Being a Better Entrepreneur

The primary motivation of people who start their own business is not that they have a great business idea, but they just don't like working for other people. That is according to Scott Shane in The Illusions of Entrepreneurship.

New businesses often reflect what their founders want. People who start businesses to avoid working for others tend to want autonomy, not money, and as a result, they tend to accept lower financial performance in their businesses.

In addition, the profile of the typical American entrepreneur is not the likes of Bill Gates and Michael Dell who were college dropouts but who made it big nonetheless. According to Shane, he is one who change jobs often, has been laid off from his previous job and is now unemployed, and has made less money in his last job.

The person who is often unemployed is more likely to start his own business than one who has a stable day job. This is quite logical because for the chronically unemployed, getting employed is more unstable in that he is more likely to be fired or he is more likely to quit.

Given the above motivation and profile, many (American) entrepreneurs generally fail rather than succeed, hence the dismal statistic of successful businesses. Perhaps this also applies to other nationalities who venture into their own businesses.

Among the common advice one hears or reads in order to succeed in starting up a business are the ff: Never start a business alone, Keep things simple, Have persistence. These sound logical and seem to be common-sense but actually they won't get you very far.

Common business start-up origins
Starting businesses at a small size
Having small capitalization
Being a sole proprietorship
Starting a business on a part-time basis
Starting a business from scratch
Starting a business on your own
Having the wrong motivation
Being in the wrong industry
Competing on price
Not focusing on a single product
Not emphasizing on marketing

Improving the chances of success of your start-up business
Larger start-ups are better.
Large capitalization; capitalization of $100K are 23% more likely to succeed than those with funds of less than $5K.
Corporations outperform proprietorships on almost every possible measure.
Full-time entrepreneurs acquire more capital; hence they are more likely to survive.
It's better to purchase a business.
New businesses founded by teams are better.
Compete on service, quality.
Aim for making money, not autonomy.
Know your industry and its profitability.
90% of fastest growing private companies sell to businesses.

Before buying into the above, one should ask himself about his financial goals for his business. One doesn't need to go into being a corporation if he is already content with the income derived from being a micro-business. However, if one really wants to make it big, then the above tips from the book should help.