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.
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.