Entrepreneurs and Entrepreneurship

An Entrepreneur is Born in Rural WashingtonEntrepreneurs and Entrepreneurship

An Entrepreneur is Born in Rural Washington

 

Mike Reichner is somewhat of an impulsive guy. After Mike and his wife, Jadyne, bought property on Washington’s Olympic Peninsula, he attended a community meeting on growing lavender. “He came home and announced that we were going to start a lavender farm,” Jadyne said. Being the analytical half of the team, she researched lavender and found that it was a promising possibility. In 1996, they sold their boat and borrowed $4,000 from Jadyne’s mother for an irrigation system and 19 lavender plants. They traded and borrowed equipment, and friends helped ditch in pipes. And so in the Dungeness Valley on Bell Bottom Road, Purple Haze Lavender was born.

Over the past five years, our team has traveled over one million miles throughout rural America. We have crossed paths with many remarkable people like Mike and Jadyne. The power of entrepreneurs to see and create successful ventures around them is simply amazing. In so many ways, Mike and Jadyne embody the true characteristics of rural entrepreneurs and fly in the face of popular myths. Mike was a state park superintendent and Jadyne was a science teacher. They were wage and salary folks seeking retirement in a beautiful valley in Washington State’s rain shadow near Sequim. However, like all successful entrepreneurs, they had passion and a dream. Retirement could wait a bit longer. They acquired the knowledge and skills to succeed in the business world. The motivation to create businesses like Purple Haze Lavender must be rooted deeply in the personalities of entrepreneurs. Business skills can be learned if the passion runs deep enough. Incidentally, those first 19 lavender plants grew into a multi-million dollar business.

Entrepreneurs and this creative process we call entrepreneurship play a central role in all our lives. Entrepreneurs create not only better lives for themselves and their families, but they also represent a driving force in our society and economy. They envision and create businesses that meet our material needs in interesting and more effective ways. Other entrepreneurs create remarkable communities through great schools, parks, libraries and other public services that enrich our quality of life.

Entrepreneurs – Who Are They?

When the word entrepreneur is spoken, everyone in the room has an image of what that word means. To some, entrepreneurs are only the high growth wizards like Bill Gates with Microsoft or Sam Walton with Wal-Mart. To others, the word equates to “small business” or “microenterprise.” For some the image is a struggling startup that never equates to meaningful economic development.

If we are to develop our communities through entrepreneurship, then we must dig a bit deeper and better understand who entrepreneurs are and how we can help them succeed, thereby enriching our communities. We offer three lenses for gaining a deeper understanding of who entrepreneurs are, beginning with some common definitions, continuing with some portraits of rural entrepreneurs, and wrapping up with a workable typology to guide our work.

Lens #: A Few Definitions

Listed here are some of the commonly used definitions of entrepreneurs and entrepreneurship. The bottom line is that all the definitions share the same central characteristics: a focus on opportunities and the creation of ventures. Like reality, there is rich diversity of entrepreneurs, from the bright-eyed startup to the seasoned veteran launching an expansion.

Here is our favorite definition of an entrepreneur:

“Entrepreneurs perceive new opportunities and create and grow ventures around such opportunities.”

Several points about the meaning of entrepreneurs and entrepreneurship warrant emphasis. First, entrepreneurship is all about specific individuals or groups of individuals, not businesses. The outcome of entrepreneurship is a successful commercial or philanthropic venture, but our focus is on the person who engages in this creative process—the entrepreneur. Second, small business owners are not necessarily entrepreneurs. According to the National Commission on Entrepreneurship (NCOE), only 4%–5% of American firms account for high growth companies and most are small businesses, according to the U.S. Small Business Administration’s definition. The difference between most small businesses and entrepreneurial small businesses is the orientation and capacity of the owner/operator with respect to innovation and growth.

