Forming of Entrepreneur Thinking

1. Indroduction – The Entrepreneur’s  Job

“Most people tend to their usual daily business and have enough to do at that.
Most of the time such people are on slippery ground and the effort to stand straight exhausts their energies and suppresses all appetite for further exploration.
They simply do not want to perish, they want to earn their daily bread in the proven way. They do not have the disposition to experiment with something new.
Even when it occasionally happens that they have an idea that this or that might be done much better or easier – they lack the moral courage to try.
They do not have the force and the leisure to think the matter through, they cannot risk the basis they have established for their existence.
The daily work keeps them down, organisation as well as the influence of their colleagues inflict untearable chains on them.
This is the masses. A minority of people with a sharper intelligence and with a more agile imagination perceive countless new combinations.
They look at everyday events with more open eyes and a wealth of ideas suggests themselves on their own.
Many people belonging to this minority rescue enough freshness from the daily routine, allowing them to further pursue some of those ideas and give them concrete form.
But that is not enough. Similar obstacles also exist to these people, they too have to dedicate their energy to the chosen path in order to avoid ending up paying for their ideas with their economic existence.
Should they not do so, nothing ever happens and such insights will have no more practical implications than dreams in the realm of fairies.
And even very carefully elaborated ideas are so worthless for practice that the “practitioner” in most cases has but a smile left for them, and excessive contriving of plans is considered a mental defect.
Not without justification. Often, the only implication is that the static activity of such conjurers of plans is suffering.
But at least they establish the preliminaries, the fruits of which, however, they hardly ever will enjoy.

Then there is an even smaller minority – and this one acts. It does not matter whether they have conceived the plan of their activity themselves or have picked up one of the many plans that the just mentioned type is incessantly producing.
You can always have the new combinations, but what is indispensable and decisive is the act and the force to act.
It is this mental constitution we sought to characterize.
It is this type that scorns the hedonic equilibrium and face risk without timidity.
He does not consider the implications a failure will inflict upon him, or care whether everybody depending upon him will lose their keep for old age.
He does not care at all what his equals and superiors have to say about his enterprise, and his daily work has not left him without force and courage.
And whatever his situation, whether he urgently needs further employment, or can abundantly satisfy all his needs – he is tempted by the act.
The decisive moment is therefore energy and merely the “insight’”.
The latter is much more frequent, without leading to even the most simple act.
What matters is the disposition to act.
It is the ability to subjugate others and to utilize them for his purposes, to order and to prevail that leads to successful deeds – even without particularly brilliant intelligence”.
(Dr. Joseph Schumpeter “Theorie der wirtschaftlichen Entwicklung”, Leipzig, 1911) translated of „American Journal of Economics and Sociology, April 2002

The path to entrepreneurship, self-employment, owing and managing a business, can begin at any time by happenstance or by design.
“An artist has developed an improved surface for drawing and painting.
He has found that some art supply stores are interested in carrying is.
After producing some in his garage he has become frustrated with that activity and with the interruption of his art work.
How best can he benefit from his invention?”

Or

“Two women, one al lawyer and the other a beautician, have designed what they believe to be better backpack for a mother co carry her baby.
Both have some acquaintance with business, but neither has previously been involved in manufacturing and selling a product. How should they start?”

No situation is a “typical” jumping off place for becoming an entrepreneur.
As these two examples illustrate, many starting points are possible.
Both are described further in cases that appear later.
Examples will illustrate even more variety.

What does it take to become a successful entrepreneur?
It is hard to think of a single statement in reply that is not either complex or incomplete.
Is the answer “a million dollars to capitalize a new business?”
With that amount, a would-be entrepreneur could hire a lawyer to form a corporation, rent an office, take out an advertisement in news-papers, and put up a sign saying “inventions wanted, capital available.”
Meanwhile, most of the money could be invested to earn interest which would finance the office until a “hit product” came in.
Then the capital could be invested to produce and sell the invention.
If such an invention did not turn up, then the money could simply be left invested, the profits would continue, and the venture could be called a success, all thanks to one key ingredient, capital.

