10/20/14

What is Entrepreneurship?

What is entrepreneurship to you? The reason I ask is because it seems that most people don’t really know. And that includes the entrepreneurs themselves, the media, and the business schools.

This morning I stumbled upon something in my inbox written by Sramana Mitra that anyone even thinking about starting a business should read at least once. Entrepreneurship Does Not Equal Financing.

Popular media would have us believe that entrepreneurship is rounding up investment capital and becoming a mega-gajillionaire. Mitra suggests otherwise and offers a simple equation that resonates with me:

Entrepreneurship = Customers + Revenues + Profits

Financing is optional.

Exit is optional.

It’s a very small percentage of startups that have the $multi-billion-dollar market or the ability to ramp up to serve such a market with an influx of cash. What’s more, every great business idea doesn’t (or maybe even shouldn’t) lead to an exit to be successful. Many wildly successful entrepreneurs lead very successful companies with no intention to exit after a few years.

Growing up in a family with a small business, I can appreciate the difference between making decisions knowing that I will have to live with them 10 years from now, and making decisions knowing the long-term consequences will be someone else’s problem down the road. When my dad started his business, he was creating something he intended to be his life’s work—and it was.

“Most small businesses simply do not grow at an exponential pace,” he says. “Most businesses have linear growth curves, not hockey stick growth curves.” What’s more, he adds, “There is nothing wrong with a $10 million business that grows at 20 percent year-over-year. VCs won’t fund these businesses, but you can bootstrap one with revenues and profits, and that is entrepreneurial success, as far as I’m concerned.”

I couldn’t agree more. In fact, there are many highly successful businesses in communities all across the country that don’t come anywhere near the $10 million mark.

If your metric for success is dependent upon whether or not a VC will make an investment in your company, you should probably re-think your definition. “Over 99 percent of the businesses out there are not venture fundable because they are either too early, too small, or too slow,” he said. Nevertheless, “That doesn’t mean they are not viable businesses, and that you cannot be a successful entrepreneur by building one.”

Mitra argues you can still create value, create wealth, and make a difference. “That’s success,” he says.

Most of the world has been sucked into the Silicon Valley model of entrepreneurship. It’s what the media writes about, it’s what they teach in business school, but it’s not a successful model for most small businesses. I think Mitra’s definition hits the nail on the head. Success should be measured by the value you offer your customers. Are you able to solve a pervasive market challenge with your product or service? Is your business profitable? Does your product or service make a difference in the marketplace?

If we returned to the view of successful entrepreneurship that existed 30 some odd years ago when I entered the workforce, we would likely have fewer over-hyped companies that produce no value but somehow manage a high valuation. I once heard this companies referred to as “taco chip” companies. In other words, their long-term value is that of a taco chip.

What are you doing to ensure your company provides value and makes a difference so you can make a profit?

It takes a little cash to change the world.

So what are you waiting for?

About the author

Ty Kiisel
Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business financing and trends accessible in common sense language devoid of the jargon.

Comments

  1. Love this article and so agree with it!! For me, being an entrepreneur means that I am taking risks to bring value to others. I am so proud of myself and all of my efforts. It feels great to help solve problems for others all while creating the life that I truly desire to live.

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