Lens #2: Five Entrepreneurs

Entrepreneurs are specific people who engage in the creative process. We can talk about entrepreneurs in abstract terms, but that will never have an impact on our communities. Eventually, we need to identify and learn about the entrepreneurs in our community. To help this process of discovery, we’d like to introduce you to five entrepreneurs from rural America:

Maxine Moul of Nebraska
Larry Comer of Georgia
Pam Curry of West Virginia
Beth Strube of North Dakota
The Kentucky Highlands Investment Corporation

Maxine and her husband Francis are journalists. They had a dream of owning their own newspaper. The chance presented itself and they used the three Fs (family, friends and fools) to raise the funds necessary to purchase the weekly newspaper in Syracuse, Nebraska (population 1,762). They not only succeeded with this venture, but they also created the Penny Press, a multi-state want-ad publication. By all standards Maverick Media and Francis and Maxine Moul were highly successful entrepreneurs and business people. Those family, friends, and fools who took a risk with the Mouls did really well when Maverick Media was sold. But our story about Maxine is not focused on her business successes—it is about her role as a civic entrepreneur. Maxine went on to become Nebraska’s Lieutenant Governor and the Director of Nebraska’s state economic development agency. However, her true civic legacy is in the creation of the Nebraska Community Foundation. NCF, as it is called, has become one of America’s most successful and innovative rural community foundations. Maxine played the central role in its early creation and growth.

As a child growing up in Americus, Georgia, Larry Comer liked to play Monopoly. In this small farming community, he dreamed of running his own business. He admired his uncle, who worked long hours in a pipe fitting firm and then started a sprinkler company in the 1930s. In 1964, back in Americus, Comer started Metalux, a commercial and industrial lighting manufacturer. By 1985 when Larry sold Metalux, it had grown to $60 million in sales nationwide with more than 1,100 employees. Two years later Larry bought a struggling company called Caravelle Power Boats. He revived the ailing company and sold it in 1998. Like many entrepreneurs, Larry invested in other ventures. He was civic-minded, serving on the Georgia State Chamber of Commerce and other groups. However, Larry’s greatest legacy may be his willingness to share. Throughout his life, he has mentored others seeking to own their own businesses. Larry Comer is a remarkable human being. He is creative and he is a premier entrepreneur. Most importantly, his impact on his community is multi-dimensional.

Our next entrepreneur is Pam Curry of West Virginia. Like Larry, she is quiet, determined, and she is changing her corner of the world for the better. Pam Curry’s West Virginia home, as romanticized by John Denver’s lyrics, inspires her life’s work as a social entrepreneur. “West Virginia is my home and I have no plans to leave,” Curry said from her office at the Center for Economic Options (CEO) in Charleston, West Virginia. The Center for Economic Options not only creates economic opportunities for entrepreneurial artisans in West Virginia, it also enriches the cultural life of this rural state.

Curry, CEO’s executive director, spent decades watching family and friends who were forced to move because of the lack of economic opportunity: the diminishing coal industry, the absence of corporate headquarters and the distance to a large metropolitan area. “So many of us have left the state, always hoping to come back,” Curry said, pointing out that her father-in-law, a coal-miner, relocated his family to Cleveland to work in the auto industry before finally moving back. Curry’s solution for West Virginia also became her means of staying home. During the past 14 years, as the leader of CEO, Curry has helped West Virginia entrepreneurs realize their economic potential and at the same time dug her roots firmly in West Virginia.

Like Pam Curry, Beth Strube wanted to dig her roots in rural America. Her home is Dickinson, North Dakota, and her story is next.

One minute she’s editing a preschool lesson on animal ABC’s. The next, she’s reading The Wall Street Journal. Beth Strube’s business serves small children and their caretakers, but running a business grossing $1 million in sales annually is not child’s play. Strube is president of Funshine Express, Inc., which originates and distributes preschool curriculum. From downtown Dickinson, North Dakota, she manages 14 employees and serves a customer base of 3,000 to 4,000—an impressive increase from her start in 1995 when she had two employees, 30 customers and a copy machine in her basement.

