New entrepreneurs are developing new business ideas in record time. With Internet coding hackathons, some business plans and products are created within a 48 hour window of time. The chances of new businesses succeeding on the Internet increase as time goes by. You may be in this group of new entrepreneurs out of necessity, choice or pure passion for having control of your financial lives.
Embarking on an entrepreneurial adventure is more likely to be both successful and satisfying if you examine your reasons to start a new business and be sure that you are on course to pursue what you really want.
Noam Wasserman, associate professor at Harvard Business School, says “If you’re starting a new company, you probably already know that a crazy variety of land mines await you.” In his new book, “The Founder’s Dilemma: Anticipating and Avoiding the Pitfalls That Can Sink a Startup,” which will be published later this year, he gives pointers and tips to identifying the potential problems involved in starting a new business. He borrows from his Harvard classes on entrepreneurship for the compelling content.
Wasserman collaborated with Timothy Butler, a senior fellow and director of career development programs at Harvard to survey some 2,000 founders relative to motivation. They divided the participants by gender and age. The data was compared with non-entrepreneurs who also ranked the possible motivations. Those with an entrepreneurial spirit tended to focus on autonomy and power, while those in the non-entrepreneurial group say to a greater degree that they valued security and a congenial work environment above other motivators.
He lists the seven most common motivators entrepreneurs have for starting a new business. The results of a survey (which vary between men and women) suggest common reasons people pursue business startups.
AUTONOMY: If this is your first objective, don’t take on partners or significant investors. The downside could be slower growth or a smaller business initially, but the upside is that you have ultimate control. This advice is for those who want independence above all, including financial gain.
POWER AND INFLUENCE: If this is your motivation you may want to examine some problems associated with bringing on partners. Two like-minded partners can quickly find themselves in headlocks if each aims to be CEO. Money and hiring practices can also lead to logger-heads if there is no clear definition of who does what. Founders in this category may have trouble letting others do their jobs.
MANAGING PEOPLE: This motivation can lead to frustration if there is a disconnect between yourself as manager and those you want to manage. It takes some adjusting as the manager learns to let the doer do what he is hired to do. If you are bent on hiring, counseling, evaluating and rewarding, Wasserman advises keeping the business small.
FINANCIAL GAIN: If gain comes first, the entrepreneur may have to give up some control when seeking partners or professional investors. In studying the problem, Wasserman said, those who demanded full control of a board and CEO realized an equity stake 52 percent less valuable, on average, than those who shared significant decision-making authority with others. He calls the push-and-pull between autonomy/power and influence/financial gain as the “rich versus king” dilemma.
ALTRUISM: Nonprofit or socially responsible companies best fit this motivation. It requires that you make decisions based on what’s best for others, rather than what’s best for your bottom line. There may be other ways to accomplish what you envision besides creating a traditional company.
VARIETY: You can accomplish this by starting new companies or by exploring new product lines and markets. Employees may have ideas on developing new ideas in-house. Studies indicate that variety becomes more important to entrepreneurs as they age, so strong support by a partner is important.
INTELLECTUAL CHALLENGE: To satisfy this craving, the answer is to diversify. This, too, is a motivator that may carry more weight as you get on in life. Consider starting special projects that relate to your next line of products or extension of the company. Devise projects that exercise your curiosity.
Wasserman suggests that “people problems are responsible for a significant portion of startup failures, and that entrepreneurs tend to underestimate their potentially dangerous long-term effects.” When starting a new business keep in mind what your long term goals are and how to best achieve those goals.
Keep your business accounting simple by using QuickBooks from the beginning of your new business.