So another answer to the question of what it takes to become a successful entrepreneur might be “whatever those start-ups have that major venture capitalists would invest in”.
But this answer too has its inadequacies.
One is that not all companies venture capitalists invest in are successful.
About 20 percent fail entirely.
Roughly another 60 percent become investments the capitalists are sorry they made, either because although the ventures in which the money was invested survive, their profits are too low, or because although profitable the ventures cannot be sold and the capitalists are stuck with their capital tied up.
For the remaining 20 percent of their investments to make up for shortcomings of the less satisfactory 80 percent, the few real winners must generate very large profits indeed.
It is at that top 20 percent of winners must generate very large profits indeed.
It is at that top 20 percent of winners that the venture capitalists must aim.

2. Characteristics of Entrepreneurs

People new to the subject of entrepreneurship sometimes ask what characteristics determine who will be an entrepreneur.
One person may take advantage of an opportunity that arises while another does not.
Is there something different in those two people’s makeup that decides who will do what?
Or does each of them operate from a different vantage point that somehow directs their decisions for them?
Decades ago scholars began looking for personal determinants of entrepreneurial proclivity.
Their studies gave some indications, albeit of arguable strength.
Entrepreneurs seem to score slightly higher on tests of achievement motivation, striving for goals that require challenge but that are achievable.
Entrepreneurs seem to believe that they, not their environment or their treatment, determine what becomes of them.
Entrepreneurs seem to place especially high value on personal independence, choosing their own hours, and doing what they choose rather than what they are told.
There are two problems with these studies. One is that the measurements are made after the subjects become entrepreneurs, so that their experiences may skew the test results.
The other is that the results deal with group averages, which may have no meaning for an individual.
The judgment of one consultant who had started several companies and also worked with many other entrepreneurs, Dr. Joseph Mancuso, was that “If nothing else, my experience hat taught me that it is nearly impossible to predict what makes a “successful” entrepreneur”.
Then he posited an “Entrepreneur’s Quiz” for someone to “see if you’ve got what it takes to be an entrepreneur” based on observations some have made that

an entrepreneur tends, among other things, to be

1. the first-born in a family
2. the child of self-employed parents
3. married
4. between 30 and 40 years old
5. a moderate risk taker
6. uncomfortable working for others

A longer list of similar questions was proposed by Dr. Phil Shragge, a successful Canadian entrepreneur.
Some personal qualities he suggested as favourable for entrepreneurship including having
7. worked in a small business or in close contact with the chief of a small division
8. ventured as a child
9. lived in three or more cities
10. been fired
11. worked in several functional areas of business
12. had improvement ideas rejected
13. a preference for doing, rather than planning, things.
14. a tendency to set long-term goals and stick of them
15. an inclination to accept workable solutions even if they aren’t perfect
16. a preference for games of skill rather than luck
17. a liking for solving problems, including seeking help from others
18. a tendency to view failures as learning opportunities
19. a tendency to seek situations where personal initiative is possible

Still other qualifications were drawn from an examination of the histories of especially successful entrepreneurs, conducted by Mitton.
Such entrepreneurs, he found, possessed the following:

20. a big-picture perspective
21. an ability to spot unique business opportunities
22. a tendency to commit totally to a cause
23. a need for complete control
24. a utilitarian view of what is right
25. an appetite for uncertainty
26. a tendency to use contacts and connections
27. an attitude that embraces high competence
28. special know-how

Another characterization of successful entrepreneurs, made by Robert Kunze, an outstanding successful venture capitalist, was that “Almost to a person they are daring, single-minded, egocentric, disenchanted with the status quo, impatient, and obsessive.
Many also are brilliant, innovative, charismatic workaholics. Some are jealous, greedy, angry, grandiose, messianic, hateful and sociopathic.
The single quality every successful entrepreneur shares is the ability to endure an all-or-nothing world.”

One of the first questions Kunze said he asked those who came to him for money, was why they wanted the life of an entrepreneur.
Few, he observed, gave the obvious answer, to become rich and famous.
“When I prompt them with that answer, “ he said, “they nod, grin and blush a bit.
A few entrepreneurs actually tell me they aren’t in it for the money. I always assume that means money is all they want”.
Another famously successful venture capitalist, Arthur Rock, had a somewhat different answer: “I’m looking for entrepreneurs who ask, “How can I make this business a success? – not “How do I make a fortune?”.

