Younger entrepreneurs tend to be more comfortable asking for advice
People who build businesses play a vital role in society. They create jobs. They drive economic growth. Many are innovators, designing new products and services that make life more convenient, comfortable, healthy or fun.
But building a business is a long road. About one in three start-ups fails completely, according to the Harvard Business Review. Among businesses that survive, reality often falls short of expectation. It can be many years before backers begin to see a return on their investment.
The most common reason entrepreneurs give for starting a company is to be their own boss
Given the potential benefits to the broader community, it is little wonder that countries use a range of policies to encourage a culture of enterprise. Some provide tax relief, sponsor access to advice, or offer support for first-time exporters. A wealth of research has explored the effectiveness of these policies.
There has been surprisingly little investigation, by contrast, into what makes entrepreneurs tick, their mindset and motivations. Why do they set out on the journey of building a business? What makes them keep going when the going gets tough? And how do they convince other people to follow in their footsteps? Finding the answers to these questions could help policymakers – and banks such as HSBC – support entrepreneurs more effectively.
There is no such thing as a typical entrepreneur. But a study released by HSBC earlier this year, based on interviews with more than 2,800 owners of businesses around the globe, found that successful entrepreneurs share some common characteristics.
The most common reason entrepreneurs give for starting a company is to be their own boss. They want to take personal responsibility for risks and credit for achievements. For lots of people this sense of independence is exciting and motivating. Business owners who are keen to be self-reliant may also shy away from growth opportunities that mean relying on others, however, such as expanding their executive team or forming partnerships with other companies. Younger people tend to be more comfortable asking for advice.
Family comes first for other entrepreneurs. For people who say that their first responsibility is towards their loved ones, owning a business can be a way to secure an income, guarantee a comfortable lifestyle and create opportunities for the next generation. Running their own business is seen as a way to achieve work-life balance, fitting the activities of the company around the needs of the family. If looking after loved ones sometimes comes ahead of pursuing a sale or clinching a deal, family-first entrepreneurs are likely to feel comfortable with their choices.
A sense of personal challenge is what motivates other business owners. They want to prove their potential, acquire new skills and test their limits. Entrepreneurs who are in business because they relish a challenge often end up running companies with a bigger staff and higher turnover. Paradoxically, financial success may not be what they value most: their personal development is the measure of success that matters.
Some people start a business because they want to make a difference. They aim to pioneer a new product or service, create jobs in their local community or establish a name for themselves. Their strategy is often to bring other people with them, inspiring enthusiasm about their vision. Where they succeed, leaders such as these may end up running some of the largest businesses of all. Their sense of purpose is often reflected in their approach to community investment. They may choose to set up charitable trusts and get personally involved in their activities, rather than simply giving to good causes.
Finally, of course, some entrepreneurs defy all categorisation. They have started their business because of unique personal circumstances or found ownership of a company has devolved to them for reasons outside their control. But even those people who become entrepreneurs “by accident” can be highly successful in their field, creating wealth for themselves, their employees, and the communities where they work.
Whatever their background, all entrepreneurs can help to spur growth. Having a clear view of their motivations is a vital step for policymakers and others to help them achieve their goals. And if we want to encourage other people to begin the journey of building a business, understanding the mindset of the entrepreneurs of today is a good start.