Beth illustrates the style of so many successful entrepreneurs. She has a passion (kids) and saw a need to fulfill (better preschool curricula). She networked and acquired the skills she needed to take an evolving dream and grow it into an exceptional business. Dickinson, North Dakota (some refer to this community as North Dakota’s entrepreneurial community) supported Beth. They accepted her idea for this unique business and treated her venture like a more traditional business development opportunity, making the full range of economic development resources, including financing, available to her.

Our next story is about an organization that has excelled in its support of entrepreneurs: The Kentucky Highlands Investment Corporation.

Kentucky Highlands Investment Corporation (KHIC) is based in London, Kentucky, and serves a nine-county rural region in southeastern Kentucky. This organization has been around for a long time, and it has become what we call an Entrepreneurial Support Organization (ESO). Started in 1968, KHIC serves a tough corner of rural America. Economic and social challenges run deep in this part of Appalachian Kentucky. Providing access to capital is a primary strategy KHIC employs to support area entrepreneurs. However, what makes the Corporation unique is that, over time, the organization discovered that investment capital alone was not enough. KHIC becomes every bit as involved with entrepreneurs as is required to ensure their success. In some cases, KHIC staff members join the management teams of entrepreneurial companies.

The corporation is among a handful of Entrepreneurial Support Organizations that represent best practice in rural America. Other ESOs worth investigating include Northern Initiatives in Michigan, Coastal Enterprises of Maine and ACEnet of Ohio.

The preceding profiles of people, businesses and organizations illustrate the diversity among entrepreneurs. All share the common motivation to create, enhancing themselves and their communities. So how do we get a handle on the entrepreneurs in our community? The following framework can provide a good start to answering this question for your community.

Lens #3: Entrepreneurial Talent Framework

If our development goal is to grow our community through entrepreneurs who create expanding businesses and stronger civic resources, we must find ways to better understand who they are and what their needs are as well. We like to use the concept of entrepreneurial or “E” talent to help communities begin this discovery process. The concept of E talent moves us beyond quibbling over “who’s an entrepreneur” and gets us focused on uncovering the E talent within our communities.

We have developed a framework for identifying and organizing entrepreneurial talent within a community. It is a no nonsense approach that allows sophistication without complexity. Everyone in our community can be placed in one of five basic entrepreneurial talent categories:

Type 1 – Limited Potential
Type 2 – Potential Entrepreneurs
Type 3 – Business Owners
Type 4 – Entrepreneurs
Type 5 – Civic Entrepreneurs

We’ll start by focusing on the first four types of business or private entrepreneurs. We’ll talk about civic entrepreneurs a little later in this section.

LIMITED POTENTIAL. Dr. Tom Lyons, an expert on entrepreneurship from the University of Louisville, makes the point that entrepreneurs are made not born. The research he cites strongly suggests that any person can be entrepreneurial. While we agree with the findings of this research, we recognize that most Americans are not and are unlikely to become entrepreneurs. For example, young children, aging elders, persons unable to work or persons who would really rather be employees comprise a large category of limited potential persons. However, changing circumstances can move persons within this framework. That primary school youngster will grow up and in high school may become very entrepreneurial creating a first business venture before graduation.

POTENTIAL ENTREPRENEURS. Motivation is a key ingredient essential for entrepreneurial behavior and success. Entrepreneurs must be passionate about creating and growing ventures. Within the potential entrepreneurs group there are three subgroups—youth, aspiring and start-ups. Since entrepreneurship is a learned behavior, any young person has the potential to become an entrepreneur. Youth represent a massive population of potential entrepreneurs. The question is whether we are educating and motivating young people to become employees or entrepreneurs. Aspiring entrepreneurs are those who are actively considering crossing the bridge and engaging in the entrepreneurial process. Finally, start-ups are those who have crossed the bridge from thinking about it to doing it. They are now in the first stages of the entrepreneurial process of creating and growing a venture.

Potential entrepreneurs are just that—they have the potential to be an entrepreneur. There is a motivation driving them to pursue the entrepreneurial track. The critical question here is whether they can acquire the knowledge and skills to succeed. Are they personally able to launch that first venture? Can they acquire the necessary skills quickly enough to succeed with the venture? Finally, can they acquire the comfort levels necessary to thrive in the entrepreneurial process? For most, the answer is no. However, our field research strongly suggests that in communities with active support environments, the number of potential entrepreneurs who move forward in creating successful ventures rises.

