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Entrepreneurship: Driving variables
by H. Randall Goldsmith, Ph.D.

Every entrepreneur, by definition, is successful. The dictionary defines entrepreneur as someone who assumes the risk for founding and managing a business. The degree of entrepreneurial success, however, can be measured in performance outcomes such as market share, longevity, sales revenue, and number of employees. It is universally accepted that the United States has the strongest entrepreneurial climate in the world. At any given time, 1 in 10 Americans are involved in starting a new business, and 5 percent of U.S. adults between the ages of 18 and 64 are principal owners in a venture that is less than 42 months old. Research shows that the prime age for startup entrepreneurs is 25-44 years of age, a cohort that accounts for 30 percent of the U.S. population.

Statistics suggest that entrepreneurial success is not dependent upon experience and track record. Of the companies listed in the Inc 500, 40 percent of the founders had no previous experience in their company’s field. In addition 30 percent of the founders were out of work when they founded their companies. These statistics suggest that entrepreneurial opportunities in the U.S. are not limited to individuals with experience and a track record, but instead are influenced by other factors.

One of the strongest factors driving U.S. entrepreneurship is anticipation. When there is evidence to support an anticipated increase in demand for goods or services, the market reaction is positive and entrepreneurs respond. The forecast for U.S. growth for the next quarter century is 23 percent, a healthy growth rate. States and communities in the U.S. that anticipate strong population growth will reap disproportionate economic benefits over those, which anticipate weaker growth. Entrepreneurial companies account for one-third to one-half the differences of gross domestic product between states and nations. The correlation between entrepreneurship and economic growth is high. This condition will ultimately translate into a widening competitive gap among cities and states. According to Dr. Harold Welsch of DePaul University: “Entrepreneurship is still the best private vehicle we have to turn around and improve the economic health of a community.”

Education is another strong factor that drives entrepreneurship. Research indicates there is a strong correlation between post-secondary education and new venture activity. The educational attainment of persons within companies in business for less than 42 months is strongly skewed to the post secondary level: high school, 25%; some college, 33%; college graduate, 24%; and some post graduate, 13%.

Perhaps some of the stronger intangible variables that promote entrepreneurship are culture and social norms. In an international survey, Americans were: 1) twice as comfortable with the notion that young people can expect to change jobs many times during their career; 2) three times more comfortable with the idea the citizens should not rely too heavily on the government; 3) 5 times more likely to place value on self-sufficiency, individualism, and personal initiative; and 4) in strong disagreement with the rest of the world that everyone should have an equalized standard of living.

Another intangible factor gaining recognition as a major contributor to entrepreneurship is the strength of the climate for innovation -- that addresses the availability of financial resources for new firms, local policies and programs designed to support start-ups, the level of education and training for aspiring and practicing entrepreneurs, and access to service providers.

Regardless of the environment, the opportunities, the individual’s and community’s entrepreneurial capacity, or the motivation to pursue a new venture, the defining factor for success in most entrepreneurial ventures is the founder’s personality, adaptability and willingness to deliver the product. However, that being said, the advantage will fall to the founding entrepreneurs who quickly recognize their shortcomings and business deficiencies and quickly fill the gaps -- especially if they need outside financing. Investors invest in people first. The greater the talent, experience, knowledge level, and motivation of the management team, the more likely funding objectives will be achieved. The first step is to round out the management team with individuals skilled in finance, marketing, human resources, production, and other aspects of the business. While the United States is the entrepreneur’s land of opportunity, this land is still fiercely competitive. Entrepreneurs need every advantage they can find.