Michael Tefula

This is a sample chapter taken from my career skills book Graduate Entrepreneurship. You can purchase a copy on Amazon or Book Depository. Please refer to the book for references and sources of key statistics and data.

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Myth 1: You need a great idea

Everyone has a business idea in them but they never think it’s good enough. This is because people often judge early ideas against already established businesses. However, no venture ever starts fully formed. Every successful idea starts small and over time can mature into greatness. Did you know, for example, that Sir Richard Branson’s Virgin Group started as a small mail-ordering business? The company would take orders through the post and mail music records to customers. In those early days it is doubtful Branson knew how big his venture would become.

The reality of entrepreneurship is that an idea does not have to be perfect from the get go; nor does it have to be extraordinary. For instance, in a survey that involved 100 highly revered start-ups only 12 percent of the founders attributed their success to an extraordinary or unusual idea. The other 88 percent attributed most of their success to the extraordinary execution of an ordinary idea.

In light of the above, the pressure we place on ourselves to come up with a revolutionary idea is unjustified. Few successful businesses ever start that way and many great entrepreneurs simply execute an existing idea better than everyone else has done. In other words, you don’t need a great idea to start a business. You just need a reasonable concept to build upon.

Myth 2: Entrepreneurs are born not made

The founder of Nike, Phil Knight, did not realise he wanted to be an entrepreneur until he got into business school for his master’s. It was during a class when a lecturer asked students to invent a new business that Phil realised that’s exactly what he wanted to do as a profession. Was Phil Knight born an entrepreneur? No. He didn’t pursue the craft until his later years. Moreover, this is just one example among many where someone becomes an entrepreneur but it wasn’t always something they had a natural inclination towards. And yet the myth that entrepreneurs are born lives on.

The truth is there’s no evidence that some people are natural-born entrepreneurs while others are not. Research indicates that entrepreneurs come from both entrepreneurial and non-entrepreneurial families. In one survey, which involved more than 500 company founders, more than half of the people surveyed (52 percent) were the first in their families to launch a business. If entrepreneurship is genetic you would not expect this percentage to be so high. And so the conclusion is clear: you aren’t born an entrepreneur; you become one.

Myth 3: Age matter

Web entrepreneur and YouTube personality Zoe ‘Zoella’ Sugg was in her early twenties when she started to earn a reported £20,000 a month from her social media ventures. Fraser Doherty set up his jam-making business when he was just 14 and, by the time he was 18, he was supplying jam to the supermarket chain Waitrose. There’s no shortage of media coverage on young entrepreneurs because the younger they are, the more sensational the story. But these reports warp our view on the relationship between age and entrepreneurship. The reality is far more diverse.

Doris Fisher co-founded Gap when she was 37 years old. Ruth Handler launched the Barbie dolls business aged 42. Giorgio Armani didn’t start his company until he was 41. And a 55-year-old pharmacist invented Coca-Cola. Most entrepreneurs actually start a business in their late thirties to mid-forties. In fact, the average age for a first-time founder is 45. The media, however, finds younger entrepreneurs more newsworthy so you’ll always hear more about the twenty-something millionaire and less about the mature businessperson.

Does this mean that you should wait until you are 35–45 years old to start a business? Not necessarily. Starting a business when you are young has advantages. You have fewer responsibilities and can be more flexible. On the other hand, when you’re older you may have a mortgage and family to think about and that restricts the sort of risks you can take. The upside, of course, is that you will have more experience, a better network of contacts, and perhaps even more cash to invest. Each age group has its pros and cons but a major advantage to starting now is the flexibility and energy that comes with youth.

Myth 4: Entrepreneurs love risk

Another common misconception is that entrepreneurs love risk and that you have to be a big risk-taker to become an entrepreneur. However, when it comes to risk preferences business owners aren’t that much different from the general public. If you asked an entrepreneur to leave their car unlocked while shopping they would view the risk of theft to be just as high as anyone else’s assessment. There’s a possible key difference, however: entrepreneurs are generally more confident and optimistic. When reviewing a business opportunity they have a strong belief in their ability to profit from a venture. In contrast, other people are likely to see threats where entrepreneurs see opportunity. On that account, entrepreneurs are not risk-taking enthusiasts. They simply believe that if they work effectively they can turn risk into reward.

