FRANCIS J. GREENE ENTREPRENEURSHIP THEORY PRACTICE AND Entrepreneurship ‘This is an excellent text book. It combines theory, practice of entrepreneurship and great examples in a very accessible way. The inclusion of teaching points makes it a valuable resource for both stu- dents and lecturers.’ Professor Helen Lawton Smith, Birbeck, University of London, UK ‘This modern textbook offers support to teachers as they facilitate student learning processes, allow- ing students to develop their knowledge and skills in a new way. The mix of theories, models, cases and exercises offer a good foundation for learning what entrepreneurship is all about and creates a mind-set for executing.’ Erik Lindberg, Associate Professor USBE, Umeå, Sweden ‘This is an excellent textbook for entrepreneurship students and educators alike. Packed with easy to follow prose, illustrative case examples, and workbooks to implement student ideas, Greene’s textbook has set the standard for others to follow.’ Niall G MacKenzie, Adam Smith Business School, University of Glasgow, UK  ‘A comprehensive and contemporary text offering an excellent overview of entrepreneurship, small business and enterprise issues. The insightful integration of critical theory and practical cases with additional teaching material aimed at student-centred learning offers invaluable material for those teaching undergraduate and postgraduate students within Business and Management. This text combines a solid academic approach with innovative learning approaches from a leading entrepre- neurship scholar.’ Professor Susan Marlow, University of Birmingham, UK ‘This highly informative book provides a comprehensive examination of current theory and prac- tices on entrepreneurship in different contexts. Systematic and user-friendly, this book enables readers to critically analyse complex problems and practically navigate the start-up journey from idea through to implementation. The book is ideal for students with an interest in the connections between practical and theoretical knowledge about various entrepreneurial activities, which are here illuminated through case studies and research insights.’ Professor Boris Urban, University of the Witwatersrand, South Africa ‘One of the most comprehensive entrepreneurship textbooks, successfully bridging both theory and practice. It practically guides readers through how to start up, offering in-depth coverage of the key entrepreneurship theories. It is an invaluable and accessible resource for students, teachers and practitioners.’ Dr Xiaodan Yu, Nottingham University Business School, China ‘Highly recommended. Leading scholar Francis Greene provides a lucid and enjoyable overview of the main themes of contemporary entrepreneurship, skilfully blending together insights from the- ory and practice.’ Professor Alexander Coad, CENTRUM PUCP, Peru ‘Bridging theory and practice, this book provides a comprehensive examination of entrepreneur- ship. Francis Green has successfully integrated evidenced-based thinking and captured the current developments in the field, covering different aspects, such as entrepreneurial contexts, start-up pathways, scaling and exit. Covering every aspect of entrepreneurship theories and including case studies, activities and class discussion, this book is an excellent addition to existing entrepreneur- ship textbooks.’ Dr Shova Thapa Karki, University of Sussex, UK ‘Francis Greene’s new book is a fabulous platform for both students and entrepreneurs looking to manage the fraught process of establishing and growing a business. It pulls in and summarises the work of key practitioners and thinkers in this subject and present the tools for success in a practical and user-friendly way alongside excellent case studies. Highly recommended.’ Mark Copsey, Leeds Beckett University, UK ENTREPRENEURSHIP THEORY AND PRACTICE FRANCIS J. GREENE © Francis J. Greene under exclusive licence to Macmillan Education Limited 2020 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted their right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2020 by RED GLOBE PRESS Red Globe Press in the UK is an imprint of Macmillan Education Limited, registered in England, company number 01755588, of 4 Crinan Street, London, N1 9XW. Red Globe Press® is a registered trademark in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-137-58955-2 paperback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. Brief Contents PART 1: ENTREPRENEURIAL FOUNDATIONS 1 1 Entrepreneurship in Focus 3 2 What Makes an Entrepreneur? Traits and Biases 23 3 Entrepreneurial Characteristics and Contexts 43 PART 2: PLANNING THE START-UP JOURNEY 65 4 From Idea to Start-Up Proposition 67 5 Start-Up Planning Pathways 93 6 Start-Up Feasibility Planning I: Using the Business Model Canvas 123 7 Start-Up Feasibility Planning II: Identity, Ideas, Teams and the Competition 153 PART 3: FINANCING THE VENTURE 183 8 Start-Up Financial Information 185 9 Entrepreneurial Finance 211 PART 4: BEYOND START-UP 241 10 Entrepreneurial Growth 243 11 Entrepreneurial Exit 275 12 Entrepreneurship Policy 303 PART 5: INTRODUCTION TO THE WORKBOOKS 327 Workbook 1: Start-Up Desirability and Feasibility 329 Workbook 2: Building Your Business Model for Start-Up Pitching and Planning 347 v Long Contents PART 1: ENTREPRENEURIAL FOUNDATIONS 1 1 Entrepreneurship in Focus 3 1.1 Why is entrepreneurship vital? 4 1.2 How this book helps you understand and practise entrepreneurship 4 1.3 What is meant by entrepreneurship? 