 

BUSINESS OWNERS. We have concluded that all persons in business have some entrepreneurial traits, but that all business owners/operators are not entrepreneurs. For many, each day they wake, open the business, run it and then go home. They are focused managers of their enterprises. However, life changes and motivations can change as well. For example, a new Wal-Mart opening 20 miles down the road, the desire to bring a family member into the business, or even the desire to break out of a rut and do more with one’s life can be motivation for entrepreneurial behavior. Ewing Marion Kauffman (founder of the Kauffman Foundation) often identified the difference between a business owner and an entrepreneur in the following way: A business owner works “in” the business while an entrepreneur works “on” the business. The difference is profound. Revitalizing, growing and reinventing a business are inherently entrepreneurial.

Within the world of business owners, there are at least three subgroups— survival, lifestyle and re-start business owners. Throughout rural America there are many self-employed persons who are creatively patching multiple economic activities together to make a living. Typically, the survival ventures are not doing particularly well, but they are keeping food on the table and a home in place. Lifestyle businesses are also numerous and range from the successful family practice doctor to the corner bookstore on Main Street. Often these businesses are successful, but their owners/operators lack the motivation or capacity to grow the venture. Finally, there are the re-starts. They have tried business before and come up short, but they are trying again. There is a degree of motivation driving their new efforts, but whether they become successful entrepreneurs is yet to be determined.

ENTREPRENEURS. Our fourth group, entrepreneurs, includes those persons who have demonstrated they have the motivation and capacity to create and grow successful ventures. These are the folks who are actively evolving, inventing and creating more robust, dynamic and successful ventures (at least that is their expectation). They are not simply running their business each day—they are creating it for success tomorrow. There are three subgroups—growth-oriented, entrepreneurial growth companies and serial entrepreneurs.

Growth-oriented entrepreneurs are succeeding and are driven to grow their ventures. They see new markets, profit centers or products to be created. They hold the promise of growth with the associated job creation and profits. Entrepreneurial growth companies or EGCs (sometimes referred to as gazelles) have figured it out. They represent just four to five percent of all American businesses. They are achieving sustained growth rates of 15% or more each year and are doubling in size every five years. Finally, there are serial entrepreneurs. This is a rare breed, the folks who are driven to create multiple ventures. They love the process of creating something new, but generally get bored in running the venture once it is up and going.

CIVIC ENTREPRENEURS. They share the same motivation, but they live by a different bottom line. Sometimes they are both business and civic entrepreneurs like Maxine Moul. Civic entrepreneurs create programs, institutions and resources that enrich our communities and our lives. They build wonderful children’s museums, great park systems, effective public health clinics, life-saving health systems and even remarkable police departments. Sometimes, they are organized as part of government, as nonprofit organizations, informal neighborhood or community groups and civic organizations. As with business entrepreneurs, they perceive and act upon opportunities. They acquire the skills of team building, venture planning, mobilizing resources, reaching markets and creating value.

There is a powerful connection between civic entrepreneurs and entrepreneurship rates. Our field research clearly shows that communities with high rates of civic entrepreneurs are the kinds of communities that also create a high quality of life. These are the environments in which business entrepreneurs can thrive. Any community-based entrepreneurship strategy should embrace supporting civic entrepreneurship on an equal footing with business entrepreneurship.

So what does all this mean? The answer is simple. Creating a supportive environment for entrepreneurs begins with an understanding of your community’s E talent. Our ability to truly energize our community’s entrepreneurial talent requires different support systems for different entrepreneurs.

Entrepreneurship is the complex process by which entrepreneurs envision, create and grow ventures. To understand entrepreneurship, we need to understand the necessary components of the process:

• Creativity
• Innovation
• Motivation
• Capacity

Let’s explore these four concepts within the context of making your community entrepreneur friendly.

