Common Myths About Entrepreneurs
An entrepreneur has been defined as “a person who starts, organizes and manages any enterprise, especially a business, usually with considerable initiative and risk”. “Rather than working as an employee, an entrepreneur runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.”
There are many misconceptions about who entrepreneurs are and what motivates them to launch firms to develop their ideas. Some misconceptions are because of the media covering atypical entrepreneurs, such as a couple of college students who obtain venture capital to fund a small business that they grow into a multimillion-dollar company. Such articles rarely state that these entrepreneurs are the exception rather than the norm and that their success is a result of carefully executing an appropriate plan to commercialize what inherently is a solid business idea. Indeed, the success of many of the entrepreneurs we study in each chapter’s Opening Profile is a result of carefully executing the different aspects of the entrepreneurial process. Let’s look at the most common myths and the realities about entrepreneurs.
Here are Fourteen types of Myths of Entrepreneurs
Myth I: Entrepreneurs are born, not made; This myth is based on the mistaken belief that some people are genetically predisposed to be entrepreneurs. The consensus of many hundreds of studies on the psychological and sociological makeup of entrepreneurs is that entrepreneurs are not genetically different from other people. This evidence can be interpreted as meaning that no one is “born” to be an entrepreneur and that everyone has the potential to become one. Whether someone does or doesn’t is a function of environment, life experiences, and personal choices. However, there are personality traits and characteristics commonly associated with entrepreneurs; these are Common traits and Characteristics of Entrepreneurs
A moderate risk taker – Optimistic disposition
A networker – Persuasive
Achievement motivated – Promoter
Alert to opportunities – Resource assembler/leverager
Creative – Self-confident
Decisive – Self-starter
Energetic – Tenacious
A strong work ethic – Tolerant of ambiguity
Lengthy attention span – Visionary
These traits are developed over time and evolve from an individual’s social context. For example, studies show that people with parents who were self-employed are more likely to become entrepreneurs. After witnessing a father’s or mother’s independence in the workplace, an individual is more likely to find independence appealing. Similarly, people who personally know an entrepreneur are more than twice as likely to be involved in starting a new firm as those with no entrepreneur acquaintances or role models. The positive impact of knowing an entrepreneur is explained by the fact that direct observation of other entrepreneurs reduces the ambiguity and uncertainty associated with the entrepreneurial process.
Myth II: Entrepreneurs are gamblers; The second myth about entrepreneurs is that they are gamblers and take big risks. The truth is, entrepreneurs are usually moderate risk takers, as are most people. The idea that entrepreneurs are gamblers originates from two sources. First, entrepreneurs typically have jobs that are less structured, and so they face a more uncertain set of possibilities than managers or rank-and-file employees. For example, an entrepreneur who starts a social network consulting service has a less stable job than one working for a state governmental agency. Second, many entrepreneurs have a strong need to achieve and often set challenging goals, a behavior that is sometimes equated with risk taking.
Myth III: Entrepreneurs are motivated primarily by money; It is naïve to think that entrepreneurs don’t seek financial rewards. As discussed previously, however, money is rarely the primary reason entrepreneurs start new firms and persevere. The importance and role of money in a start-up is put in perspective by Colin Angle, the founder, and CEO of iRobot, the maker of the popular Roomba robotic vacuum cleaner.
Commenting on his company’s mission statement Angle said: Our, “Build Cool Stuff, Deliver Great Products, Have Fun, Make Money, Change the World” (mission statement) kept us (in the early days of the Company) unified with a common purpose while gut-wrenching change surrounded us. It reminded us that our goal was to have fun and make money. Most importantly, it reminded us that our mission was not only to make money but to change the world in the process.
Some entrepreneurs warn that the pursuit of money can be distracting. Media mogul Ted Turner said, “If you think money is a real big deal you’ll be too scared of losing it to get it.” Similarly, Sam Walton, commenting on all the media attention that surrounded him after he was named the richest man in America by Forbes magazine in 1985, said:
Here’s the thing: money has never meant that much to me, not even in the sense of keeping score. … We’re not ashamed of having money, but I just don’t believe a big showy lifestyle is appropriate for anywhere, least of all here in Bentonville where folks work hard for their money. We all know that everyone puts on their trousers one leg at a time. … I still can’t believe it was news that I get my hair cut at the barbershop. Where else would I get it cut? Why do I drive a pickup truck? What am I supposed to haul my dogs around in, a Rolls-Royce?
