Why do People Become Entrepreneurs?

One other interesting finding from the American Express study I blogged about on Friday.
It found that four-in-ten (38%) respondents said the biggest influence in becoming an entrepreneur is passion. As an influence, passion. I tell aspiring entrepreneurs the importance of this all of the time. It is too hard and too much work being an entrepreneur to look for anything else as your main motivation.
Passion was followed distantly by natural entrepreneurial inclination (20%) and being “born into it” (18%).
Business owners are most passionate about building their customer base (34%).
Turning a profit (27%) and closing the deal (15%) were of less importance. This is also consistent with much of the research on entrepreneurial motivation. It ain’t all about getting rich!

Small Business Owners Still Struggle with Balance

According to the latest release of the results from OPEN from American Express Small Business Monitor, which is a semi-annual survey of small business owners, entrepreneurs are struggling with finding balance in their lives.
– While business owners recognize the importance of “down-time” in their lives and most are satisfied with the amount of leisure time they have (81%), most report that carving out this time does not come without stress. Two-thirds of business owners (64%) find it stressful balancing their personal life and their business. Women business owners are more stressed by work/life balance than their male counterparts (71% vs. 62%).
– Two-thirds of business owners (67%) report they find themselves making sacrifices in order to be an entrepreneur. Among those who feel they are making sacrifices, family (52%) and friends (42%) are areas where they make the most sacrifices, followed by personal finances (36%) and health (35%). Male business owners are more likely to find themselves making sacrifices in their personal lives in order to be an entrepreneur when compared to women (73% vs. 65%).
– As business owners find themselves trying to achieve balance, they identify flexibility as the most essential entrepreneurial attribute. One-third of business owners (34%) identify flexibility as the most essential aspect of being an entrepreneur. Following at a distance is working well under pressure (24%) and knowing the market (18%).
– Taking their own advice on the importance of flexibility, two-thirds of business owners (64%) report making personal time for themselves during the business day. Men are slightly more likely than women to make personal time for themselves (66% vs. 60%). Although entrepreneurs realize the importance of taking time for themselves during the business day, nearly half (45%) consider taking time off from work to pursue a leisure activity a ‘guilty
pleasure’. Female business owners are more than four times more likely than their male counterparts (18% vs. 4%) to consider ignoring an email as a “guilty pleasure”.
– There may indeed be a connection between exercise and business success. Fifty-nine percent of small business owners report exercising several times a week with nearly one-quarter (24%) exercising every day. Nearly three-in-ten (29%) business owners with companies over $1 million in revenues say they exercise every day.
– The vast majority of entrepreneurs have the support of their significant other. Most entrepreneurs (89%) report a happy marriage or relationship with their spouse or significant other. Of those who report having a happy marriage, a similar number (81%) believe being an entrepreneur contributes to their happy marriage/relationship.
– Entrepreneurs are not only concerned with their own well-being. When making business decisions, eight-in-ten business owners (80%) take into consideration how their decision will affect their employees and their livelihood. In terms of offering employee benefits, nearly seven-in-ten employers (69%) believe it is important to offer healthcare coverage to their employees.
– Growth is a priority for a large majority of business owners. Over the next six months, seven in ten (71%) small business owners report planning to grow their businesses in a variety of ways. While most in this group (50%) plan to grow by selling more of the same product or service, one in five (22%) will introduce new products or services, and 14% will branch out into new markets or increase investments in their business (11%).
– For many, business is a family affair, and six in ten entrepreneurs (61%) who are parents would like their children to join their business. It will be interesting to see how many of these children agree!

Not the End of the World

More and more attention is being paid to the state of VC funds and Angel money these days. A story in the Nashville local paper the Tennessean just this morning talks about the flow of cash into local VC funds has slowed way down.

Some Nashville-area venture capital funds trying to raise money are facing a tougher time as investors chase promises of quicker and larger returns from a hot private equity market.
A year after setting out to raise its latest fund, Massey Burch Capital Corp. decided this week to do away with those plans after getting commitments for only a quarter of the $125 million it had sought. And Salix Ventures of Nashville is yet to announce a closing a year and a half after it said it planned to raise a $150 million fund.

Even thought the media makes this sound horrible, it is really OK. Not to worry! As long as the politicians and bureaucrats stay out of this arena, and that is sounding like a big if right now, things will be alright.
Capital markets — if left alone — are very efficient. There has been way too much money going into the VC markets, so what is happening is an adjustment of supply to meet demand. The money that was going into VC funds is now flowing to funds seeking to take public companies private. That is where the supply of deals is right now.

Angel Networks Looking More and More Like VCs

Angel networks have been growing in their level of sophistication. They also have been moving up the food chain, looking for more later stage deals. From the Boston Business Journal via MSNBC:

As the market grows, angels — especially angel investor groups — are moving upstream, looking to dole out more money and take fewer risks. Meanwhile venture capital firms anchored by huge funds are increasingly looking to invest larger rounds of cash. Entrepreneurs say that combination has made tapping into angel capital, once fertile ground for early-stage funding, trickier in recent years.

