THE COST OF ENTREPRENEURSHIP
Anyone who has watched even one episode of The Apprentice will surely believe they can do better than some of the half-wits we see racing around London, trying to impress Lord Sugar with their sales patter, savvy-saving and new business plans. Sometimes it’s easy to forget that it’s an entertainment show, not a serious business programme – that the characters on our screens have been hand-picked by producers because of their unapologetic bravado and all-too-often misplaced confidence in their own abilities.
Back in the real world, there’s an awful lot of hard graft that goes into making a business successful – and all without “treats” from Lord Sugar every time you do something right.
Setting up a business from scratch takes genuine graft and sacrifice – long hours, unrelenting pressure, financial risk… even alienation from those around you, frustrated by the amount of time you focus on figures rather than friends and family. It’s perhaps not surprising, then, that “founder fatigue” is a thing.
A Business Leader article from September 2019 succinctly summarises this alarming issue:
Once dismissed as a niche millennial wellness matter, burnout has emerged as an issue overwhelmingly affecting start-up founders which can prove catastrophic for any company in what are the crucial early stages which set a precedent for success or failure. According to the Harvard Business Review, 25% of entrepreneurs claim to experience burn out.
And burn out isn’t restricted to business owners. This past year has taught me that anyone is susceptible to the symptoms. When you place work at the centre of your world – instead of your self - it’s only a matter of time before the core overheats and the cracks begin to show. Sometimes with catastrophic consequences.
One issue faced by many founders is their lack of financial security. They are not in a salaried 9 to 5 role, like many regular employees. Many don’t receive sick pay if they take a day off. They don’t have annual leave – or an HR department breathing down their neck to ensure they take their allocated days. Their ability to pay their bills is dictated by how well their business performs, leading many to feel overwhelmed and under pressure. A fear of failure – from a personal pride perspective – also comes into play. According to Gallup-Healthways Wellbeing Index, 45% of entrepreneurs said they were constantly stressed – the highest percentage of all workers. No wonder, when they face a genuine risk of “losing it all”.
In 2017 there were more than 582 million entrepreneurs worldwide. The number of new tech start-ups incorporated in the UK has grown by 14% in the past year. Are these individuals just gluttons for punishment with unrealistic aspirations of becoming the next Steve Jobs, Richard Branson or Elon Musk? Are they all destined to fail?
Obviously, the answer is no. But the odds are severely stacked against them.
In June 2019, Small Biz Genius published a fascinating article looking at the failure rates of start-ups. Key statistics included:
Incompetence (46%) is the most common reason why businesses fail
A 50-year-old startup founder is 2.2 times more likely to gain success than a 30-year-old
Female-led startups raised 36 times less money in 2017 than male-led ones
20% of new companies fail in their first year
19% fail because of too much competition and another 18% fail because of cost issues
So, how can business owners with big aspirations help themselves?
Leadership – in order to succeed, strong leadership is vital. Remaining resilient and motivated to continue, even when the going gets tough – which it will – is an enviable trait shared by those who climbed to the top of the tree.
Patience is a virtue.You’ve heard it all before, but the old proverb rings especially true where start-ups are concerned. You wouldn’t expect a sapling to sprout up to become a giant Oak within a matter of months. You’re in it for the long haul, so be prepared to nourish, nurture and wait.
Think funding. Does your business plan account for scaling up? How would you afford it? External investment – such as crowdfunding – may be required. It’s much easier to acknowledge the necessity of funding up front – whether from your own personal piggy bank or from the purses of investors – than to view “asking for help” as a failure when the time comes.
Do it for the right reasons. Get-rich-quick schemes are frowned upon for good reason. If you’re only in it for the money, then your motivation is misplaced. It’ll be a lot harder to ride out the storm if you are not passionate about your product, or the processes surrounding it. That’s not to say that Jeff Bezos whole-heartedly loves every single item for sale on Amazon. His passion is clear from Amazon’s mission statement:
Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.
With that vision in mind, Bezos was better-placed to make decisions than someone driven purely by profit. By catering to customer needs – product availability, user reviews, speedy delivery – he has developed a global juggernaut of a company, which just so happens to make him one of the richest individuals on the planet.
Others have not been so lucky.
Shyp.com - a shipping company with the aim of making shipping items globally as easy as “two taps on a smartphone” - received favourable coverage from the New York Times shortly after launch, leading to heavy investor interest with $62.1 million raised. However, a “growth at all costs” mentality eventually led to Shyp’s demise. Rather than readjust his strategy away from consumer customer acquisition, CEO Kevin Gibbon forged ahead - hyper-focusing on vanity metrics and leaving Shyp unable to keep up with its own growth.
Beepi.com offers another crash course in how not to run a business. The used car selling and buying online marketplace seemingly had legs (or should that be “wheels”?!), and the founders successfully raised $149 million. Sadly, they blew it on high salaries and bad decisions, rendering the company obsolete and sold for parts in 2017.
So, whilst the word “entrepreneur” may conjure up images of private yachts, high-tech open plan office spaces and rooftop terraces, the reality can be much bleaker. It’s no coincidence that the richest businessmen and women in our society tend to be workaholics. Sure, they may have more money than they could ever hope to spend – but at what cost?