Why Laundromat Entrepreneurs Take the Risks They Do
Starting or buying a business is… well, risky business.
After all, research tells 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 everyone 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 more self-confident, more risk-averse, and extremely passionate about putting their ideas into action.
Many, if not most, entrepreneurs are fully aware of the risks involved with launching a business. However, their beliefs in their ideas are important enough to them that they’re willing to take on those risks.
“Even if there is a minimal chance of success, [entrepreneurs] won’t be happy doing anything else,” explained Travis Howell, an assistant professor of strategy at the business school at the University of California, Irvine.
People strike out on their own for a number of reasons – and any perception of entrepreneurs as money-hungry gamblers always willing to risk it all is totally false, according to several researchers who have studied business startups and those who engage in them.
In truth, the most successful entrepreneurs are driven to solve a problem, right or wrong, or to help a certain market segment, according to Neil Kane, 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 noted. “And the best entrepreneurs are great at managing risk, not simply piling it on.”
In fact, data suggests that the average entrepreneur is more risk-averse than the general population, said 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 you’re not aware of the risks, you probably won’t manage them very well.
Perceptions might help to explain why entrepreneurs may seem to risk it all, but their motivations are often far more unremarkable.
Most people don’t quit good jobs to start companies. Instead, they find themselves unemployed or stuck in a job they don’t like, so starting a business seems like the best alternative. Either that, or they have an idea they really believe in.
Of course, a simple, practical calculation of a person’s salary, versus debts and family obligations, can quickly squash many startup urges. Hey… facts are facts. And avoiding risk and avoiding loss of income and prestige motivate most entrepreneurs more than a love of risk, one study found.
Whatever the motivation, budding business owners don’t simply flip on a switch one day and begin taking on the risks of a startup or business acquisition all at once. Conversely, many treat their passions as a side hustle, or perhaps an idea, a product, or prototype – working evenings and weekends or maybe a low-cost launch. No doubt, if an entrepreneur is focused strictly on financial success, but not really solving anyone’s problems, that is a bad place to begin.
If any world view, or personality type, epitomizes the successful small-business owner, it’s confidence. Then again, too much confidence can backfire. Studies have looked at the long-term success of startups and have determined that the more overconfident and more risk-tolerant entrepreneurs have less profitable businesses on average, and they’re also more likely to fail.
With that said, confidence in moderation is absolutely necessary to success.
Although it’s certainly true that a fear of failure (or success) can derail entrepreneurial dreams, the real attention-getter is a feeling of a lack of self-confidence, which often develops when people rise to significant levels of responsibility or take on new roles they don’t think they deserve and no longer feel as qualified as others may perceive them to be. Psychologically, more than eight in 10 small-business owners struggle with this “Imposter Syndrome,” where they come to believe that they don’t belong where they are and that they are, in fact, imposter.
Of course, savvy business owners know how to take some of the load off their shoulders. The best ones recognize and understand that building a strong, profitable company is not a solo journey. You can overcome your fear of failure, your uncertainty, and your anxiety by surrounding yourself with a well-qualified and supportive team. Not everyone is cut out to own a small business, but a little self-evaluation can help a person figure that out.
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.
Those who have lived most of their lives doing what other people have told them to do often are not cut out for the entrepreneurial life. 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 their own businesses.
With regard to laundromat owners, let’s assume that there are approximately 30,000 vended laundry businesses in the United States. Given the fact that the population is about 330,000,000, less than 1 percent of the population actually owns and operates a laundromat in the U.S.
Clearly, laundromat entrepreneurs are a unique and valued breed – and each and every one of you has my full appreciation and admiration.