Myth IV: Entrepreneurs should be young and energetic; Entrepreneurial activity is fairly evenly spread out over age ranges. According to an Index of Entrepreneurial Activity maintained by the Kauffman Foundation, 26 percent of entrepreneurs are ages 20 to 34, 25 percent are ages 35 to 44, 25 percent are ages 45 to 54, and 23 percent are ages 55 to 64. The biggest jump, by far, from 1996 to 2010, which is the period the Kauffman date covers, is the 55 to 64 age bracket. A total of 14 percent of entrepreneurs were 55 to 64 years old in 1996, compared to 23 percent in 2010. The increasing number of older-aged entrepreneurs is a big change in the entrepreneurial landscape in the United States.
Although it is important to be energetic, investors often cite the strength of the entrepreneur (or team of entrepreneurs) as their most important criterion in the decision to fund new ventures. In fact, a sentiment that venture capitalists often express is that they would rather fund a strong entrepreneur with a mediocre business idea than fund a strong business idea and a mediocre entrepreneur. What makes an entrepreneur “strong” in the eyes of an investor is experience in the area of the proposed business, skills and abilities that will help the business, a solid reputation, a track record of success, and passion about the business idea. The first four of these five qualities favor older rather than younger entrepreneurs.
Myth V: Entrepreneurs love the spotlight; Indeed, some entrepreneurs are flamboyant; however, the vast majority of them do not attract public attention. In fact, many entrepreneurs, because they are working on proprietary products or services, avoid public notice. Consider that entrepreneurs are the source of the launch of many of the 2,850 companies listed on the NASDAQ, and many of these entrepreneurs are still actively involved with their firms. But how many of these entrepreneurs can you name? Perhaps a half dozen? Most of us could come up with Bill Gates of Microsoft, Jeff Bezos of Amazon.com, Steve Jobs of Apple Inc., Mark Zuckerberg of Facebook and maybe Larry Page and Sergey Brin of Google. Whether or not they sought attention, these are the entrepreneurs who are often in the news. But few of us could name the founders of Netflix, Twitter, or GAP even though we frequently use these firms’ products and services. These entrepreneurs, like most, have either avoided attention or been passed over by the popular press. They defy the myth that entrepreneurs, more so than other groups in our society, love the spotlight. Now, Common Myths About Entrepreneurs by businesstown.com.
Myth VI: Entrepreneurs Are High-Risk Takers; Entrepreneurs, Rye states, are often thought of in terms of the risk they assume. Even the dictionary describes an entrepreneur as one who assumes business risks. However, like all prudent businesspeople, entrepreneurs know that taking high risks is a gamble. Entrepreneurs are neither high nor low-risk takers. They prefer situations in which they can influence the outcome, and they like challenges if they believe the odds are in their favor.
They seldom act until they have assessed all the risks associated with an endeavor, and they have an innate ability to make sense out of complexity. These are traits that carry them on to success where others fail. I certainly agree with Rye. Entrepreneurs generally seek the best risk/reward situation. Like most humans, they are often are a little hesitant to risk everything and take wild chances.
Myth VII: Entrepreneurs Are Mainly Motivated to Get Rich; Any successful entrepreneur, argues Rye, will tell you that starting a business is not a get-rich-quick alternative. New businesses usually take from one to three years to turn a profit. In the meantime, you’re considered to be doing well if you break even. During the business start-up stage, entrepreneurs do not buy anything they do not need, such as fancy cars. Most drive junk cars and use their surplus money to pay off debt or reinvest it in the business. Their focus is on creating a company with a strong financial base for future expansion.
I largely agree with Rye. For entrepreneurs, money isn’t everything. But there’s nothing embarrassing about being partially motivated by money, as are most entrepreneurs. If entrepreneurs didn’t have the ability to get rich and get financially rewarded for their work, the United States could be almost as poor as Cuba. It is OK to make money, build a business, and help build your local economy in the process.
Myth VIII: Entrepreneurs Give Little Attention to Their Personal Life; All successful entrepreneurs, Rye says, work long hours, which cuts into their personal life. However, long working hours are not unique to entrepreneurs. Many corporate managers and executives work well beyond the average 40-hour workweek. The primary difference between the entrepreneur and his or her corporate counterpart is schedule control.
In the corporate world, you may not have control over your schedule. If some higher-level manager calls a Saturday meeting, you’ve got no choice but to be there. Entrepreneurs don’t mind working 60- to 70-hour weeks, but they will do everything they can to preserve their private time. They schedule important meetings during the week so that they can have weekends off for their personal life, which is very important to them.
I find what Rye says is true, that most entrepreneurs do not give a lot of attention to their personal lives. I have, at times, been an outlier and had almost no personal time, such as when I was a full-time student at Harvard Business School and running four start-up businesses at the same time, or was a full-time college student and starting an independent newspaper business. Sometimes, as an entrepreneur with an especially fast-growing business, you are going to have to sacrifice personal time.