These venture capitalists specialized in high-technology ventures based on innovative products developed by highly trained an experienced engineers and scientists, to achieve multimillion-Dollar sales within an very few years.
Of seven ventures described by Kunz, one failed, two earned a million Dollar or less for their shareholders, one earned 85 Million Dollars, and the average produced around 30 Million Dollars for an average shareholder investment of around 10 Million Dollars, all within seven years or less.

3. “Entrepreneur” Defined

Thus far, we have been discussing the image of the entrepreneur and the interest that he creates without clearly defining who the entrepreneur is and in what sort of activities he engages.
We have two recent efforts to define the entrepreneurial role from which we shall draw: Cole (Business Enterprise in Its Social Setting) represents the endeavours of a group of economic historians to breathe life into history and economics by focusing on the actors in the drama.
Rather than treating economic history in terms only of impersonal factors, the entrepreneurial historians have emphasized the decisions and acts of wilful men caught within a network of social and economic forces but nonetheless interpreting and acting upon events and shaping the course of history.
Out of this interest, they have developed a behavioural and, in our opinion, realistic approach to history and economic growth and change.
Harbison/Myers (Management in the Industrial World) are institutional economists with strong behavioural leanings who also have been somewhat critical of the sterility of impersonal economics in explaining economic change and development.
They too have sought to reconsider the role of the entrepreneur and to raise him from the status of an impersonal, profit-seeking computer to a flesh and blood, living, human being motivated by sentiments, cultural influences, and intelligence.
As such Harbison/Myers fit in with a number of modern economists who are concerned with a rejuvenation of current economic models.

Although theoretical economists have made room for the entrepreneur as a decision-maker and actor in economic events, he has typically been cast in the role of a rational man who makes optimal choices in an environment of very limited and highly specified dimensions.
As such, his function is confined to that of a kind of computational link between impersonal forces on the one hand and foregone conclusions on the other.
In short, it has not been necessary to give much attention to the entrepreneur in economic analysis since any rational person seeking optimal choices within a highly specified environment would reach the same conclusions and act in the same way.
Something of the same kind of disregard has occurred among economic historians who have analysed economic events as though they were related to philosophical, cultural, and religious influences, but hardly at all to business activities and the efforts of men to build business enterprises.

If we bring the entrepreneur front and center, just who is it we are talking about?
Is he the man who conceives of a potential new business?
Is he the man who promotes the necessary relationships required for the new business to come into existence?
Is he the consolidator?
Is he the man who administers and operates the organization once established
Is he the man who risks his capital in new ventures?
These may appear to be unimportant questions. But if we are attempting to identify the catalytic agent in society which sets into motion new enterprises, new combinations of production and exchange, we are dealing with an extremely important economic function – which may have a great deal to do with the industrialization of underdeveloped countries and the continued growth of our economy.

Cole and /Harbison/Myers agree that entrepreneurship is essentially a broad organizing and decision-making function.
Cole defines entrepreneurship as “The purposeful activity (including an integrated sequence of decisions) of an individual or group of associated individuals, undertaken to initiate, maintain, or aggrandize a profit-oriented business unit for the production or distribution of economic goods and services”.
Harbison/Myers subscribe within certain limits to A. Marshall’s definition:
“The task of direction production so that a given effort may be most effective in supplying human wants is so difficult under the complex conditions of modern
life that it has to be broken up and given into the hands of a specialized body of employers, or to use a more general term, of business-men;
who bring together the capital and labour required for the work; who arrange or “engineer” its general plan, and who superintend its minor details.

