Are you a business owner?
Perhaps you’re still considering carving out your own post-covid path as an entrepreneur.
Here’s a question for you: Why?
There has been a lot of research conducted to understand the motivations behind (and in front of) why people choose to start their own business.
The data on small-to-medium businesses shows that your motivations for going into business can strongly dictate:
Your mental and emotional state; and
Your chances of success in a given venture
Unsurprisingly, this can have significant implications for your professional and personal life.
Push or Pull: Which One are You?
We’re all in it for the money, right?
Well actually, research has consistently shown that when it comes to the motivations of small business owners, money and personal wealth are secondary to independence, personal autonomy, and quality of life. (Mason, Pinch & Storey 1991; Rosa, Hamilton, Carter & Burns 1994)
Moreover, 71% of small businesses report intrinsic lifestyle factors as significant motivators over financial ones. (Fielden, Davidson & Makin 2000)
Basically, money comes second to lifestyle for a lot of business owners.
The reasons why people choose to start a business can be split into two categories:
Many of us will notice factors from both columns at play in our own lives, but it is important to honestly consider whether you are more strongly pushed or pulled into business.
We saw above that your motivations for going into business can have a big effect on your mental and emotional state.
The research backs this up.
Starting a venture because we are walking away from something rather than striving towards something can lead to businesses “[which are] started as a means for owner-managers to be self-supporting which, in some cases, create distressed, unwilling or reluctant entrepreneurs.” (Keeble, Bryson & Wood 1992; Stanworth & Stanworth 1997)
Entrepreneurship can be immensely rewarding, but the grass isn’t always greener on the other side.
We will usually be happier and more successful when pursuing something that motivates us in and of itself; something that pulls us towards it.
Why do so many small businesses fail?
We’ve all heard the stats around how few businesses make it:
60% of businesses fail in the first 3 years
Only 35% of businesses make it past 10 years
The reasons for this are numerous:
Lack of cash flow
Poor market research
Poor understanding of businesses concepts and data
The primary cause underpinning all of these is a lack of strategic planning.
It has been apparent for decades that there is a lack of strategic planning in SMBs.
In fact, half of SMBs have no marketing plan, and a quarter have no idea how they will grow in the following year.
This, despite the fact that investing as little as 5-10% of annual revenue into marketing can produce growth for 81% of small businesses.
Furthermore, businesses that apply strategic planning tend to perform better than their more reactive counterparts who focus solely on short-term operational matters. (Carland & Carland 2003; Gibson & Casser 2005)
While it may seem logical to attribute a lack of planning to insufficient time and expertise – and much of the research has focused on these factors – there is more to it than this.
Motives can determine outcomes
Tying this all together, individuals who go into business due to Push factors tend to be less focused on long-term results.
This probably explains why the vast majority of small business owners, when surveyed, said they would rather spend their time on anything other than marketing activities.
These are the same SMB owner-managers who research has shown as more likely to be satisfied with running a ‘lifestyle business’ rather than growing a larger enterprise.
I’m generalising with this article and by no means am I suggesting that starting a business because of covid-related redundancy or wanting to escape lousy management destines you to failure.
I would, however, encourage you to check your motivations and think about how they may influence the way you work in and on your business.
If you’re not working on your business then remember that many of your competitors probably are working on theirs.
There is no status quo in business or in life anymore.
Most industries are constantly evolving.
Automation and AI are just two categories of technology that will force many of us to re-skill or be left by the wayside.
Businesses now need to innovate just to keep up with the rapid rate of change in the world.
I’ll leave you with a couple of quotes that make this point better than I ever could:
“When you stop growing you start dying.”
- William S. Burroughs
“In this world you’re either growing or you’re dying, so get in motion and grow.”
– Lou Holtz
Your motivations for going into business has implications for your personal life and chances of success
Going into business because of Push factors – that is, because you are avoiding or fleeing the negatives of being an employee – can produce stress and reluctance
Small businesses fail for numerous reasons, many of which are underpinned by a lack of strategic planning
SMBs that apply strategic planning are those that achieve higher sales revenues and profit margins
Nevertheless, many SMB owner-managers do not plan ahead because they are satisfied with operating a ‘lifestyle business’ rather than growing a burgeoning enterprise
As a result, 50% of SMBs do not have a marketing plan
55% of SMBs spend less than 5% of annual revenue on marketing
Investing as little as 5% of time into marketing can produce revenue growth
Investing as little as 5-10% of annual revenue into marketing can produce revenue growth