Myth IX: Entrepreneurs Are Often High-Tech Wizards; We are all aware, says Rye, of a few high-tech entrepreneurial wizards who have made it. Media attention overplays the success of these few high-tech entrepreneurs. Only a small percentage of today’s personal businesses are considered high tech, and what was considered high tech just a few years ago is not considered high tech by today’s standards.
It takes high-profit margins, not high tech, to make it as an entrepreneur. One has only to look at the recent problems that have plagued the computer industry to understand this basic principle. High-tech personal computers did very well when they made high-profit margins. The industry then went into a nosedive when profits fell.
Yes, I think Rye is right on the money. Very few businesses require high tech abilities. In fact, I have started and run a multimedia business, an interactive software business, and two Internet businesses, with virtually no tech experience or expertise. (Although, to be sure, I did learn to do a little computer programming along the way when I started these businesses, to help me appreciate what the engineers were doing.) Furthermore, most businesses are not even tech businesses at all.
Myth X: Entrepreneurs Are Loners and Introverts; Initially, Rye says, entrepreneurs might work alone on a business idea by tinkering in the solitude of their garage or den. On this myth, I don’t totally agree with Rye. The astute entrepreneur knows that he or she must draw on the experience and ideas of others in order to succeed. Entrepreneurs will actively seek the advice of others and will make many business contacts to validate their business ideas. The entrepreneur who is a loner and will not talk to anybody will never start a successful business.
I’ve spent a lot of time working largely in isolation during the early stages of building businesses. I think a lot of other entrepreneurs have, too. Not ideal in hindsight, but that’s what I often did. Generally, I think entrepreneurs are willing to work independently if it is necessary to succeed. But even independent-minded people can get lonely, especially if you are working day and night in small home-based business.
Myth XI: Entrepreneurs Are Job Hoppers; A recent study of successful entrepreneurs, notes Rye, showed that most of them worked for a large corporation for a number of years before they started their own business. In every instance, they used the corporate structure to learn everything they could about the business they intended to establish before they started their own. Entrepreneurs are not job hoppers.
I tend to agree with Rye. I think most entrepreneurs have usually had a good track record in the workplace. Most have spent years working for other people before going on their own. But you don’t have to do so to succeed. The longest single job I ever held lasted about eight weeks, but in total, I’ve only worked a few months for anyone else in my entire lifetime.
Myth XII: Entrepreneurs Finance Their Business with Venture Capital; Entrepreneurs, Rye says, know that venture capital money is one of the most expensive forms of funding they can get. Consequently, they will avoid venture capitalists, using them only as a last resort. Most entrepreneurs fund their business from personal savings, or by borrowing from friends or lending institutions.
I often remind people that venture capital is a relatively small industry and, as such, finances an extremely minute number of small businesses. To be financed by a VC firm, your business might need to meet all kinds of criteria, and then find a VC firm that totally loves it. Furthermore, since VC firms tend not to want to put much money into any one startup, most VC-funded startups have to get money from not one but several different firms.
Myth XIII: Entrepreneurs Are Often Ruthless or Deceptive; Rye thinks that some people believe that to make it as an entrepreneur, you have to be deceptive and step on anybody who gets in your way. On the contrary, this mode of operation doesn’t work for the entrepreneur. The truly ruthless or deceptive entrepreneur will often alienate others and be forced to waste time and energy repairing relationships with employees, customers, and suppliers, or simply fail.
I don’t know if people are predisposed to think negatively of entrepreneurs as Rye states. But, in any event, I think entrepreneurs have some bad apples in their ranks. Not many, but some. I have lost sales to competitors who fabricate the facts, exaggerate the truth, slander their competitors, and engage in all kinds of other unethical behavior. But I have found that such competitors eventually implode.
Often, they lose their best employees, whom they also treat poorly, or they lose their customers. Once, when I was in a dogfight with a totally ruthless competitor in a business that was extremely dependent upon sales, his three best salespeople, as well as his sales manager, approached me on their own initiative and ended up joining my team.
Myth XIV: Entrepreneurs Have Limited Dedication; Rye says it is a myth that entrepreneurs are not dedicated to any one thing. But he adds that dedication is an attribute that all successful entrepreneurs exhibit. They are dedicated to becoming their own boss. To this end, they’ll work like a dog to make their business succeed.
While I agree with Rye that entrepreneurs will work like a dog to succeed, I do think that many entrepreneurs can change businesses or direction quicker than other people. Often, this ability to switch direction quickly can be essential for success, and entrepreneurs tend not to switch direction recklessly, although there are always exceptions.
Notes: Here are read it Common Myths About Entrepreneurs, Would you like more read it; What is an Entrepreneur?, and also read it What Is Entrepreneurship?, don’t forget read it; Why Become an Entrepreneur?, Next up; Who Changing Demographics of Entrepreneurs?.