Both sources agree the entrepreneurial function is generally performed by a group rather than an individual.
Cole says: “ The aggregate of individuals which together and cooperatively develop the decisions might perhaps be denominated the “entrepreneurial team”.
It is really a team in the senses  (a) that each person or officer plays a particular positions or represents a particular aspect of the total enterprise, and (b) that each such person or officer is in some measure a complement of the others as far as the total purposes of the unit are concerned.
Harbison/Myers put it this way: “(Marshall’s) assumption, made for purposes of abstraction, that the qualities of entrepreneurship are found in one person can apply in reality only to the very small firm. In most enterprises, a hierarchy of individuals is required to perform entrepreneurial functions”.
They rather frankly move in that direction and talk in terms of management, managerial resources, and high-talent manpower which is their primary concern.
However, they still reserve a special place for the so-called organization builder who they say is “the catalytic agent in the process of industrialization, i.e., he acts and reacts with the economic and social environment to bring about economic change”.
For them, the “organisation builder” is truly the entrepreneur.
Their term organization builder is an apt description of the entrepreneur, if by organization they mean an ongoing system involving productive activities as well as transaction and exchange.
After all thinking  of the entrepreneur in the way  we can following Schumpeter: “Everyone is an entrepreneur only when he actually  ‘carries out new combinations’, and loses that character as soon as he has built up his business”.

In any event, we should like to make a distinction between the independent or innovating entrepreneur and the bureaucratic entrepreneur.
While the functions performed may be the same once the business has been established, nonetheless there is a world of difference between the creation of a business enterprise and climbing a hierarchical ladder within an already well-established structure.
I personally  mean “ the innovating entrepreneur, who has developed an ongoing business activity where none existed before.”

4. General Business Knowledge – A Presupposition for Successful Entrepreneurs

Conventional business functional area courses convey knowledge that ist applicable to businesses in general, whether start-ups or ongoing firms.
It includes the familiar categories of marketing, finance, operations, “people” topics, business law, accounting, and the like.
It may also include management of research, and development, engineering and other subjects that work on product and service improvement frontiers.
Each of these subjects, although typically taught with an orientation toward established businesses, applies also to start-ups.
An entrepreneur with prior knowledge of methods used in market research for established firms may to better equipped to check out the likelihood of customer acceptance for a new product or service to be offered by a venture.
One with knowledge of accounting should be better able to prepare records and financial statements that a banker or investor will find reassuring in making a decision to advance money to the start-up, and so forth.

Problems in each of business functional areas are bound to arise as the company gets started.
The entrepreneur’s responses will presumably be based on common sense, prior work experience, possibly formal study of business and counsel from others.
How effective the “answers” must be to make the venture succeed will depend upon how strong the venture’s profit margin and strategic position are relative to competitors.
A high margin enjoyed by a monopoly product or service, such as one protected by patents or licenses, can compensate for substantial mismanagement.
Without such protection, however, managerial error can easily lead to failure.
Moreover, even with such protection it is likely that the degree of success will be higher if the business side of the venture  is more competently performed.
Learning the facts and methods of business may help raise the level of competence with which the business side of the venture is performed.

This learning can be undertaken a two different times, either before the venture is begun or after.
Most entrepreneurs become involved in a start-up through some sequence of unanticipated events, find a need for certain know-how, sometimes through calamity, and then seek it, often through trial and more error than they would like.
The “catch” in this learn-only-when-needed approach ist that
1. to a person without such knowledge the need for it may not be apparent, and
2. . when the knowledge becomes cutely needed there may not be enough time available to seek it out.
3. Countless other tasks and decisions may simultaneously be clamouring for attention.
4. Developing the product or service, working out deals with customers and suppliers, arranging facilities and production, obtaining permissions from government agencies, setting up records for taxes and many other chores also require acquisition of special knowledge.
5. If a least some of the necessary knowledge can be acquired in advance the bustle of start-up activities may go more smoothly.

5. General Entrepreneurship Knowledge

More specialized information within each of the functional business areas that is applicable to start-ups in general more than to ongoing firms can be considered general entrepreneurship knowledge.
For instance, in the area of finance the entrepreneur can learn about various sources of capital used for funding ventures by reading about them in some books and articles on the subject.
They treat such subjects as what sources exist, what types of ventures use them, what kinds of terms are struck in making deals, how well venture funds perform, how venture capitalists participate beyond putting up money, how the procedures of banks or leasing-companies differ from those of investors and many other topics associated with raising start-up capital.