5 1.4 How is entrepreneurship measured? 10 1.5 What are the differences between large and small businesses? 16 1.6 What you have learned in this chapter 20 2 What Makes an Entrepreneur? Traits and Biases 23 2.1 Introduction 24 2.2 Psychological traits 24 2.3 Planned behaviours and self-efficacy 29 2.4 Cognitive biases 32 2.5 What you have learned in this chapter 37 3 Entrepreneurial Characteristics and Contexts 43 3.1 Introduction 44 3.2 Utility: What motivates start up? 44 3.3 Ability, risk and personal characteristics 49 3.4 The importance of context 54 3.5 What you have learned in this chapter 57 PART 2: PLANNING THE START-UP JOURNEY 65 4 From Idea to Start-Up Proposition 67 4.1 Introduction 68 4.2 Problem framing and reframing 69 4.3 Fact-finding about the problem 71 4.4 Generating solutions 75 4.5 ‘Me, Market and Money’ 80 4.6 Is starting up right for the idea? 84 4.7 The elevator pitch 87 4.8 What you have learned in this chapter 89 5 Start-Up Planning Pathways 93 5.1 Introduction 94 5.2 Why writing a business plan first is a bad idea 95 5.3 Understanding the theory of a business model 97 5.4 Alternative approaches to starting up 112 5.5 What you have learned in this chapter 119 vii viii LONG CONTENTS 6 Start-Up Feasibility Planning I: Using the Business Model Canvas 123 6.1 Introduction 124 6.2 The Business Model Canvas 124 6.3 Focusing on the customer 126 6.4 The value proposition 136 6.5 Getting to the customer 140 6.6 Start-up infrastructure 148 6.7 What you have learned in this chapter 150 7 Start-Up Feasibility Planning II: Identity, Ideas, Teams and the Competition 153 7.1 Introduction 154 7.2 Forming a start-up identity 154 7.3 Protecting identities and ideas 157 7.4 Team start-ups 162 7.5 Industry attractiveness 170 7.6 What you have learned in this chapter 178 PART 3: FINANCING THE VENTURE 183 8 Start-Up Financial Information 185 8.1 Introduction 186 8.2 Revenues and costs 186 8.3 Keeping score: The P&L statement 194 8.4 Cash is king 202 8.5 The balance sheet 207 8.6 What you have learned in this chapter 210 9 Entrepreneurial Finance 211 9.1 Introduction 212 9.2 The sources of entrepreneurial finance 212 9.3 Demand and supply issues in entrepreneurial finance 214 9.4 Financial constraints facing small businesses: Ties that bind? 221 9.5 Understanding the key funding sources for entrepreneurs 224 9.6 What you have learned in this chapter 235 PART 4: BEYOND START-UP 241 10 Entrepreneurial Growth 243 10.1 Introduction 244 10.2 Why are fast growth businesses difficult to spot? 244 10.3 The five common features of fast growth businesses 247 10.4 Stage models: Overcoming growing pains 248 10.5 Strategic entrepreneurship approaches to growth 252 10.6 Environmental approaches to growth 261 10.7 Random approaches 265 10.8 What you have learned in this chapter 267 LONG CONTENTS ix 11 Entrepreneurial Exit 275 11.1 Introduction 276 11.2 The difficulties in defining and measuring exit 276 11.3 Is business exit really that bad? 281 11.4 What factors influence business farewells? 283 11.5 Keeping it in the family 290 11.6 What you have learned in this chapter 295 12 Entrepreneurship Policy 303 12.1 Introduction 304 12.2 Why governments support entrepreneurs 304 12.3 How governments support entrepreneurship 310 12.4 Does entrepreneurship policy work? 316 12.5 What you have learned in this chapter 319 PART 5: INTRODUCTION TO THE WORKBOOKS 327 Workbook 1: Start-Up Desirability and Feasibility 329 W.1.1 Introduction 330 W.1.2 Me 330 W.1.3 Market 337 W.1.4 Money 342 W.1.5 Evaluating the idea 344 Workbook 2: Building Your Business Model for Start-Up Pitching and Planning 347 W.2.1 Introduction 348 W.2.2 Product–market fit 348 W.2.3 Marketing and sales 360 W.2.4 Revenue modelling 364 W.2.5 Business operations and logistics 365 W.2.6 Business identity, management and team 368 W.2.7 Competition 376 W.2.8 Growth and funding needs 379 W.2.9 Financial plans and the go/no go assessment 381 List of Figures PART 1: ENTREPRENEURIAL FOUNDATIONS 1.1 Self-employment rates in selected developed economies 11 1.2 Self-employment rates in the Netherlands, Norway, USA and UK 12 1.3 Self-employment rates of men and women in richer countries 13 1.4 Percentage of workers in employment and self-employment 14 2.1 Ajzen’s theory of planned behaviour 30 2.2 Bandura’s concept of self-efficacy 31 3.1 Difficulties faced by the self-employed 47 PART 2: PLANNING THE START-UP JOURNEY 4.1 Amabile’s model of creativity 76 4.2 Idea to start-up proposition: ‘Me, market and money’ 80 5.1 The BRIE causal model 96 5.2 Business Model Canvas 100 5.3 A smoothie BMC 101 5.4 Lean start-up approach 116 6.1 Business Model Canvas 125 6.2 The lean canvas 126 6.3 Target niches 131 6.4 TAM, SAM and SOM 132 6.5 Customer vignette 133 6.6 Empathy map 135 6.7 The value proposition canvas 138 6.8 AIDA and the sales funnel 142 7.1 Your ‘coat of arms’ 166 7.2 Porter’s five forces 173 7.3 A stylised view of an industry life-cycle 176 PART 3: FINANCING THE VENTURE 8.1 The P&L formula 195 8.2 The break-even point (BEP) 198 8.3 Break-even for an online floristry business 199 8.4 Into the ‘valley of death’ 201 8.5 Cash flow statement equation 203 8.6 Balance sheet equation 207 9.1 Sources of start-up finance for start-ups in India, China and the UK 214 9.2 Sources of finance used in existing small businesses 215 9.3 Patterns in entrepreneurial finance 219 9.4 Pre-and post-valuation share ownership 228 9.5 Venture capital fund cycle 230 x