Starting one’s own business involves going through a checklist, ticking all the boxes, and being prepared for the worst.
Are you thinking of becoming an entrepreneur but cannot decide? Well, you are not alone. In this article I will first take a moment to reflect on my personal motivations for becoming an entrepreneur before examining the motivations of others. By answering three simple questions, I will help you to better understand why you should or should not become an entrepreneur. Ultimately, I hope you will realise that becoming an entrepreneur is not a decision that should be taken lightly.
It all started when I was a Ph.D. student at Carnegie Mellon University in Pittsburgh. As I was approaching the end of my first year, my department head told me that my introductory stipend was nearing its end and would not be continued in my second year.
Either I would have to find a professor who was willing to pay my tuition and living expenses, or I would have to raise money to cover it myself. At that time, the estimate for Carnegie Mellon tuition fees and other costs were roughly $32,000 per year.
Back home, in Sweden, my parents were poor farmers without enough money to even visit me, let alone anything else. However, finding a professor to fund my education meant pursuing a thesis on a project that had already been funded.
Although there were several potential projects available, none of them were particularly interesting for me – I wanted to do my own thing. I decided to somehow find the funding for my three remaining years myself. I also wanted to be with my girlfriend who was back in Sweden, so I packed up my only suitcase and returned home.
A month before finishing my first-year final exams, I sent a letter to about 20 large Swedish companies – Volvo, SKF, ABB, among others – stating that I would be available to do some consulting work should there be a need. It was quite presumptuous and I only received one reply. But Skandia Insurance Company did invite me to its headquarters in Stockholm to work on a project.
Meanwhile, I was also able to secure a part-time job as a project manager for the upcoming year at a research institute affiliated with Chalmers University in Göteborg. In addition, over the course of the same year, I wrote about 20 applications and finally obtained two scholarships for my continued studies in Pittsburgh.
In retrospect, my year in Sweden was definitely a success from a venturing perspective. I had had a steady job that paid the bills, and I did approximately 100 days of consulting for Skandia, working on several interesting projects in Stockholm whilst touring their branches across Europe. I learned a myriad of new things about business, but the main reason for me becoming an entrepreneur was to make money.
Indeed, the money I earned from consulting went straight to the bank and it lasted three years before being completely depleted, primarily due to the high tuition fees at Carnegie Mellon. Some may say that this was “necessity entrepreneurship” since I became an entrepreneur strictly to fund my Ph.D. studies. But it was relatively riskless and I certainly was not broke. However, consulting was not for me. By the end of my year in Sweden I was stressed and nursing a stomach ulcer. It was time to go back to Pittsburgh.
Now, let us consider for a moment in more general terms the reasons why a person may start a business. This information may help calibrate your own decision to become an entrepreneur. Table 1 reports the responses of ‘nascent entrepreneurs’ in the US when asked: “Why do you want to start this business”? Rather surprisingly, among the five categories that comprise the most important reasons, making money is not one of them.
Only one-fifth of the entrepreneurs reported that they started a business to make money. Other than that, most cited non-monetary reasons like: “To be my own boss”, “I am tired of working for the man”, “I want to manage my own time.”
If you want to start a business to be your own boss, you have plenty of company. In fact, an astounding 71% of all employees in the US and 42% of all French employees want to become entrepreneurs. Why is that so?
Table 1: Reasons for starting a business in the US
Non-pecuniary motivation (I want to be my own boss; tired of working for others; flexibility; set my own hours; enjoy work) – 35.3%
To generate income – 19.5%
Had a good business idea/create new product – 32.2%
Lack of other employment options – 2.2%
Other – 10.8%
It turns out that people are mightily dissatisfied about being employees.
*Original Data Source: Panel Study of Entrepreneurial Dynamics.
Shows how dissatisfied Americans are about being an employee compared to being self-employed. The fraction that is either very or a little dissatisfied is twice as high among employees as it is among entrepreneurs.
Very dissatisfied – 2.0%
A little dissatisfied – 5.8%
Moderately satisfied – 29.8%
Very satisfied – 62.5%
Very dissatisfied – 3.8 %
A little dissatisfied – 10.3%
Moderately satisfied – 39.9%
Very satisfied – 45.9%
Why are people so happy about being entrepreneurs?
Partly it is because self-employed people feel that their work provides more autonomy, flexibility and skill utilisation. However, while self-employed people are more satisfied than wage workers with their jobs and with their life, they work longer hours, feel greater pressure at work, are in poorer health, and come home exhausted.
In addition, their jobs limit their family time and make them too tired after work to enjoy the things they would like to do at home. The other complaints that the self-employed have include feeling unhappy and depressed, being constantly under stress, and their family getting fed up with them.
Now, after reading the story of my first venture, and looking at the evidence of why people become entrepreneurs and how they feel about it, please take a moment to ask yourself these three questions before you consider becoming an entrepreneur: Will I enjoy it, given all the hardship, the late hours, and the stress? Would I be okay about losing all the money I put in a venture, including money from my friends and family who will be helping me with my investments? Will I be able to bounce back by getting a regular job if I fail?
If you answer ‘no’ to all of these questions, then you should definitely not become an entrepreneur. If all your answers are ‘yes’, then you could do it, but understand that answering in the affirmative will not make you more successful. If one or two answers are no, you are in a tricky spot, and it would be a really bad idea for me to advise you on what to do next.
If you answer ‘no’ to all three questions you should definitely not be an entrepreneur. If you answer yes to all three questions then you will have fun, and you will hopefully not come out of it hurting too much. If you answer no to at least one, then think hard about doing something else that’s equally thrilling but less costly, such as hang-gliding or parachuting.
About the author
Thomas Astebro teaches entrepreneurship and managing innovation at HEC Paris. He holds a Master’s degree in Engineering and an MBA from Chalmers University of Technology.
About HEC Paris
Founded in 1881 by the Paris Chamber of Commerce and Industry, HEC Paris is a founding member of Université Paris-Saclay. It boasts a faculty of 138 full-time professors, more than 4,400 students and over 8,000 managers and executives in training each year. In 2010, HEC Paris joined Qatar Foundation and brought Executive Education programmes and research activity to Qatar and the rest of the region.