Alternatively, an entrepreneur can wait until there is need for capital, and then go looking for it, usually by asking people and proceeding from one referral to another until he or she either gets the capital or gives up.
Acquisitions of entrepreneurial know-how on an “as needed” basis can and often does work, although the acquisition process will take time, and also may consume mental processing capacity that could be used for other tasks of getting the business started: setting up shop, arranging for supplies, making advertising decisions, seeking out needed employees, and so forth.

Entrepreneurship knowledge can include simply awareness of what venturing is like.
Most entrepreneurs learn this by doing, but study in advance can add insight.

      6. Opportunity- and Venture-Specific Knowledge

An important aspect of opportunity specific knowledge is that it is unlikely to be found in business curricula.
It usually involves insightful awareness of a market and possibly also of an available resource or technological frontier.
This sort of knowledge most often comes from work or hobby experience..
An other category, venture-specific-knowledge, includes further information that those who have opportunity-specific- knowledge require in order to capitalize on their ideas.
To illustrate, if the entrepreneur believes there is a potentially viable market for a new radio station and wants to start one to exploit that opportunity, he or she will need information about how to obtain a licence.
Some of that information can be read in books and government literature.
But much of the essential venture-specific information is too specialized for publication.
For instance:
- What frequencies are available in a particular transmitting site?
- What real estate is available to use for a station location? How much does it cost? Who owns it? What do they want?
- Who are the potential listeners and what might they be interested in hearing?
- What do competing stations of the area offer and what do they leave out?
- What should the shows, be for this particular circumstance, how will they be acquired, from whom, and at what cost?
- Where can equipment be obtained? What will it cost? Who can operate it and how can their services be obtained?
- What is the best month to begin operations, and what hours are best to be on the air?
- How much financing will be need, when and where will it com from, and on what terms?
- What will be the operating expenses of this station, at this site, and with this particular format?
- Who will buy air time for advertising, what type and at what prices?

Three ways to obtain knowledge helpful in answering questions like these are
(1) to take a job in such a business and learn it as an insider,
(2) to undertake a start-up of the venture and learn what is required step by step, or
(3) to develop a business plan for the venture through study and investigation.

Each of these three approaches has its strengths and shortcomings.

      7. Why Study Entrepreneurship?

The proposition that studying about entrepreneurship might help make someone more likely to succeed as an entrepreneur is often challenged with “can entrepreneurship really be learned?”
Evidence that such study can be helpful is to date mostly anecdotal.
Those who have taught the subject occasionally hear former students say, “That entrepreneurship course certainly helped me in starting my business”.
But who can say whether they are representative or only exceptional?

A survey of 600 business major alumni of a College in USA who had graduated six to 10 years earlier found that participation in entrepreneurship courses tended to correlate with later owning a business.
Half had taken one or more entrepreneurship courses in college and the other half hat not.
In the half that had not, the survey found that 17 percent had a business, which illustrates the unsurprising fact that study o entrepreneurship is certainly not prerequisite for becoming a successful entrepreneur.
However, the other half of the sample displayed some contrasts.
Among those who had taken an undergraduate entrepreneurship course, 27 percent were found to be owning a business six to 10 years following graduation.
Among those who had taken an entrepreneurship course at MBA level, 34 percent now owned a business.
Thirty in the sample had taken both an undergraduate and a graduate entrepreneurship course, and over 50 percent of this group was found to be owning a business.
That certainly doe not prove that courses caused alumni to become self-employed.
Perhaps those who as students were already oriented toward starting businesses were simply more likely to choose entrepreneurship courses.
But at least the courses didn’t dissuade them.

Study of entrepreneurship may or may not be significantly helpful for those bent upon venture start-up. Others who may want to learn about the subject include:
- Some who might work with entrepreneurs in other capacities such as bankers, consultants, suppliers, partners or employees.
- Some who would like to consider entrepreneurship as a career path and might find that knowledge about the subject helpful in deciding whether to pursue it or not.
- Some who were planning on another career initially but would like to understand more about entrepreneurship as a possible alternative for later career change.
- Some who regard it as an interesting aspect of business and want to expand their knowledge for the satisfaction of learning.