Creativity
Rural economies continue to be dominated by sectors that are more strongly connected to the old economy than to the new economy. However, there are some sectors—existing, emerging, and potential—that may provide new economic development opportunities for rural communities. While some of these sectors may be familiar to you and your community, others require you to think more creatively about the opportunities they may hold for your local economy.

Creativity is defined by Webster as:

Having the ability or power to create things.
Productive.
Characterized by originality, expressiveness and imagination.

Like artists, actors, playwrights, authors, musicians, inventors, athletes and other perceived creative people, entrepreneurs are part of what Richard Florida calls the “creative class.” Highly successful entrepreneurs are driven to create. Chances are their drive to create is the most powerful motivation moving them forward in the entrepreneurship process. Being creative can be both frustrating and energizing. The ability to create new things (in this case businesses or civic resources) is an incredible high. However, when the creative process is not working, entrepreneurs, like other creative people can become frustrated and challenged.

Most entrepreneurs are not the same folks who developed the new idea, product, services, resource or approach. Rather, they are the ones who see value in new ideas and creatively take innovation to a commercial plane. That brings us to our next important concept—innovation.

Innovation
Innovation occurs when new wealth is created and change becomes transformational. Innovation may not be high tech, life saving or even useful. Remember the “pet rock” craze? At the heart of the entrepreneurial process, entrepreneurs perceive innovation and are able to take it to market. They transform ideas into commercial products or civic services that folks want and are willing to pay for. New wealth is generally created during this process of innovation commercialization. That is why entrepreneurs and others who are part of the early commercialization phase generally become rich.

Creativity and the ability to do things with perceived innovations are foundational with entrepreneurs. However, the motivations that drive entrepreneurial behavior are wide ranging. Our next important concept in understanding entrepreneurship is motivation.

Motivation
There is a myth that equates entrepreneurship with greed. Somehow, our society believes that entrepreneurs are driven to create by money. However, like most myths, this one is largely untrue. Of course, entrepreneurs enjoy and appreciate making money, but usually money is not their most important, driving motivation.

Ray Smilor, in his landmark book Daring Visionaries, shares insights on this important point. In Section One of his book, Smilor talks about the soul of the entrepreneur. He employs the word “passion.” If there is a common theme, this is it—All entrepreneurs do indeed have some kind a passion:

• To live the kind of life you want
• To create a service that meets a critical need
• To grow a company that employs thousands
• To prove your worth
• To make a better life for yourself and family

These examples describe very different motivations, but all reflect powerful passions. To build supportive environments in rural communities, we must take the time to understand the motivations that are driving our entrepreneurs. In doing so, we are better prepared to enable and support them.

Motivation is fundamental, but just being passionate is not enough to succeed as an entrepreneur. Acquiring the capacity is equally important. Few entrepreneurs with the capacity, but lacking motivation, succeed with their ventures. We also find few entrepreneurs who succeed with passion alone. It is clear that the individuals who realize success have strong motivation and a willingness to acquire specialized capacity. Our final key idea about entrepreneurship, then, is capacity.

Capacity
Successful entrepreneurs do not start with all the knowledge, skills and insights necessary to create thriving ventures. They acquire these skills, develop them and employ them consistently and effectively. Five core capacities enable entrepreneurial success.

ABILITY TO PERCEIVE OPPORTUNITY. First and foremost, entrepreneurs develop a heightened ability to perceive opportunities. A very successful entrepreneur will perceive more opportunities walking down a street than most of us will in a year’s time. However, successful entrepreneurs also develop discipline. They become good at not only perceiving opportunities, but also assessing them and determining if there’s a fit with their evolving game plan. There is a focus that prevents vision and mission drift.

ABILITY TO ASSESS AND MANAGE RISK. There is a myth that entrepreneurs are risk takers. While there may be a shred of truth to this myth, in fact entrepreneurs hate risk. They become very skilled at risk identification, assessment and management. Entrepreneurs understand that too much risk can kill an idea. The ability to effectively deal with risk distinguishes successful from less successful entrepreneurs.

