business creation. Exploratory nascent entrepreneurs, who are making tentative steps but are not sure about this career choice, are a substantial minority. In either case, there are ten things to know about the entrepreneurial experience. 1. It can be very satisfying. The sense of satisfaction and self-confidence among those that create successful businesses is obvious at every turn. Further, most that get involved and discover that their initiatives may not be viable find it a rewarding experience and often pursue other start-up efforts. On the other hand, it is not for everybody and in most developed countries the majority do not participate in business creation.