Tuesday, October 24, 2006
What Makes and Entrepreneur
What makes an entrepreneur is a complex question. It includes factors from the environment in which an individual was raised, his or her family situation, and his or her personality traits. This question has been the subject of a great deal of both study and research. The following discussion is a summary of my own observations plus some of the conclusions of others.
About 20 or 25 years ago if you asked almost any expert to describe a successful entrepreneur, you would probably have been given a list similar to this:
- Only child
- About 35 to 45 years old
- Bachelor's or master's degree in engineering
- Born in the Midwest
- Father owns a hardware store
- As a youth, delivered newspapers and sold lemonade
Should you be concerned if you do not fit this stereotype? Absolutely not. Very few of these are factors that determine whether an entrepreneur succeeds or fails.
However, much recent research and many of my own observations seem to indicate that there are qualities commonly found in successful entrepreneurs, and there are things that you can do if you are concerned about any you may lack. Many writers on this subject seem to be primarily concerned with the qualities found in successful entrepreneurs. I look at the questions a little differently and believe it is equally as important to consider those traits that successful entrepreneurs usually do not have and those traits that simply do not matter.
Personal qualities common in successful entrepreneurs
Motivation to achieve -- In almost every case, successful entrepreneurs are individuals who are highly motivated to achieve. They tend to be doers, people who make things happen. They are often very competitive. Many researchers have concluded that the most consistent trait found in successful entrepreneurs is the sheer will to win, the need to achieve in everything they do. They don't want to come in third, they don't want to come in second, they want to come in first.
The habit of hard work -- Starting a company is hard work. Let no one kid you about that. Some time ago a student reported that one of his other professors said that unless you are prepared to work hard you should not start a company. He asked my opinion, I said the statement was nonsense. I think the correct way to say it is that unless you already work hard you should not start a company. There is a big difference. Starting a company is unlikely to turn a lazy oaf into a raging bull. In his excellent book, Winners, published by Holt, Rinehart and Wilson, Carter Henderson quotes Nolan Bushnell, founder of Atari game company and Pizza Time Theater, as saying it all comes down to one critical ingredient, "Getting off your ass and doing something." In summary, entrepreneurs are almost always very hard workers.
Nonconformity -- Entrepreneurs tend to be independent souls, unhappy when forced to conform or toe the line. They are people who find it difficult to work for others, who want to set their own goals. It is hard to imagine anyone who is more nonconformist than Steve Jobs and Steve Wozniak, the founders of Apple Computer, or Bill Gates, founder of Microsoft.
Strong leadership -- Starting a new company can be a harrowing experience full of uncertainty and risk. Successfully bringing a small organization through these trying periods requires a lot of leadership skills.
Street smarts -- I do not know quite how to put this. Shrewd or sharp might be a better word. Paul Hawken describes it as "trade skill" in his excellent book Growing a Business, published by Simon and Schuster. We all know owners of some very successful businesses who were lucky to finish high school and never even considered college. Yes, they always seem to make the right moves. Call it common sense, instinct, whatever you want. Successful entrepreneurs seem to have intuitive good judgement when making complex business decisions.
Personal qualities not found in successful entrepreneurs
Compulsive gambling -- Almost without exception people who start companies are not gamblers. They are attracted to situations where success is determined by personal skill rather than chance. They strongly prefer that their destiny be determined by hard work and conscious decisions rather than by the roll of the dice.
High risk-taking - Contrary to popular opinion, entrepreneurs do not take excessive risks. Through careful product and market selection, creative financing, building a good team, and thorough planning, the real risk of starting a new business can be quite low. In the world of small business, optimism is truly cheap and high risk- takers die an early death.
Age -- This simply does not matter any more. During the 1950s, 60s and 70s the large majority of people starting companies were in their 30s and 40s. Not true during the 1980s or today, Steve Jobs and Steve Wozniak were both in their early 20s when they started Apple Computer. At the other extreme Ray Kroc was 59 when he started the McDonald's restaurant chain.
Sex -- Here again, it just does not matter. Until recently, entrepreneurship was considered by many to be the last bastion of male dominance in the business world. This is no longer true. More businesses are now being started by women than are being started by men. I know many women who have started successful companies in recent years and I do not mean only gift shops or snack bars. I mean building contracting, bicycle manufacturing, printing, software, real estate agencies, newspaper publishing, market research, law firms, accounting firms, and on and on.
Marital status -- This is almost, but not quite, irrelevant. For a woman, being pregnant or having several preschool children may not be the best time to take the step into entrepreneurship. For a man who is the sole support of the family, having two or three children in college may not be the best time. But this in no way means they should not start a business. It means that perhaps they should have it done several years earlier or wait a few years longer. The question is when to start a business--not whether.
Educational level -- Knowledge and skill are very important. How you acquire them is less important. Too many college degrees may be a handicap rather than an asset. One researcher suggested recently that one of the biggest handicaps you can have when you start a business is a PhD. For example, Bill Gates, founder of Microsoft, the country's largest software company, quit Harvard after his sophomore year.