Myth 5: Nine out of ten businesses fail

One of the most common myths in entrepreneurship is that nine out of ten businesses fail. Fortunately, the statistic is an exaggeration. It’s too simplistic and ignores a component that, if removed, leads us to forget an even more bizarre reality: over a long enough timeline all businesses come to an end. A vivid example of this phenomenon is that of the world’s oldest business, the Japanese company Kongō Gumi. After running for an impressive 1,400 years the company ended in 2006 – an impressive run, no doubt, since the average life span of a company is 40–50 years.

The ultimate end of all businesses, which by the way should not worry you, given the timespans involved, highlights an important point: when we talk about business failure rates we also have to consider a time component. A more telling statistic should tell us how many businesses fail over a specified period of time. Fortunately, this data is available and it is more encouraging than the usual nine-out-of-ten- businesses-fail mantra (see Figure 1.1).

According to a study by researchers from the University of Sussex and Barclays Bank, only one in six businesses (16.98 percent) fail in the first year. Over time this proportion increases, but even after six years, 30 percent of the original companies are still running. So next time someone tells you that nine out of ten businesses fail, ask them, ‘after how many years?’

With that said, it’s worth acknowledging that statistics are informative but not always instructive. Taken alone, the above numbers tell you nothing about the kind of things you can do to enhance your chances of success (more on this in Part 3 of the book). The numbers reflect a select group of businesses that might be completely different from your venture. As such, don’t assume that your fate has already been sealed. Your chances are better than you think!

Myth 6: Starting a business is straightforward

Few people believe that starting a business is easy but many underestimate the effort it takes. Entrepreneurs generally work longer hours and at the early stage of a venture don’t get paid much. According to research from the UK, entrepreneurs work an average of 52 hours a week. That’s 63 percent longer than traditional employees. In America the renowned investor David Rose says he has never met an entrepreneur who works fewer than 60 hours a week. He believes that starting a business is an ‘all-in sport’. You can’t do things half-heartedly. Once the engine gets going you have to commit fully (more on this in Chapter 15).

In addition to the long hours there’s usually little to no salary in the early stages of a venture. The founders of Innocent Drinks, for example, didn’t have any income for 12 months. It took them four years before they could earn a salary of £40,000, which was the same amount they had left at their corporate jobs.

Paradoxically, entrepreneurs are happier than most people are. In a global survey of over 197,000 individuals, authors of the 2013 Global Entrepreneurship Monitor Report found that entrepreneurs score higher on ratings of happiness and life satisfaction when compared to non-entrepreneurs. So while it’s harder to start a business it’s also often more satisfying than regular employment. You enjoy more creative freedom and the hours fly by when you’re working on something you really care about.

Myth 7: You need lots of money

You don’t always need a lot of money to start. The amount of cash you will need depends on the type of business you hope to start. For instance, there are many examples of people who started an online business for less than £100 but went on to make six-figure incomes. On the other hand, a small coffee shop that seats about 20 people might cost you between £15,000 and £20,000 to set up.

The general pattern is that service companies have lower costs while product-based businesses (restaurants, manufacturers, retailers) tend to have higher costs. Regardless, in Chapter 15 we will look at some of the ways you can start with a minimal amount of resources.

As a side note it’s worth pointing out that there is a danger to having too much money at the start of a venture. You may be tempted to spend money on every problem. For example, if you aren’t generating enough sales you might be inclined to spend more money on marketing even if the product is not satisfying customers. In contrast, being short on resources instils a stricter discipline. You are forced to consider the underlying issues as to why something isn’t working, instead of using the brute force of cash to attack every problem.

The truth about entrepreneurship

You may have never considered entrepreneurship until now. You may still be at university, or you may be a graduate. Regardless of your current position it’s never too late to start a business. The odds of success – especially if you are educated – are better than most people think; you don’t need a million dollar idea; your age hardly matters; and it’s possible to attain the business skills necessary to become an effective entrepreneur.

This is a sample chapter taken from my career skills book Graduate Entrepreneurship. You can purchase a copy on Amazon or Book Depository. Please refer to the book for references and sources of key statistics and data.

This post originally appeared at the MBA Blog of Said Business School.

In Trinity Term one of my favourite MBA electives was the Nature of the Corporation. In this course we asked, “what’s the purpose of a corporation?”, “do companies need to have a clear purpose?”, “how many corporations adhere to a healthy reason for their being?”, “is this reason good for shareholders alone or does it have a wider positive impact?”, and “which of these two approaches is more sustainable?” Though such questions risk coming across as grandiose, self-important, and overly philosophical, thinking about them can be instructive.

