Matt Mireles vividly describes it as his “hallelujah moment,” that point in time two-and-a-half years ago when the notion of starting his own business suddenly made perfect sense.
“After trying a number of other things in my life, I still felt like I hadn’t quite found my niche,” recalls Mireles, who is the founder and CEO of the Silicon Valley–based startup SpeakerText. But after a five-week entrepreneur’s course at the Stanford Graduate School of Business, he says he realized, “this is what I was born for.”
Ben Plikerd speaks of an altogether different experience. After starting a small, part-time computer repair business more than a decade ago simply to earn a little extra cash, Plikerd now sits atop a budding entrepreneurial empire comprised of seven different IT, communications, and real estate corporations that stretch across northern Indiana. Last year, all these ventures brought in annual revenue of roughly $2.8 million. But despite this success, Plikerd recalls on his personal blog: “there was never a day when I woke up and decided that I’d become an entrepreneur.”
Talk to enough entrepreneurs and you’ll no doubt hear a similarly broad cross-section of stories, explains Belmont University’s Director of the Center for Entrepreneurship, Jeff Cornwall. “Some come to it because it’s what they’ve always wanted to do,” explains Cornwall, who founded a number of successful health care start-up ventures in the ’80s and ’90s before embarking on his academic career. “But other people find it along the way or have it kind of thrust upon them. They’re what I call accidental entrepreneurs.” As a result of this diversity of thought and experience, Cornwall says, “The best predictor of success for entrepreneurs is not who they are but what they do.”
Beware the “Facebook effect”
So, is there any way to know if the entrepreneurial life you’re contemplating is right for you? The answer often depends not on the path you take but the reasons for choosing it. That’s why, to avoid putting the proverbial entrepreneurial cart before the horse, Case Western Reserve management professor Scott Shane recommends investing some time into carefully considering your motivations behind such a move. “One of the reasons the failure rate is so high is because many people say, ‘I want to be an entrepreneur, now I have to figure out what I want to do,’” he explains. “If the motivation to be an entrepreneur comes first, there’s a danger.”
As the author of the 2008 book The Illusions of Entrepreneurship, Shane attributes some of this pre-emptive launch behavior to what he calls the “Facebook effect.” Every so often, a startup like Facebook rockets out of obscurity to achieve fame and billion-dollar riches seemingly overnight, its meteoric trajectory romanticizing entrepreneurship for a whole new batch of dreamers. But for an overwhelming number of them, the reality is much less glamorous and financially rewarding. “Eighty percent of new startups are non-employer businesses that bring in a median of $45,000 in sales a year,” he notes. Couple these income figures with a failure rate of roughly 50 percent after five years and it becomes clear that the chances of becoming the next Mark Zuckerberg are almost astronomical.
Still, Shane has discovered that many push on, regardless. In fact, he cites surveys in which as many as 40 percent of entrepreneurs acknowledge that their new business offers no competitive advantage over others in their marketplace. “I mean, if the owner of the company already believes that, then why start the business in the first place?” Shane asks incredulously. “What we see in many of those cases is that motivation overrides common sense.” What are the warning signs of entrepreneurial ambition run amok? Shane says they include launching a small business without having any kind of expertise in that specific industry, choosing to forego any kind of a business plan, and placing no financial controls on a new company.
You gotta have a certain personality, right?
“I’ve learned in my own years as an entrepreneur—and now an entrepreneurship professor—that there is a gut level ‘fit’ for people who are potential entrepreneurs,” writes Daniel Isenberg in a recent blog post at the Harvard Business Review. And though Isenberg, who teaches management practice at Babson University, acknowledges that the 20-question test he developed for HBR was done quickly and somewhat tongue-in-cheek, he maintains, “There’s some truth there. People who make the leap have those attitudes.”
Still, Isenberg is quick to say that if someone doesn’t ace his test that doesn’t mean they lack some “entrepreneurial DNA” necessary to succeed. “There isn’t a gene for entrepreneurship,” he points out. “For any occupation, there is only a very, very low genetic component.” Basketball players do tend to be tall, he acknowledges, but he also points out that an overwhelming majority of tall people are not successful basketball players. “In fact, our research shows that most talent is not innate, we’re not born with it.” But what about the notion that entrepreneurial aptitude correlates with characteristics like a willingness to take risks and an abiding passion for following one’s dreams?
Ask SpeakerText’s Mireles and he’ll agree that launching a startup usually involves absorbing a certain amount of chaos and uncertainty into one’s life. (For more on his long, strange trip to becoming an entrepreneur, check out Mireles’ personal blog.) However, he is quick to add an important qualifier. “There is risk-taking, yes, but I think if you’re successful you don’t take stupid risks,” he says. “Instead, I call it having strategic courage.”
Isenberg agrees. According to his research, the most important characteristics needed for a successful entrepreneurial career involve the ability to cope with large amounts of uncertainty—a term he also uses instead of the more loaded word “risk”—and an ability to lessen that uncertainty incrementally by taking action. As for the need to be passionate, Isenberg emphasizes that budding entrepreneurs need not lose sleep if they can’t conjure up fiery emotions every time they think about their small business idea. “Most people think that passion is a critical part of entrepreneurship,” he says. “That’s really a big myth.”
Keep an open mind
More than a decade into what easily qualifies as a successful entrepreneurial career, U4 Corporation CEO Plikerd says he still experiences moments that leave him scratching his head. “There’s always stress, even now,” he explains. “But I got to where I am by not being afraid to ask questions when I didn’t know how to do something, even if that meant that I looked like the dumbest guy in the room.”
Unfortunately, says Plikerd, many of the small business tenants he encounters now in his capacity as a commercial real estate owner don’t share this affinity for curiosity and adaptability. “By now, I can usually tell within 15 minutes of meeting them and asking them questions about their business whether or not they’re going to make it,” he says.
Professor Cornwall echoes Plikerd’s anecdotal impressions. “Those [entrepreneurs] that work out the best are the ones willing to listen. Those that aren’t willing to adapt and change and instead just blame the ‘stupid customers’ for not buying their products—they’re the ones that are bound to fail,” he says.
But perhaps the most important thing to remember when contemplating an entrepreneurial endeavor is that, like everything else in life, you’ll likely get out of it what you put into it. “Starting a small business, technically, is a very simple process,” Cornwall points out. “However, it is a lot of work.”
May 7, 2011 business_opportunity, business_start_up, common_mistakes, daniel_isenberg, getting_started, matt_mireles, none (add) new_business, start_your_own_business, starting_a_business, u4_corporation 3 Read more >