"Ever notice how it's a penny for your thoughts, yet you put in your two cents? Someone is making a penny on the deal." -- Steven Wright
In our last post we looked a little at “what is entrepreneurship” and discussed some aspects of entrepreneurial thinking. Here we will look at some common entrepreneurial traits and behaviors and then take a look at “why” entrepreneurs do what they do.
One major trait that entrepreneurs may have in common is a higher tolerance of risk. There is a definite perception that taking the leap and starting a new business is a risky endeavor. A failed business could potentially result in serious financial problems, strained relationships, and even health problems due to the high levels of stress that can be associated with entrepreneurship. A person deciding to start a business may be walking away from a regular paycheck, a secure job, a career path, and future opportunities derived from their career path. They may be walking into a time of uncertainty and high stress.
Entrepreneurs often need to take additional risks beyond those above by putting themselves on the line, making promises and taking chances. Sometimes these actions are necessary in order to get the business moving forward. Also there is always unpredictability in business, one may never know when their number one customer may leave, or which if any of a myriad of potential problems may be waiting around the next corner. When the responsibilities for the business rest largely one one person’s shoulders, the problems for the business can potentially pose big problems for that person and their personal reputation, credit and relationships.
Many entrepreneurs will try to mitigate these risks as much as possible, perhaps by conducting extensive market research or talking to as many potential customers as they can prior to launch (“testing” the idea). They may attempt to start a business in the cheapest possible manner to mitigate financial stress. Perhaps they can seal a deal with a customer, getting their first order in before they really begin to incur any costs.
There are also others arguing that entrepreneurship isn’t nearly as risky as it is perceived, especially in today’s world where jobs are not as secure as they once were. They also cite the off quoted “90% failure rate” (or something like that) for new businesses that everyone has heard and show why that number is misleading or wrong (in fact, we’ll be writing about the misleading business failure statistics in an upcoming post as well).
Whatever the true level of risk facing the entrepreneur, honest is an important characteristic. Entrepreneurs need to be honest with themselves about the condition and capabilities of their company. They need to be honest to themselves about the real potentials of their products. It is good for them to exude optimism about the company’s future and how great their product is when talking to others but if the entrepreneur buys too much of his own salesmanship they may be headed for unexpected troubles. Finally, and quite importantly, entrepreneurs need to be honest to their spouses and the friends and family. They need to be honest up-front with those people that they will need to rely on when the stress gets very high, or the money gets very low. Hopefully all of these people are aware that such things may be headed their way in the future.
Why then, with these pressures and risks do entrepreneurs choose to start businesses? Of course, with higher risks come higher proportions of rewards. Strictly monetarily, many entrepreneurs have the potential to make far more money starting a business than they may have sticking to their prior career paths. However, money isn’t everything (right?) and entrepreneurs are often quoted saying things like “you have to be passionate about what you’re doing otherwise your business will not survive the low points”. Entrepreneurs often make it sound like the potential money alone could not inspire them enough to get through what they need to go through as they grow a business.
So what does get them through the low points? Inc. Magazine, in their March 2012 issue published the results of a survey they conducted of 2,000 business founders asking why they start businesses. The #1 reason among all groups (males in their 20s, 30s, 40+s, females in their 20s, 30s, 40+s) was – Autonomy. According to the article the only distinction was whether they were seeking independence or whether they were “fiercely” seeking independence.
The next most popular response, for 5 of the 6 groups, was Power and Influence – the desire to be a leader (female entrepreneurs over 40 preferred intellectual challenges over power and influence). Other common responses where desire to manage people, seeking variety, altruism and financial gain.
We asked David Walker, CEO and founder of Enable IPC for his thoughts - why did he start Enable IPC and other companies. Here is his response: "I think the biggest motivating factor for me to start a new venture was to avoid becoming old and regretting that I never tried".
This concludes our brief look at entrepreneurs. Next week we will return to our series on deciding whether or not to start a business by beginning to take a look at industries and markets.