Purposeful Companies

On the course, we came to learn that corporations which lack a clear and systemic purpose tend to drift towards ill-conceived aims such as the singular pursuit of maximising profit for shareholders. But this tendency is problematic. This is because purpose informs values, strategy, and day-to-day decision-making. And so, if the sole purpose of a business is to maximise profits for its owners what’s to stop it from engaging in dubious practices that produce gains for a few at the expense of many? One example of this is Volkswagen. The car manufacturer cheated emissions tests so it could save millions of dollars but in doing so, it knowingly violated the Clean Air Act by putting cars on the road that emitted up to 40 times more pollution than was allowed. (The company was subsequently fined billions of dollars.)

In contrast, companies that adhere to the systemic purpose of acting to the benefit of not just shareholders, but also other stakeholders (customers, employees, suppliers, the community and environment within which the business operates), tend to perform better in the long run. Research shows that these companies are more innovative and resilient; they have more motivated employees; they have a lower cost of capital, and are less exposed to regulatory scandals. All in all, companies that pursue a clear, multi-dimensional, and healthy purpose outperform those do not.

Purposeful Lives

While thinking about corporate purpose I was also reflecting on a personal question: “what’s my purpose in life?” For a long time, I have struggled to articulate a coherent response to the question and this is not uncommon. Many of us find purpose vague, impractical, and too preachy to honestly consider. Moreover, on the MBA programme we are so busy with classes, assignments, socials, and career anxiety to think about a seemingly unproductive question. But think about it we must. Because as the American scholar Clayton Christensen once wrote, “the type of person you want to become—what the purpose of your life is—is too important to leave to chance.”

Why is purpose in our personal lives so important? Research shows that people who are clear about their purpose—people who are able to craft and make sense of their being—are more satisfied with life. They enjoy their work more. They have higher self-esteem. And, they are less prone to depression and anxiety symptoms. Most of us already know this intuitively. Think about your own life and the decisions you’ve had to make the in past. Were things more or less clear when you knew your values and what you stood for? Alternatively, were you more or less engaged with life (i.e. living vs. existing) when you had a vivid sense of direction?

Purposeful MBAs

As our MBA programme concludes we are faced with the question, “what next?” In answering this question we can choose to go wherever the wind blows or we can be more proactive and seek answers informed by a greater question, “what’s your purpose?” Albert Wenger, a prominent venture capitalist who gave a talk at Saïd Business School earlier this year, writes that “this is the single most useful question to ask anyone who is taking time out to think about what to do next.” I agree. Without purpose we risk drifting toward singular aims—money and status for example—that may provide gains in the short term but great losses in the long term. Fortunately, it’s possible for all of us craft a purposeful life if we spend some time thinking about it.

As freshly minted MBAs, how can we achieve this? The New York Times columnist David Brooks put it elegantly in his book ‘The Road to Character’ when he wrote, “…you don’t ask, ‘what do I want from life?’ You ask a different set of questions: What does life want from me? What are my circumstances calling me to do?” This is how you find purpose. This is how you craft meaning. You find a way contribute to the world and in doing so it contributes to your well-being.

In recognition that we all have different interests and experiences, Brooks adds: “…all of us are given gifts, aptitudes, capacities, talents, and traits that we did not strictly earn. And all of us are put in circumstances that call out for action, whether they involve poverty, suffering, the needs of a family, or the opportunity to communicate some message.” In other words, to craft a purposeful life, you start with who are and what you’ve been through, and then you leverage those elements to make some personally meaningful contribution to the world.

None of this needs to be dreary by the way. Your purpose (or purposes, should you have more than one) could be crafted simply—to be a good friend, parent, spouse, or member of your community. It could also be crafted ambitiously—to fight climate change, empower the disadvantaged, or end poverty. Whatever the purpose, if it leads to a life that resembles an ideal once described by the psychologist Alfred Adler—“to be interested in my fellow man, to be part of the whole, [and] to contribute my share to the welfare of mankind”—then such a life will be one that’s truly worth living.

P.S. Many thanks to my classmates Armand, Candice, and Dana, who read an early draft of this essay.

In 1942 Howard Hughes set out to build the world’s largest aircraft, the Hughes H-4 Hercules. With a wingspan close to 100 meters and a weight of 180,000 kilograms, it was questionable whether the gigantic bird would ever take off.