ABILITY TO BUILD A TEAM. Ernesto Sirolli, the founder of Enterprise Facilitation™, makes the point that no individual has all the passion and skills necessary to succeed in business. He argues that to succeed, an entrepreneur must have passion and capability in the production, marketing and finances of a venture. In fact, entrepreneurs can become highly skilled at team building. They learn what kinds of team members they need and figure out how to assemble the right human resources. Great teams build great ventures.

ABILITY TO MOBILIZE RESOURCES. Another myth is that successful entrepreneurs have deep pocket venture investors. The reality is that most successful entrepreneurial growth companies start like everyone else—with too few resources and dependency upon family, friends, fools and their credit cards. Here again is an attribute that distinguishes highly successful from less successful entrepreneurs. Skilled entrepreneurs learn how to mobilize resources. They can mobilize not only necessary investment capital, but also strategic partners, people, facilities and whatever else is necessary for success.

ABILITY TO ENSURE CREATIVITY. Finally, many entrepreneurs are not happy becoming managers of successful growing companies. They hire folks like chief financial officers to ensure good management. Skilled entrepreneurs learn how to keep growing and maturing companies creative. They learn how to develop environments and processes that allow companies to recreate themselves and grow.

Successful entrepreneurs acquire many skills, but we believe these five capacities are the most important of those shared by most entrepreneurs.

Entrepreneurs Can Make the Difference

Entrepreneurs have been with us for a long time. They are a central part of American culture and identity. We take pride in our innovative ways. We respect the upstart with an idea who becomes widely successful. Entrepreneurship is more than a creative force that enriches our economies and communities. It is also a power pathway that creates opportunity and equality within America. Passion, hard work and the willingness to learn can enable ventures large and small to thrive, creating better lives for many.

Despite entrepreneurship’s historic and central role within America, in many ways it has not been part of our development game plan. In rural America we have tended to focus on sustaining natural resource industries such as agriculture, timber, fisheries and energy. Today, while natural resource commodities continue to be important to many rural landscapes, it is increasingly clear that a future in the 21st century cannot be built solely on this foundation.

Since World War II, we have sought to diversify our economies beyond natural resources through industrial relocation. For 50 years, America’s factories left the cities in search of cheaper land, labor and other production inputs. This strategy worked well for many communities. Industries, investment and jobs flowed to thousands of rural communities and contributed to their development. However, like natural resources, the future of our rural communities cannot rely on business relocation to give them purpose and economic meaning. Today, the greener pasture for many of these factories is China, Mexico or other places where land, labor and production costs are even lower. Rural communities are seeking new development strategies.

Don Betts, with Georgia Tech’s Economic Development Institute, talks about the importance of entrepreneurship as the bedrock of a rural development strategy. Creating a community environment that supports entrepreneurs also creates a place that is attractive to new industry locations and where people want to stay and grow their businesses. Entrepreneurship is now on the rural development radar screen of many rural regions. However, a major challenge remains to make the case that entrepreneurship can lead to meaningful economic development. In the section on Making the Case, we explore the emerging rationale supporting entrepreneurship as a core rural development strategy in the 21st century.

Additional Resources

We recommend the following resources as a great place to expand your understanding of entrepreneurs:

• Ray Smilor’s book, Daring Visionaries: How Entrepreneurs Build Companies, Inspire Allegiance, and Create Wealth. Smilor provides fantastic insight about who entrepreneurs are and what motivates them to create. Adams Media Corporation.
• Michael Gerber’s The E Myth Revisited. Gerber provides great insight into the heart and soul of entrepreneurs and entrepreneurship in America. HarperCollins Books.
• A controversial but worthy read is Richard Florida’s book The Rise of the Creative Class. This book does not focus squarely on entrepreneurs, but entrepreneurs are part of the creative class explored in this book. Basic Books.
• Amar Bhide’s book, The Origin and Evolution of New Businesses, will challenge you and take you further into the entrepreneurial process. Oxford University Press.

The Center has more resources and can provide additional assistance to you as you support entrepreneurs in your community. To access Center Resources, click on our logo.