The impact of any economic activity on the individual should be to develop a ‘sustainable livelihood’ or value. This is measured through the resources which are available to that person, in terms of capital. Here we define capital as a resource which can be stored, held or used for the benefit of the entrepreneur.A number of academic papers have discussed what forms of capital should be measured and how this should be analysed (Scoones, 1998; Berkes & Folke, 1992; Bebbington, 1999) especially when analysing sustainable rural businesses. The impact of the economic activity should therefore be measured by evaluating the development of the entrepreneurs’ capital, based on the eight forms of capital:
Cultural – Cultural capital functions as a social-relation within an economy of practices (system of exchange), and comprises all of the material and symbolic goods, without distinction, that society considers rare and worth seeking.
Experiential (Human) – We accumulate experiential capital through actually organizing a project or solving problems and developing solutions.
Financial – Money, currencies, securities and other instruments of the financial system
Intellectual – The value of a company or organization’s employee knowledge or any proprietary information that may provide the business or entrepreneur with a competitive advantage
Material – Non-living physical objects form material capital
Natural – Made up of the world’s stock of natural resources, which includes geology, soils, air, water and all living organisms
Social – The networks of relationships among people who live and work in a particular society
Spiritual – Practices of personal values, religion, spirituality, or other means of connection to self and universe.
Entrepreneurial activity may increase one or more of these capitals depending on the entrepreneur, the type of business and the stage of the business. This connection to capital also connects with Ahmad & Hoffman (2008) who specify the ecosystem of entrepreneurship as the combination of three factors: opportunities, skilled people and resources. These factors can be driven from our Capitals. Skilled People is intellectual capital. Entrepreneurial opportunity from our social and spiritual capital.
I think we should look at this set of capitals at both a personal, business and community level, its about a set of ecosystems. At any level not all of the capitals have to be used (A Buddhist priest on a personal level may never use Financial capital, An online blogger on a business level may never use Natural capital, A town council may never use the Spiritual capital).
Each entrepreneur has a unique set of capitals, which have specific generic root causes from the entrepreneur themselves, the business industry, the addressed market and locality ecosystem they are active. The skill is understanding which and a what level is required to lead a successful business at what stage.
The way we start businesses is changing and through academic research, additional knowledge, skills and tools, the process and issues around growing businesses have profoundly changed Entrepreneurship in the last twenty years. This article develops a new 9 Stages of Enterprise Creation model which is based on today entrepreneurial mindset and the business community ecosystem which molds entrepreneurs and allows their ventures grow.
The first three stages of the Enterprise Creation stages which emerged are: Discovery, Modeling, and Startup which form the new venture formation stages. The next three Existence , Survival and Success develop the business into a sustainable business entity. The last three stages: Adaption, Independence and Exit provide the entrepreneurship pathways for the entrepreneur. These final elements complete the entrepreneurship model by focusing on the success of the business, how the entrepreneur progresses beyond the business, their separation into different entities and the entrepreneurs eventual exit. The 9 Stages of Enterprise Creation are set out below:
Stage 1 – Discovery
This first stage of the 9 Stages of Enterprise Creation is centred around the focal competency of Opportunity recognition, creation and evaluation. These are the processes by which entrepreneurs identify and evaluate potential new business opportunities. An opportunity by definition is a favorable set of circumstances which creates a need for a new product, business, or service. Opportunity recognition is the process by which the entrepreneur comes up with a prospective idea for a new venture. Evaluating the opportunity takes research, exploration, and understanding of current needs, demands, and trends from consumers and others. The process of researching and surveying allows the product or service idea to develop, so that it can be modelled.
Stage 2 – Modeling
The second stage is about developing the business logic to create a business model. This is split into three parts and starts by setting out a Strategy, formulating a business model and setting the business processes to achieve the strategy . These form the key elements for the plan to start the business and, are an integral piece of submitting any proposal for an entrepreneurial or intrapreneurial business. The model should be underpinned by the resources available and those which may still need to be secured. Resource allocation and availability are extremely important to startups because sustainability and profit (not loss) depend on proper planning and understanding of the internal and external environments.
Stage 3 – Startup
The fourth stage is starting the enterprise. Once the resources detailed in the business plan are mobilised the entrepreneurial process can be effected and implementation can take place. In this stage the business may be trading or begin to research or develop a product. The aim of this stage is to have the processes in place so that the business can have a scalable, repeatable and profitable business focused on distinct customers within an identified market.