Other -- After writing this section, something gnawed at me. Somehow I felt that I had overlooked an important personal quality. It occurred to me that intelligence is not on my list. People with below-average intelligence should probably not start businesses, but it is not necessary to be a genius. Somehow or other, being smart-whatever that means-ought to be better than being dumb, but I do know quite a few very average people who have started some very successful companies. I watched a television program recently on which the founder of a major company with sales in hundreds of millions of dollars was interviewed. He said he had graduated last in his high school class of 230 students. Then he added that he did not think he graduated at all, but they just wanted to be rid of him. As I said earlier, if you do not fit the mold, don't panic. Every entrepreneur is an individual with different skills, different strengths and weaknesses, and different personality traits. Your smartest strategy as you start or develop your business is to be aware of your own special set of skills, strengths and weaknesses, and build on these.
Upside/Downside: Reward and Risk
Conventional wisdom is that starting a company is an extremely risky proposition. Data from many sources show that a high percentage of new businesses in the United States fail within the first few years. These statistics put fear in the heart of anyone thinking about launching an enterprise. I urge you not to be too concerned; it's not as bad as many people seem to think. In fact, the odds can really be quite good.
First of all, the above quoted data includes all startups: corner grocery stores, gasoline stations, trendy restaurants, and similar businesses that have a notoriously high attrition rate. Conclusion: Avoid these businesses entirely and your chances of surviving will increase dramatically.
Secondly, many people starting businesses are doomed almost before they begin because of poor initial strategy. The most frequent error, in my view, is to select an offering (either product or service) that is distinguished from competitors only by price. Instead, if you find ways to concentrate, differentiate, and innovate in every aspect of the business rather than selling price alone, the odds of success will be better.
Risks and rewards come in many forms. The most obvious are financial, but for many entrepreneurs the financial issues are of less importance than others. The two I want to discuss first are professional and emotional. What different people consider acceptable risk will vary substantially. More things than money must be considered.
The professional rewards of starting a company and succeeding are obviously very great and do not need further discussion.
The most important professional risk of starting a business and failing is the possibility of suddenly becoming unemployed. The question to ask is how two or three years of managing an unsuccessful startup company would compare to the same two or three years with your former employer when it comes to reentering the job market. My belief is that the broad experience and extensive contacts that come with being the head of a company, even though it fails, would make it easier to find a job. If this is true, or even almost true, it means that the professional risks of starting a company are low.
Emotional risks and rewards are another matter-the rewards can be very great but the risks may also be great both for you and your family. Let us look first at the reward side. I started a company from scratch. We had two employees in addition to the four founders. Eight years later, at the time of our merger with Harris Corp., RF employed about 800 people; today it is closer to 1,200. Most of these employees have a spouse and children. There is a multiplier on top of these when you consider the company's supplier and merchants in the community where our employees spend their income. All-in-all I estimate that the company I started in a basement supports 10,000 to 12,000 people in the Rochester area. Is this an emotional reward? You better believe it is!
Starting RF Communications was financially rewarding to the founders. My living standard and lifestyle moved upward considerably but not nearly as far as my income, so suddenly I had resources available for other purposes. As a result of the success of RF Communications I was able to donate an athletic field to each of the two private high schools my children attended plus a dozen or so scholarships that will help other young people get a similar education.
On the downside the emotional risks associated with starting a business can be great whether the business succeeds or fails. Consider how your complete dedication to and immersion in the new venture will affect your marriage and family. When you spend every waking hour dealing with business problems it may not leave much emotional energy to deal with family problems. Are your spouse and children prepared and able to make the emotional investment needed for you to start a business? If you venture goes down, will you be able to prevent your marriage and family from going down as well?
These are scary questions that deserve a lot of attention. While the emotional rewards of entrepreneurship can be very great, so can the risks. Each person must assess whether and how they can handle these.
In addition to these two areas, where the risks and rewards must be carefully balanced, there is a long list of others where only reward is possible and the risk is zero. These include things such as the wish to be your own boss, the desire to be involved in all aspects of the business, getting away from the politics, red tape, and bureaucracy of the large company, and many more. If these things are important to you, and they usually are, there is only an upside.
The above discussion covers many issues but it does not cover many other important ones that may determine whether the new business succeeds or fails, such as: writing a business plan, picking products and markets, controlling cash flow, getting orders, and many others. These are addressed in other parts of this Web page or in books, such as mine, which spend many chapters covering these other issues.
From Start Up: An Entrepreneur?s Guide to Launching and Managing a New Business, © 1999 by William J. Stolze.
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These Qualities that you wrote are indeed what makes an Entrepreneur. I do believe that most people has these qualities but for many reason they are afraid to try.
Don't Worry Make Money said this on Friday, September 24, 2010 2:32:00 PM
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