Ventures sometimes start part time and shift to full time, and sometimes develop the other way around.
It is rare for a substantial enterprise to emerge directly from  an entrepreneurship course or to be started by a graduate immediately following school, but occasionally that too happens further cannot be predicted.
The role of formal study is ambiguous in entrepreneurship as well as in other business field.
Some people learn to be journalists without going to journalism school and artists without going to art school, others learn business without going to business school.
Most business people, regardless of their success levels, haven’t in the USA attended business schools.
Countries like Japan and Germany became industrially successful without business schools, though mor recently they have been adding them.
And most entrepreneurs start companies without having taken courses in entrepreneurship.

8. Learning Entrepreneurship Trough Venture Planning               

A would-be entrepreneur may wonder, “Once you have an idea for a venture, where do you start?”
A good first step may be to sketch out a venture plan on paper.
This can begin with
- a brief description of what the product or service is
- what it will do for the customer,
- what it will cost to produce,
- why customers might be expected to buy it and
- how much they will probably be willing to pay.

These notes may only represent guesses. Much more work may be needed to treat these and other topics of importance. For instance on idea and venture plans screening.
But brief notes can form a suitable beginning.
Eventually, the venture will have to demonstrate that it can make money, so another early step is to guess whether that is possible by making some tough calculations.
What is the break-even sales volume (fixed costs per month divided by the difference between sales price per unit and variable cost per unit)?
Does that rate of selling seem reasonably possible?
How much capital will be needed to get started?
What level of return on investment or how short a payback period will the venture likely produce?
If the venture idea seems to hold up under such test, then more investigation and possibly action will be appropriate.
If not, it’s time to modify or drop the idea to seek a better one.Perspectives from which to view the idea include those of
- resource provider and
- operator as well as
- owner.

Even if all three are embodied in one person it will be a good idea to cider hem separately.
Will this business adequately pay back any investor?
Who will be capable of performing the venture and will they want to?
Will this business be worth he time, cost and trouble if it succeeds?
Is the risk that it will fail worth taking?

Writing a business plan may not answer these questions as surely as might be wished, but it is usually a low-cost, low-risk starting point.
Both in and after graduation from school, preparing and critiquing g business plans can be an effective learning exercise.
For a real venture, although most start without formal written plans, the plan can serve as a helpful guide as well as a device for persuading people to advance capital.
Most business plans cover the same general topics, but there is no standard format, as can be seen by comparing plans of different ventures.
For a starting point, however, here is one possible outline:
a. Table of Contents. List page numbers of important sections, including appendice.
b. Executive Summary. In one or two pages hit the main points of the plan with specific figures and facts. This summary should not bei vague just because it is short, and it should include the man “punch lines” of the plan.
c. Company Description. The description should tell what the venture will make and sell. (Sketches and diagrams may be helpful). It should state what benefits customers will receive and how, as well as what the distinctive competence and hoped for sustainable competitive advantages of the company will be.
d. Sales. Tell who will buy from this venture and why, how many will do so, how much they will pay and why, how the selling will be done, by whom and on what timetable. If possible present specific evidence that people will buy, such as market research data or letters of intent.
e. Competition. Describe other choices customers currently have for obtaining such a product or service and how those choices can be expected to change. What companies offer such choices, what their competitive advantage are now and how those will likely change in the future should be stated.
f. Technology. Tell how well-proven the venture’s product or service and the venture’s ability to produce it are. What else will be done to keep its performance up with or ahead of the times? What sorts of legal protection, such as patents, will e available and when?
g. Operations. Say who will produce the output of the venture and how the venture’s production capability will compare to that of competitors. What, if any, special location and facilities will be required, and at what cost and timing?
h. Financial Aspects. Include pro forma income statements, along with balance sheets and a cash flow forecast which breaks down figures monthly for two years and annually for three with footnotes explaining assumptions and important details behind the figures. The plan should indicate how and when any lenders or investors recover their cash.
i. Team. Provide data on founders’ capabilities that will be critical to success of the venture, what their task-relevant training and experiences are, and what their stakes in the venture will be.
j. Appendices. Present details behind the body sections in order to keep the body down to about 20 pages of main facts and exhibits plus the summary and table of contents. Financial statements, resumes, market research details, copies of patents, letters of intent and such can appear here