Stage 4 – Existence
At this stage the business has two core focuses; to gain enough customers to create a profitable business and, at the same time establishing production or product quality. The majority of businesses fail at this stage due, in part, to either one or both of these factors. At this stage the organisation is a simple one, the entrepreneur does everything and directly supervises subordinates, who should be of at least average competence. Systems and formal planning are minimal to nonexistent. The company’s strategy is simply to remain alive which requires the focal competency of tolerance of uncertainty, risk and failure
Stage 5 – Survival
At this stage the business should be a viable entity in terms of cash flow and resources, it has enough customers and satisfies them sufficiently with its products or services to gain repeat sales. The organisation is still simple. The company may have a limited number of employees supervised by a junior manager or supervisor. Neither of them makes major decisions independently, but instead carries out the rather well-defined orders of the entrepreneur. Formal planning is, at best, cash forecasting. The major goal is still survival, and the entrepreneur is still synonymous with the business. The entrepreneur starts to implement ideas through leadership and management which provides opportunities to scale.
Stage 6 – Success
Entrepreneurs at this point of the 9 Stages of Enterprise Creation have a number of options: capitalise on the company’s accomplishments, expand or, keep the company stable and profitable. The entrepreneur has a number of ways to capitalise, from exit to taking a ‘founders dividend’ from the business. If the entrepreneur want to expand then the core tasks are to make sure the basic organisation stays profitable so that it will not outrun its source of cash and, to develop managers to meet the needs of the growing organisation. Through the entrepreneurs leadership all managers within the business should now identify with the company’s future opportunities rather than its current condition demonstrating a success to its stakeholders.
Stage 7 – Adaptation
Businesses which reach this stage normally have a number of factors pushing them to adapt, these are normally grounded in changes either to the micro or macro environments. Businesses at this stage will normally be entering a phase of rapid change and will have to have secured the required finances to develop. At this point key management is in place with a set of operational systems. Operational and strategic planning are now a key focus. The organisation is decentralised and, at least in part, divisionalised. The key managers must be very competent to handle a growing and complex business environment. The systems, strained by growth, are becoming more refined and extensive. Both operational and strategic planning are being done and involve specific managers. The entrepreneur and the business have become reasonably separate, yet the company is still dominated by both the entrepreneur’s presence and stock control.
Stage 8 – Independence
A business at this stage should now has the advantages of size, financial resources, market share and managerial talent. Innovation and Intrapreneurship are now key factors in keeping the business in market position. The organisation has the staff and financial resources to engage in detailed operational and strategic planning. The management is decentralised, adequately staffed, and experienced. Business systems are extensive and well developed. The entrepreneur and the business are quite separate, both financially and operationally.
Stage 9 – Exit
The last of the Enterprise Creation stages is focused on exiting the business and making their separation permanent. An exit strategy will give the entrepreneur a way to reduce or eliminate their stake in the business and, if the business is successful, make a substantial profit. This stage removes the entrepreneur from primary ownership and decision-making structure of the business. Common types of exit strategies include Initial Public Offerings (IPO), strategic acquisitions and management buyouts. The organisation at this stage is generally profitable, has a definable set of resources with a clear and realistic strategy to continue. The CEO and founder(s) are separate.
9 stages of Enterprise Creation
The full paper which develops the 9 Stages of Enterprise Creation: Bozward, David and Rogers-Draycott, Matthew Charles (2017) Developing a Staged Competency Based Approach to Enterprise Creation. Proceedings of the International Conference for Entrepreneurship, Innovation and Regional Development. ISSN 2411-5320, can be found at http://eprints.worc.ac.uk/5377/
When we work with start-ups its important to provide an assessment on their journey within the startup lifecycle. Understanding where a startup is in their lifecycle allows us to assess their progress, providing mentoring to the founders and also provide a vision. The startup lifecycle is made of 6 stages of development, where each stage is made up of levels of substages, allowing for more granular assessment which helps pinpoint the main drivers of progress at each stage.