That is what I am seeing with the entrepreneurs we work with. There is plenty of cash, but it is getting farther out of reach from the early stage entrepreneur. An additional trend is the mass of private equity money going to fund buyout deals like Chrysler. This will put additional pressures on finding seed monies.
(Thanks to Dr. Jim Stefansic, an entrepreneur in search of early stage money himself, for passing this along).

Gaps and Weak Links

Eric, a regular at this site, sent me this question via e-mail over the weekend:

I recently saw a presentation by Vinod Khosla who left an interesting quote of “other companies hired what they could easily and left every other thing as weak links…” (in reference to Sun’s founding executive team). What “links” do you think a good company needs to fill?

This quote hits at one of the key aspects of sustaining growth — building a strong team.
Who any given entrepreneur needs to add to their team depends on several issues:
– The entrepreneur should always build a team that complements his or her strengths. I was strong on the strategic aspects of marketing and in financial strategies, and my partners were strong in healthcare program development. That meant we needed to fill in the gaps in areas that we were weak as a founding team.
– The very next person you need to add to your team is always the area that is causing the most pain for your business as it grows. This can differ greatly from company to company. Rarely do you have the money to add everyone on the team at once. So be strategic. What is the area that is most critical to grow your business the next 10-20%? Or, what is the “link” that if you do not fill it, you may not survive the stresses and strains caused by your current growth? That is the position you need to fill first.
– Consideration must also be given to competitive criteria. For example, we sought to have our healthcare facilities accredited at the very highest level. We knew it would give us a huge competitive advantage. So we hired someone who could help us achieve that goal. We could not afford to pay him the actual salary that he was worth, so we crafted an equity and bonus package that made it possible.
– Different industries require different talent in teams. For some, IT is critical — so that may be your key “link.” For others it may be a controller that can keep costs in line and allow them to be more competitive on bidding.

Healthcare Entrepreneur Recognized

Last evening the Massey Graduate School of Business here at Belmont, in conjunction with the Massey Alumni Association and Alumni Board, presented the first annual Distinguished Alumni Award. The occasion marks the 20th anniversary of the Jack C. Massey Graduate School of Business.
The first recipient is Dr. Richard Treadway, who earned his MBA from Belmont. Dr Treadway was involved in the founding of three companies, Psychiatric Solutions, Medical Properties of America, and Treadway Enterprises.

Entre-Boomer by Choice

When I talk with folks about the phenomenon called the Entre-Boomers, people usually assume that these are either, 1) baby boomers who got laid off and are unemployable at their age, or 2) baby boomers who did not plan for retirement and have to find ways to continue to earn income into the future. While this may explain some Entre-Boomers motivation, we are seeing more and more from this generation who are making a conscious choice to enter the world of entrepreneurship.
From StartupJournal we see a profile of one baby boomer who made a clear decision to make a change:

Bill Rumford was driving down Highway 101 in the San Francisco Bay area one afternoon at a clip of 65 miles per hour when a car behind him started honking and flashing its lights for him to speed up.
“That was the very moment I knew I needed to get out of the rat race,” he recalls.
Mr. Rumford went home that day in 2004 and dropped a bomb on his wife, Maggie. Remembering a bed-and-breakfast they had visited recently on Pender Island, a tranquil setting with 2,500 residents located between Vancouver on the Canadian mainland and Victoria Island, Mr. Rumford told his wife: “I think we should go up there and offer to buy it.”

Let’s Call a Meeting About This Study

Meetings. Most of us really don’t like them, and many entrepreneurs hold off using them in the day-to-day management of their business as long as they can. But at some point, your business will grow large enough where meetings become a key tool to facilitate coordination and communication between a growing staff of managers.
So how do you make your meetings productive? Opinion Research USA has just issued an “Ouch Point” study that examines what makes meetings painful to participants. The top things that make meetings painful:
27 percent — disorganized, rambling meetings
17 percent — peers who interrupt and try to dominate meetings
16 percent — cell phone interruptions
9 percent — co-workers falling asleep
8 percent — no bathroom breaks (older respondents)
6 percent — no refreshments (younger respondents)
5 percent — people arriving late or leaving early
5 percent — others checking e-mail on Blackberry
4 percent — meetings that start late and those that end without distributing a written recap
So if you are at the point of needing meetings in your business remember to be organized with a clear agenda, set some basic rules and expectations about behavior, and if you have any folks my age, for goodness sake offer frequent bathroom breaks!

Capitalism and the Common Good

One of my favorite writers and thinkers on the importance of freedom is Fr. Robert Sirico with the Acton Institute. I encourage you to read the text of a recent speech he gave a Hillsdale College, in which he argues that capitalism and its inherent freedom offers the most hope for the common good. Here is an excerpt:

We are all entitled to call ourselves socialist, if by the term we mean that we are devoted to the early socialist goal of the well-being of all members of society. Reason and experience make clear that the means to achieve this is not through central planning by the state, but through political and economic freedom. Thomas Aquinas had an axiom: bonum est diffusivum sui. “The good pours itself out.” The good of freedom has indeed poured itself out to the benefit of humanity.