Here’s a Look at What Makes Certain People Willing to Take the Plunge into a Life of Business Ownership
Starting or buying a company is not for the faint of heart. The statistics tell us that roughly one-third of all small businesses fail within the first two years.
So, why do people do it? What could these risk-takers be thinking? What is the pure psychology that separates successful entrepreneurs from everybody else trying to earn a living?
Decades of research has produced some pretty good answers.
The reality is that successful entrepreneurs – including laundromat owners, of course – lean toward being self-confident, more risk-averse than you might imagine, and beyond extremely passionate about putting their ideas into action.
Many, if not most, entrepreneurs are totally aware of the risks of launching a business, but they believe their ideas are important enough to them that they are worth trying anyway. According to Travis Howell, an assistant professor of strategy at the University of California-Irvine’s business school: “Even if there is a minimal chance of success, entrepreneurs won’t be happy doing anything else.”
People strike out on their own for a number of reasons. Any perception of entrepreneurs as money-hungry, flat-out gamblers always willing to risk it all is completely false, according to many researchers who have studied business startups and the people who launch them.
In truth, the most successful entrepreneurs are driven to solve a problem, right or wrong, or to help a certain market segment, stated Neil Kane, who is an entrepreneur and educator at Michigan State University’s Burgess Institute for Entrepreneurship & Innovation.
“Rather than taking huge risks, I think what characterizes the entrepreneurial mindset is a willingness to bet on yourself,” Kane said. “And the best entrepreneurs are great at managing risk, not simply piling it on.”
In fact, research suggests that the average entrepreneur is more risk-averse than the general population, pointed out Olav Sorenson, director of research at UCLA’s Anderson School of Management.
However, here’s where things get confusing, because perceived risk is not always the same as actual risk. When asked, hypothetically, whether they would prefer a risky bet to a sure thing, entrepreneurs are not more likely to prefer the risky bet. In fact, people may start businesses not because they see risks and accept them, but rather because they do not fully appreciate the risks. If one is not aware of the risks involved, he or she most likely will not manage them very well.
Perceptions might help explain why entrepreneurs often seem to risk it all. However, their motivations are often far less remarkable.
Most people don’t quit good jobs to start companies. Instead, they find themselves unemployed or stuck in a job they hate – so starting a company seems like the best alternative. Another scenario is that they have an idea they really and truly believe in.
A simple and practical calculation of a person’s wage or salary, versus debts and family obligations, can quickly quash many business startup urges, or it can deter the approach to launching a business. Facts are facts.
One study found that avoiding risk and avoiding loss of income and prestige motivates most entrepreneurs more strongly than a love of risk.
Whatever motivates them, budding business owners don’t simply flip on a switch and take on the risks of a startup or business acquisition all at once. By contrast, many treat their entrepreneurial passion as a side hustle at first. Perhaps they have an idea, a product or a prototype, and they begin working on it in the evenings and over the weekends. Maybe they initiate a low-cost launch. After all, if one is focused strictly on financial success, without really solving anybody’s problems, that is a bad place to begin a business venture.
If any world view or personality type epitomizes successful small business owners, it’s confidence. However, that confidence needs to be in moderation. Too much confidence can backfire. Studies have examined the long-term success of business startups and determined that, on average, overly confident and risk-tolerant entrepreneurs operate less profitable businesses and are more likely to see their ventures fail.
Although it’s certainly true that fear of failure (or success) can derail entrepreneurial dreams, the real attention-getter is a lack of self-confidence that often develops when people rise to significant levels of responsibility or take on new roles they don’t think they deserve, and they no longer feel as qualified as others may perceive them to be.
Psychologically, more than 80 percent of small-business owners struggle with this so-called “Imposter Syndrome,” where they come to believe they don’t really belong in the positions they’re in.
However, savvy and successful business owners understand these feelings and know how to ease some the that burden and take some of the load off of their shoulders. In fact, the top entrepreneurs recognize that building a company is not a solo journey. Owners can overcome their fears of success or failure, their uncertainty, and their anxiety by surrounding themselves with a smart, supportive team.
But make no mistake. When you own a business, the buck clearly stops with you, and you have to be the type of person who can handle that type of pressure. Of course, not everyone is cut out to own a business, but a little self-evaluation will help most people figure that out – hopefully, before it’s too late.
Those who have lived out most of their lives doing what others have told them to do are often not cut out for entrepreneurship. On the flip side, people who are accustomed to taking initiative and solving problems on their own are more likely to succeed and relish in the process of owning or launching a business.
With regard to the laundry industry, let’s assume that there are approximately 29,500 laundromats in the United States. With a population of about 330 million people, less than 1 percent of those living in the U.S. can call themselves laundromat entrepreneurs.
Think about it. If you own a laundromat or are even considering investing in this business, you’re a unique and valued individual – and you have my sincere admiration.