1) Discovery (or Pre-Seed)
Goal: This phase is all about discovering and validating whether you are solving a meaningful problem and whether anybody would “hypothetically” be interested in their solution. Milestones: Founding team is formed, many customer interviews are conducted, value proposition is found, minimally viable products are created, team joins an accelerator or incubator, Friends and Family financing round, first mentors & advisors come on board. Management Team : Founder(s)
Funding Requirements : £500 – £5,000 (always depends on the business type and technology requirements) Business Development Milestones : Validated Problem and potential solution Typical Funding Resources : Cash Average Valuation : Nil (Typical Technology Start-up) Time: 3-6 months (average for all types)
2) Seed
Goal: Development of a minimum viable product which can be shown to potential customers, sponsors and customers. Milestones: Founding team is formed, many customer interviews are conducted, value proposition is found, minimally viable products are created, team joins an accelerator or incubator, Friends and Family financing round, first mentors & advisors come on board. Management Team : (Core team) Founders, co-Founders, Mentor,
Business Development Milestones : Letters of intent or some preliminary relationships Funding Requirements : (Seed Capital) £10,000 – £50,000 Typical Funding Sources : Friends and Family financing round, first mentors & advisors come on board Average Valuation : £10,000 – £100,000 Time: 5-12 months (average for all types)
3) Validation
Goal: The Startup is looking to get early validation that people are interested in purchasing their product through orders or pre-orders with deposits. Milestones : refinement of core features, initial user growth, metrics and analytics implementation, start-up funding, first key hires, pivots (if necessary), first paying customers, product market fit. Management Team : (Entrepreneurial Lieutenants) At least one real manager, Founders, Mentors and Advisors Funding Requirements : (Startup Capital) £100,000 – £300,000
Typical Funding Resources : Business Angels, Grants, Business Development Milestones : Paying Customers Average Valuation : £1m Time: 9 months – 1 year
4) Established / Efficiency
Goal: The company refines the business model and improves the efficiency of their customer acquisition process. The business should be able to efficiently acquire customers in order to avoid scaling with in-effective processes. Milestones: value proposition refined, user experienced overhauled, conversion funnel optimized, viral growth achieved, repeatable sales process and/or scalable customer acquisition channels found. Management Team : (Risk takers) At least three real managers, Founders, Mentors and Advisors Funding Requirements : (Venture Capital) £300,000 – £500,000 Typical Funding Resources : Venture Capital Business Development Milestones : Profitable customers, Strategic Partners Average Valuation : £3m Time: 1 – 3 years
5) Scale
Goal: Startups step on the marketing drive and drives global growth very aggressively. Milestones: massive customer acquisition, back-end scalability improvements, experienced executive team formed, process implementation, establishment of departments. Management Team : Executive Board, Management Board, External Advisors Funding Requirements : £1.2m – £5m Typical Funding Resources : (Bridge Funding) Business Development Milestones : Historical results against plan, Focused Business Plan, Strong Processes and Controls, Average Valuation : £3-15m Time: 3-5 years (average for all types)
6) Sustain
Goal: Develop a portfolio of customers and products, either based on one technology or a set. Milestones: diversification of customers and revenue streams, agile product teams, public and investor relations Management Team : Executive Board, Management Board, External Advisors, Product Teams Funding Requirements : (IPO) Large A Round Typical Funding Resources : IPO Business Development Milestones : Multiple Revenue Streams, Average Valuation : £10-30m
Enterprise and entrepreneurship is a key driver in economic growth and can be a huge part of the solution to unemployment. Its impact also affects the whole of civilization because of the advancement in innovation technology as well as the creation of jobs that in consequence reduce poverty, according to Ernst and Young’s (2011).
“Small and medium-sized enterprises (SMEs) with less than 250 employees make up two-thirds of total employment in OECD countries. The European Commission showed in its SME Performance Review that the number of jobs in SMEs had increased at an average annual rate of 1.9%, while the number of jobs in larger enterprises increased by only 0.8% between 2002 and 2008” Ernst and Young (2011).
Ideally, governments should take an all-inclusive approach, which promotes the strengthening of the entire entrepreneurship environment. However, doing this first requires accurately measuring the multi-layered phenomenon that is entrepreneurship, as well as understanding the impact of a host of different factors on the level of entrepreneurship in a country. “These include the quality of the physical infrastructure, the health of the population, the level of education, the pace of adoption of new technologies and many other macro and micro factors” Ernst and Young (2011).
Therefore, is it essential that a ‘framework’ that can measure entrepreneurship accurately whilst analysing KPI’s (key performance indicators).
Among the key findings in Ernst and Young’s (2011) report:
1. Self-confidence is key
Our overall analysis provides a clear overview of where the G20 member countries stand with respect to fostering entrepreneurship. Combining two of our key findings — entrepreneurs’ confidence in their own country, and new business density
2. Entrepreneurship culture
The culture of a country can affect entrepreneurs and entrepreneurship on many levels. Our perceptions survey was central to our analysis of whether the culture of a country is conducive to Entrepreneurship.
3. Education and training
We go beyond looking at the overall performance of the educational system, to take a closer look at entrepreneurship specific education and assess how important this is for encouraging entrepreneurship.
4. Access to funding
Securing access to funding, both at the start-up phase and at later stages of enterprise development, is one of the biggest challenges for young entrepreneurs. We analyze the experiences of entrepreneurs in accessing funding across the G20 countries, and find some dramatic differences and valuable lessons.
5. Regulation and taxation
The regulatory and taxation environment is one of the areas in which governments have a key role in providing an enabling environment for entrepreneurial growth.
6. Coordinated support
There are typically a number of different agencies involved in facilitating and supporting entrepreneurship within a country. The level of support these agencies provide — and the extent to which they coordinate with one another — can make a crucial difference to the entrepreneurship Environment.
This increasing entrepreneurship and recognition of small enterprises in the health of the economy is also highlighted in recent reports.
According to the UK National Statistics (Nation. Stats 2012), the actual increase in the total business population between the start of 2011 and the start of 2012 will lie between 200,000 (4.4 per cent) and 253,000 (5.6 per cent).
