Most U.S. companies are small. Ninety percent employ fewer than 20 employees, and 99 percent employ 500 or fewer. I tell my entrepreneurship students that, odds are, many of them will not work for a large employer. In fact, the chances are very good that they will work for a smaller company. They may start one, or help to grow an existing one. The economy needs both.
Graduates of business schools should be able to add value immediately to an economy that relies on smaller companies. Are we teaching students about small businesses or only big ones? Smaller companies are not little big businesses. Many business theories developed around larger companies do not apply well to smaller companies because the two face vastly different issues.
Graduates who have knowledge and skills in the entrepreneur life cycle, cash flow, sustainable growth, smaller staffs and the evolution of corporate structures will be more valuable to employers.
Entrepreneurship famously includes creating new businesses, but it actually has emerged to become a new management paradigm. It includes innovations undertaken within existing businesses or through new market mechanisms. Real, sustainable growth takes entrepreneurship and innovation, which are happening in existing businesses.
Innovation is not only the development of products that are new to the market, but it also can be new ways of delivering familiar products or leveraging opportunities that did not exist in the markets when these companies began. Subway did not invent the sandwich, I remind students, but this No. 1 franchise developed a brilliant way to get one into a consumer’s hands.
Recent jobs numbers showed that more jobs are being created by smaller, existing companies than by either start-ups or large companies. Firms with fewer than 50 employees added 58,000 jobs to the U.S. economy in August 2011, and companies with more than 500 employees added 3,000 jobs. This is according to Macroeconomic Advisers LLC, which creates its widely watched monthly report from ADP payroll data.
ADP, the nation’s largest payroll service provider, also indicated that August 2011 was the 21st straight month that smaller companies added jobs.
As pervasive as entrepreneurship is in this country, it still can seem elusive and walled off, especially to students. A study released by the Small Business Administration’s Office of Advocacy concluded that taking a course as part of an undergraduate or graduate program significantly increases the odds of later founding or working for an entrepreneurial organization.
Students should recognize that many businesses are of the “dull/normal” world. “Entrepreneurial” does not always equal a high-flying company or a glamorous industry. “Dull normal” is a phrase coined by Dr. Thomas Stanley and Dr. William Danko in their blockbuster book, “The Millionaire Next Door,” who point out there are many mundane categories of businesses — sandwich-making included — that produce substantial wealth for their owners. Business owners and employees are entrepreneurial, but they don’t necessarily make headlines because their progress is steadily upward — no soaring highs, and no crashing lows (and thus they disqualify for bailouts). These businesses survive and grow if they innovate and defend a sustainable competitive advantage. Take a moment to look at the businesses around you — it’s the entrepreneur in all of us.
Entrepreneurship is a process and a journey, not a one-time event. There is a learning curve. Different life courses prepare people differently and education can help shorten the learning curve. According to the Kauffman Center for Entrepreneurial Leadership, entrepreneurs are the initiators, the tenacious, “rational risk takers,” comfortable with day-to-day ambiguity. The initiator can see what others may have overlooked. Most entrepreneurs’ ideas come from the business or industry in which they are familiar.
The Kauffman Foundation estimates that seven out of 10 high school students hope to start their own business. But the reality is that opportunity recognition comes from networks, experience, honest assessment of the idea, and — this is big — resilience in the face of failure. Many entrepreneurs fail before they succeed. It is rare to hit a home run with a business idea right out of school, or even 10 years out of school, but students have to do the foundational work now, so they are ready for, and can recognize, opportunities.
Nancy Forster-Holt, Ph.D., is an assistant professor and the executive director of entrepreneurship and executive education at Husson University’s College of Business. A graduate of the University of Maine, she is also co-owner of Shaw & Tenney, a 153 year-old manufacturing company in Orono.