How do entrepreneurs use their resources to start businesses?
Unlike Oprah Winfrey, Linda Alvarado faced considerable obstacles when she tried to start her own
business. At 24, Alvarado had nearly everything she needed to start her own construction company. She had skills, education, experience — but no money. Because she was a woman, no bank would lend her the money to start a business in an industry dominated by men.
Alvarado’s parents mortgaged their home so they could lend her $2,500. In 1976, Alvarado founded Alvarado Construction. Her firm became one of the most successful construction firms in the country. How did she do it? “Perseverance and persistence have kept me going,” Alvarado says. Those qualities, among others, are what it takes to start a business.
An entrepreneur is someone who takes on the responsibility and the risk of starting a business with the expectation of making a profit Entrepreneurs come from every field of endeavor. The most successful are innovators and creative thinkers. They play a critical role in the economy. By creating businesses, they meet consumer demand for goods and
services, create jobs, and spur economic growth. Thomas Edison, for example, was not only a prolific inventor but also a brilliant entrepreneur. His genius lay in his ability to turn laboratory discoveries into practical inventions that people could use.
Consider the use of electricity to light homes and businesses. Edison did not invent the first incandescent lightbulb, but he did invent the first long-lasting lightbulb that could be used indoors. He also designed the first central power station and, with it, a distribution system for bringing electricity into homes and offices. Edison thus created an entire industry out of a single invention.
Mary Kay Ash, founder of Mary Kay Cosmetics, was a different kind of innovator. Ash wanted to tap into the entrepreneurial energy of women. In 1963, frustrated at the unequal treatment she received as a woman working in sales, Ash started her own company with a $5,000 investment She bought the rights to special skin-care lotions and creams and hired women to teach customers about the products, rather than pressuring customers to buy. Ash believed in “praising people to success” and rewarded her top saleswomen with pink Cadillacs. Her approach to business was unusual and successful. At the time of Ash’s death in 2001, Mary Kay Cosmetics had made more than $1 billion in sales.
Bill Gates, cofounder of Microsoft, was one of the first to see the enormous potential of the personal computer. In 1975, when Gates was 19 years old, he and his friend Paul Allen formed Microsoft and began developing software. Gates was certain that someday computers would be used in every home and office -and he wanted to be the one to put them there. For Gates’s visionary leadership in the information technology revolution, Time magazine named him one of the 100 most influential people of the 20th century.
What do Linda Alvarado, Bill Gates, and Mary Kay Ash have in common? They share certain traits that helped them to succeed. Although there is no single personality profile of the successful entrepreneur, most of them possess the characteristics that follow.
Ambition. Successful entrepreneurs are highly motivated people with the ability to see the big picture and to stay focused on the end result. They set goals for themselves and never stop striving to achieve those goals.
Self-confidence. Successful entrepreneurs believe in themselves. They feel certain that they can accomplish what they set out to do.
A willingness to take risks. Entrepreneurs are not afraid to risk their time. money. and energy on a new business idea. “The important thing is not being afraid to take a chance.” says Debbi Fields. the founder of Mrs. Fields Cookies. “Remember. the greatest failure is to not try. Once you find something you love to do. be the best at doing it.”
Energy and self-discipline. Entrepreneurs thrive on hard work. “The first requisite for success.” said Edison. “is to develop the ability to focus and apply your mental and physical energies to the problem at hand without growing weary.”
Perseverance. Entrepreneurs do not give up. “When you reach an obstacle.” advised Mary Kay Ash. “turn it into an opportunity. You have the choice. You can overcome and be a winner, or you can allow it to overcome you and be a loser.”
Problem solving ability. The ability to come up with solutions to problems marks all successful entrepreneurs. As Linda Alvarado put it. “I believe I will outwork most people in finding a solution,”
Organizational skill. Most entrepreneurs own and operate their own businesses, Thus the ability to manage time. resources. and people effectively and efficiently is critical to their success, “Good management.” said John D, Rockefeller. founder of Standard Oil Company, “consists in showing average people how to do the work of superior people.”
Ability to motivate others. Entrepreneurs are good at inspiring others to join their team, “As we look ahead into the next century.” says Bill Gates. “leaders will be those who empower others,”
Not everyone who sets out to be a business entrepreneur ends up a success, As Figure 9,2 shows. only 46 percent of new businesses survive after five years of being in business. That means 54 percent of new start-ups more than half `" fail. “Once you’ve hit five years. your odds of survival go way up.” observes economist David Birch. “Only two to three percent of businesses older than five shut down each year.”
The risk of failure is not the only challenge facing those who hope to become entrepreneurs, Raising money to finance a new business can be difficult. and new business owners are often beset by financial insecurity, Finding the right employees can also be a challenge, In addition. people who run their own businesses typically work long hours. often with little or no pay.
Madam C. J. Walker. an African American founder of a hair-care product company and the first woman to become a millionaire, put it this way: “There is no royal. flower-strewn path to success & If I have accomplished anything in life, it is because I have been willing to work hard.”
With all the drawbacks to starting a business, why would anyone want to be an entrepreneur? The answer lies in the incentives-matter principle. Running a successful business of one’s own can bring great rewards. The most obvious reward is the nearly unlimited potential to make money. Look no further than Oprah Winfrey and Bill Gates for proof of that. Yet money is not what motivates most entrepreneurs. They simply love what they do. Says Winfrey, “1 would do what I’m doing even if I weren’t getting paid.”
Part of the personal satisfaction of entrepreneurship comes from the freedom it affords. As a business owner, you are your own boss. You set your own hours, and you do what makes you happy. Entrepreneur Stephen Fairchild, for example, was always an avid spelunker, or cave explorer. In 1972, he sold everything he owned and quit his job to take over a company operating tours of Boyden Cavern, a cave in Giant Sequoia National Monument. He is now head of a company that owns other show caves and operates tours of a gold mine. “Being a ’cave entrepreneur’ is the perfect marriage of hobby and career,” Fairchild says. “I take extreme pride in what I do, but more important, I thoroughly enjoy what I do!”
Many entrepreneurs also take satisfaction in knowing that they are contributing to the economy. New businesses can breathe economic life into depressed areas, creating new jobs and helping to support existing businesses. Successful business owners often become community leaders who invest in community projects and give to local charities.
For Jerry Greenfield, cofounder of Ben & Jerry’s, a successful ice cream company, the chance to make positive change through business leadership was exciting. “We measured our success not just by how much money we made, but by how much we contributed to the community,” says Greenfield. “It was a two-part bottom line.”