The 4.8 million private sector businesses employed an estimated 23.9 million people, and had an estimated combined annual turnover of £3,100 billion.
The majority (62.7 per cent) of private sector businesses were sole proprietorships, 28.0 per cent were companies and 9.3 per cent were partnerships. At the start of 2012, small and medium-sized enterprises (SMEs)3 accounted for 99.9 per cent of all private sector businesses, representing no change since 2011 and almost unchanged since 2000. SMEs also accounted for 59.1 per cent of private sector employment and 48.8 per cent of private sector turnover at the start of 2012.
For (Heseltine 2012), the prize is potentially huge. There are about 3.6 million self-employed people and sole traders in the UK, and 1.2 million businesses with at least one employee. That is 4.8 million in total. It is a fact, often noted, that if just one in 10 of these businesses took on an employee, or an additional employee, that would increase employment by 480,000.
In (Young 2012), it is estimated that if the UK had the same rate of entrepreneurship as the US, there would be approximately 900,000 additional businesses in the UK and that’s the real context for our stakeholders.
One of the least understated resource which any budding entrepreneur needs is a personal entrepreneurial network. When I run business startup programmes, the truly lasting resource they gain is a network of like minded people. The skill learnt is to be able to find out a common fact within 60 seconds and engage that person on a entrepreneurial level and is one of the first skills we learn as entrepreneurs.
There are numerous entrepreneurial networks offering different types of resources to start or improve entrepreneurial projects. However when selecting a network what is the criteria you should use to make you decision. Here are seven traits to look for.
Social capital
When we look at social capital with entrepreneurial networks, we see a number of factors which highlight the importance of the network and the development of trust. A number of researchers have underlined the importance of networks and social capital (Aldrich-Zimmer 1986, Burt 1992, Adler-Kwon 2002). There are numerous definitions of social capital, but the most appropriate one is ‘features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit’ (Putnam 1995, p. 67). What social trust does the network promote?
Collective Self-Efficacy
Collective efficacy refers to a group’s shared belief in its conjoint capabilities to attain their goals and accomplish desired tasks (Bandura, 1986). The network should want to collaborate in collective action to address the problems within the group. This mean the continue mutual benefit should remain through the stages of enterprise development. So how will you get the most out of this network while you grow? What can you provide to the group and what will they provide you?
Social Organization
The network should be organized with rules, routines and opportunities to engage with every member. According to Shane and Venkataraman (2000) the domain of entrepreneurship is a connection between opportunities and enterprising individuals. This connection within the network needs to be organized for it to be effective for you as a member. Look for network which provide these connection opportunities within its social structure.
Entrepreneurial set of norms
The entrepreneurial network has a set of norms which will help define the enterprise development, the business opportunities, the skills and the opportunities for future enhancement of the entrepreneur. What are the set of norms you will need?
Innovation – Combined with leadership, the entrepreneurial network is an indispensable kind of social network not only necessary to properly run the business or project, but also to differentiate itself.
Beliefs – Social beliefs are the expectations around which we organize daily social life. They allow us to put order into the world around us through kinship and social values. Does the network fit with your beliefs?
Behaviors – The behavior traits such as dominance, extrovert, patience and conformity will be held within the group. Does it contain the right mix for your success?
Routine – In general, entrepreneurs manage the risks around them by developing procedures and routines that enable them to access a suitable solution when a problem arises (Edvinsson and Malone 1999; Roos et al. 2001). If you have a regular access to the group, they can form part of you risk reduction strategy.
Size of Network
The network should have the diversity of people but also be large enough for you to constantly finding new people and opportunities. However your person network should be solid enough for people to know you well enough to interact with and provide and receive opportunities. The critical elements of the network are nodes, (members) and links (relationships) (Gartner 1988, Burt et al. 1994, Lipnack-Stamps 1994). So
How well do you need to know someone to consider them part of your network?
How many people can you consider to part of your network?
The network should be at ten times larger than this number. This allows for you be able to develop as a business owner and also find new people to discuss the entrepreneurial mindset.
Diversity of Membership
The importance of a diverse range of members in the network important in being able to quickly gain adequate human resources to fulfill the entrepreneurial achievements. These fit into the following groups.
Business Services: Lawyers, Accountants, Marketing, Sales
Co-Founders: Technologists, Scientists, Engineers, Business managers
Client & Suppliers
Partners – high skilled employees, mentors, investors
Online Network
The internet provides a faster and more reliable method of connecting and sharing with others. Therefore we see more entrepreneurial networks, both on dedicated sites and also on the main stream social networks such as twitter, Facebook and also Linkedin. Twitter is many groups of people who are dedicated to enterprise providing the information which is needed to start and develop a business. Linkedin has many groups which debate and connections can be developed to share business ideas and opportunities.