Although venture plans can be written and helpful at any time, most are prepared part way along in a venture when some kind of as start has been made and more money is needed.
The entrepreneur and any partners will have used personal savings to make a prototype, open a shop or otherwise get the venture partly going.
They will see the cash supply running out and seek more, either from a bank or other investors.
Financers will welcome any accomplishments of the venture to date that indicate it has been moving toward success.
The entrepreneur will prepare a cash flow forecast to show in Rubels how that will happen.
Those Rubels imply occurrence of other events which also must be described to show there is a basis for believing the figures.
Hence other supporting information such as market data, resumes showing prior accomplishments of the venture’s founders, diagrams showing how he venture’s product or service will work and will compare to competitors, and whatever else is important to the venture’s success should be included in the plan.

9. The Entrepreneur – the Most Important Factor

The path to being your own boss isn’t a walk in the park.
In fact, it is more like a challenging mountaineering expedition that demands the right equipment your personal skills and abilities must be up to task, and your family also has to be prepared to support you.
Naturally, your professional and entrepreneurial know-how are extremely important.
Pack your “entrepreneur’s backpack”, and make sure that you have everything you need, including for emergencies.
Distribute your gear evenly and check it repeatedly to make sure that you have really thought of everything.
The checklist below will help you here. The more questions you can answer “yes” to, the better you fulfil the prerequisites for starting your own business.

Your attitude toward the being in business for yourself

- Can you be sure that you are not starting your business out of necessity but because you are convinced that being self-employed is right for you?
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- Are the goals that you want to achieve by being in business for yourself realistic?
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- Have you thought through your business idea all the way and are you convinced of your chances of success?
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- Will you take enough time to prepare for the start of your new business venture?
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- Are you able to paint a realistic picture of you future-day-to-day existence as an entrepreneur?
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- Do you know any entrepreneurs (for example in your social circle)?

Your personal prerequisites

- Can you imagine the physical and mental stress you will have to deal with, particularly in the first years?
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- Are you healthy and in good physical shape?
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- Do you make a point of eating right and exercising regularly?
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- Have you talked to your family about what will change when you go into business for yourself?
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- Is your family supportive?
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- Are you ready to work exceptionally long hours (including evenings and weekends), particularly in the first few years?
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- Are you prepared to have no vacation in the first view years?
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- Do you keep a cool head even when things get hectic?
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- Can you recover from stress situations quickly?
- Do you follow through on goals you set for yourself?
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- Do you tackle unpleasant issues and try to solve them?
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- Do you see setbacks and disappointments as challenges to do better next time?
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- Do you have the impression that you are equal to the tasks that confront you?
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- Do you seek help if you can’t solve a problem yourself?
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- Can you accept criticism without feeling insecure?
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- Is it your experience that you have learned from your mistakes?
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- Do you know your own personal and performance limitations?
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- Are your able to assess the pros and cons of risks and a decision on this basis?
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- Do you have personal contacts that you can also use in your new business?
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- Do you like approaching people?
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- Do you have the impression that you can convince the people you talk to with your arguments and get them excited about your ideas?
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- Are you good at putting yourself in another person’s place?

Your attitude toward money

- Can you sleep well even when you don’t have a certain income?
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- Are you willing and able to cut back financially at the beginning if necessary?
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- Can you handle money in a disciplined fashion and create reserves (e.g. for paying off loans, taxes) even when this means initially deferring purchases (such as a new car or a new desk)?
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- Have you looked into financing possibilities?
- Do you already have a good relationship with the customer representative at your bank?
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- Do you have the financial reserves to survive a dry spell (approx. 6 months)?
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- Would your spouse/companion finance your joint living expenses for the initial period?
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Your professional know-how

- Does your professional experience to date fit with your plans and the industry in which you want to start your business?
- 
- Do you have formal qualifications that will convince others that you are a “master of your trade”)?
- 
- Are you able to use the software that is standard in your industry?
- 
- Do you know what you can do, and particularly what you can’t do?
- 
- Can you compensate for professionals deficits (continuing education, partners, employees)?
- 
- Are you aware of the forecasts for your industry?
- 
- Do you make sure that you are always up to date professionally?
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Your entrepreneurial know-how

- Do you have commercial or business knowledge and  do you know, for example, how to prepare profitability and liquidity forecasts, what basic bookkeeping looks like or what a VAT tax declaration entails?
- 
- Do you know what official or formal requirements you need to fulfill?
- 
- Do you have experience in training and managing employees?
- Can you delegate tasks?
- 
- Do you understand marketing and sales?