The Hughes H-4 Hercules – 2 Nov 1947

What’s just as uncanny is that most of  the aircraft’s structure had to be constructed using wood, since a world war had restricted the supply of steel. A few years later, when Hughes had to testify before the US government (the aircraft was partially funded by the tax payer), he remarked:

“The Hercules was a monumental undertaking. It is the largest aircraft ever built. It is over five stories tall with a wingspan longer than a football field. That’s more than a city block. Now, I put the sweat of my life into this thing. I have my reputation all rolled up in it and I have stated several times that if it’s a failure, I’ll probably leave this country and never come back. And I mean it.”

Hughes operated at the margin: When he wasn’t wooing beautiful actresses or breaking air speed records, he was busy developing the world’s first communication satellite and designing a moon lander that contributed to the success of the Apollo mission.¹ The billionaire loved reaching for the edges. However, these attempts also came at a cost.

For example, legend has it that when qualified pilots refused to perform a dangerous aircraft stunt for a movie Hughes was directing, the stubborn billionaire decided to pilot the manoeuvre himself. He pulled off the feat but also crashed violently shortly after. Hughes almost died in the accident. And though some say he kept bits of the wreckage to remind him just how close to death he had come, the event did not diminish his appetite for risk.² Indeed Hughes went on to have more brushes with death, and in less threatening scenarios, brushes with bankruptcy (he lost $90 million – no less than $400 million in today’s money – in a failed helicopter venture.)³

Operating at the Margin

Whenever I come across stories like those of Howard Hughes, Marilyn Monroe, Steve Jobs, Martin Luther King or Malcolm X, I’m reminded of a quote by the poet T. S. Eliot:

“Only those who will risk going too far can possibly find out how far one can go.”

That’s what operating at the margin is about. It involves reaching for the edges, pushing the limits, and breaking new ground. Marketer Seth Godin calls it edgecrafting, or to it put more plainly, finding an edge. Here’s an entrepreneurship example offered by Godin:⁴

“You must go all the way to the edge . . . accepting compromise doesn’t make sense. Running a restaurant where the free prize is your slightly attractive waitstaff won’t work—they’ve got to be supermodels or weightlifters or identical twins. You only create a free prize when you go all the way to the edge and create something remarkable.

[Remarkable things are] the cheapest, easiest, best designed, funniest, most expensive, most productive, most respected, cleanest, loudest [and so forth.]”

That’s what operating at the margin in business can look like. More generally, operating at the margin is when you move past a cushy status quo to pursue something extra—ordinary. Of course, you might fail spectacularly – in fact you will probably fail more than you succeed – but unsuccessful grand efforts often leave a trail of stepping stones that enable other forms of achievement in the future. The giant airplane that Howard Hughes built, for instance, ended up flying just once, and for a mere 50 seconds.⁵ But without his ambitious contribution to aircraft history, efforts in the sector could arguably have been more timid in the years that followed.

A Hypothesis on How to Have Impact

These observations bring me to paraphrase Theodore Levitt: the world is driven by what happens at the margin.⁶ Put more precisely:

“. . . what’s important is not the average . . .  but the marginal . . .; what happens not in the usual case but at the interface of newly erupting conditions.”

Indeed, it is the ‘stubborn courage’ of a few, as Nassim Taleb puts it, that “disproportionately moves the needle” when it comes to change and progress.⁷

So here’s some practical advice. If you want to have impact in the world, operate at the margin. Pursue a ridiculously ambitious project or two in your lifetime. Stand for something you deeply care about. Have the courage to go against the grain. You will polarise people (some will love what you’re doing and others will hate it) but what you won’t have is indifference. You will have impact.⁸

Thanks to Natalie, Gifted, Dino, and Renee for reading an early draft of this essay.

Notes

[1] http://www.inc.com/articles/2004/12/jamessteele.html

[2] https://selvedgeyard.com/2009/03/10/howard-hughes-odd-behavior/

[3] http://www.nytimes.com/1977/11/13/archives/hughes-documents-disclose-big-losses-in-last-decade-two-court.html

[4] http://sethgodin.typepad.com/seths_blog/2013/09/edgecraft-instead-of-brainstorming.html

[5] https://acesflyinghigh.wordpress.com/2012/03/21/the-hughes-h-4-hercules-aka-the-spruce-goose/

[6] https://hbr.org/1983/05/the-globalization-of-markets

[7] http://www.fooledbyrandomness.com/minority.pdf

[8] Operating at the margin can be used for both good and bad.