- Have you ever conducted sales negotiations?
- 
- Do you already have contacts to potential clients/customers, suppliers and/or cooperation partners?
- 
- Do you know what is important in choosing a location?
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- Do you know where you can obtain information and advice?
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10. Checklist: Is your Business Idea Really Well Thought Out?

Founder
- Do you have the necessary
- - personal prerequisites?
- - professional prerequisites?
- - entrepreneurial prerequisites?

Technology
- Are the technological preconditions met (e.g. sufficient level of development, controllability)?
- Can you create these prerequisites (with support where appropriate)?

Market
- Does your idea fit in with industry trends?
- Are you entering a growth market?
- Have you really found a market niche?
- Do you understand the advantages and disadvantages of your idea from the point of view of the market?
- Do you know your potential customers?
- Are there enough buyers in the market for your idea?
- Are your competitors beatable?
- Do you know what you advantage over the competition is?
- Are you prepared for the possible reactions of the competition?
- Will you be able to maintain your price on the market?
- Do you understand sales and marketing?

Work entailed in implementation
- Do you understand the legal and commercial basis of you planned enterprise?
- Will you be able to do all the work involved in preparation and founding?
- Can you obtain help, partners, etc.?
- Do you understand in essential resources time, money and know-how?

11. SWOT Analysis

A SWOT analysis helps you to describe your personal (internal) strengths and weaknesses and the opportunities and threats which your environment poses for your startup.
The SWOT analysis provides you with on overview of the many factors that influence the success of your startup.
Describe the strengths and weaknesses of you personal situation.
What are the reasons in favour of starting the business (e.g. professional qualification, management experience)? What are the reasons against, or what deficits do you need to compensate for (e.g. a lack of commercial knowledge)?
The opportunities and threats related to the market. What opportunities do you see for your enterprise on the market (e.g. rising demand, rapid market entry)? What threats exist on staring up (e.g. too many competitors, difficulty in retaining customers)?

Use the SWOT analysis during your entire founding and startup phase and gradually fill out the fields.
Also, be sure that you respond to change.
For example, if you acquire commercial knowledge, this aspect changes from a weakness to a strength.
When prepared in this was, the SWOT analyses always gives you an up-to-date picture of all important factors that affect your startup.

Internal    Personal strengths Personal weaknesses

External    Market opportunities   Market threats

12. Tips on Founding a Small Business

If you are planning to start a part-tome or micro-business, you should…

 look specifically for a business idea for an enterprise that requires the lowest possible overhead (e.g. rent,payroll and investment (e.g. office equipment). Keep your costs as low as possible.

 Check whether you really can run your company in your limited time on the basis of this idea. For example, this is not realistic for a retail business.

 Consider which business ideas also allow scope for development, e.g. from a typing service to a secretarial service for companies or from a breakfast service for office workers to your own café`.

If you are still employed…

 whether and how much you can work on your own outside of your regular employment is regulated in your employment contract (and elsewhere). In some cases, your employer’s consent is required.

 What ever the case, be sure to consult your attorney. Make sure hat your business idea does not compete with your employer.

If you are unemployed…(for instance the case in Germany)

 you are only eligible for unemployment insurance as in Germany if your part-time occupation takes up les than 15 hours per week. Once your work time reaches 15 hours, you are no longer considered unemployed and will no longer receive unemployment benefits from the Labor Agency. For this reason, once you reach 15 hours you should apply for a start-up subsidy, which is intended especially to help unemployed persons (those receiving the “ALGI” benefit) to start their own business.
       If you are below the 15 hour limit, the profits from your independent business activity will be deducted from you unemployment benefit.

I hope a lot of my listeners will be in the near future an “entrepreneur”.