When it comes to enterprise, take it slow and steady

The following article has appeared in the latest edition (Spring) of the
RSA Journal, the house magazine of the RSA.

Slow and Steady . . .

Robert Kelsey argues that, far from being restricted to the privileged few, entrepreneurial opportunities abound in all walks of life

The coalition government believes that private-sector employment can replace the jobs being lost in the public sector, with start-up businesses being hailed as crucial contributors in this respect. At a time of continued economic uncertainty, however, can we really expect people from all social groups to embrace enterprise? Indeed, couldn’t it be considered socially irresponsible to encourage economically vulnerable people to bet their meagre life savings on a venture?

Yet for those facing social exclusion, entrepreneurship is potentially a liberating career choice. Surveys of UK entrepreneurs, such as recent research by data analysts Experian, show that ethnic minorities (including the Irish) and those with learning difficulties such as dyslexia are over-represented. This suggests that entrepreneurship is a naturally effective equal-opportunities arena, perhaps even counterbalancing ingrained prejudice in more formal working environments.

“The wish to overcome prejudice is a key reason why many people start out on their own,” says RSA Fellowship Council member Emma Jones, head of small-business support initiative Enterprise Nation. “Running your own business is fantastically meritocratic. It is also flexible in ways that employment simply cannot be, hence the large number of young mums starting businesses.”

Exclusion concerns do, of course, exist among budding entrepreneurs but they go beyond ethnic, gender, age and ability divides. This is creating a new kind of social gap: between people with high fear of failure (whom I call ‘High-FFs’) and their opposites, those with high achievement motivation (‘High-AMs’).

Fear of failure is a condition from which millions suffer, irrespective of gender, class, ethnicity or age. High-FFs approach tasks expecting failure and dreading the potential for public humiliation that such failure brings. This leads them to employ avoidance techniques that, ultimately, confirm their negative predictions. While many would love to start a business – often because they feel overlooked or belittled in their current situation – they are afraid of the risks involved, making fear of failure both a debilitating and self-fulfilling affliction.

TV programmes such as BBC’s Dragons’ Den don’t help. This is behind-the-sofa viewing for most High-FF would-be entrepreneurs, whose resolve to start a business is likely to be eroded with every public roasting from a ‘Dragon’. The steely traits that form the public image of the Dragons are a long way from those of the typical High-FF.

Like the Dragons, successful entrepreneurs create their own mythology. For instance, in his book The Beermat Entrepreneur, start-up guru Mike Southon writes: “Entrepreneurs are confident. They are born optimists: they simply know they can do it. Entrepreneurs are also charismatic. They inspire people…they have optimism to spare. Entrepreneurs are also arrogant. They know they are good.”

Yet entrepreneurialism has nothing to do with hardwired personality traits. Like so many other celebrity entrepreneurs, Southon is describing himself, while conveying an image of entrepreneurship that is overly aggressive, short-sighted and unfair, not least because it alienates – and therefore excludes – so many potential entrepreneurs.

A recent survey, presented at the UK launch of Global Entrepreneurship Week, revealed that about 50% of the UK population are considering becoming their own boss, yet only 5% are doing something about it. So what’s stopping the other 45%? Partly fear of the risks and costs associated with starting a new business, and partly fear that they do not fit the stereotype of the ‘maverick’ entrepreneur.

Emma Jones points out that most budding entrepreneurs are simply looking for freedom and flexibility in their working life. The typical small-business owner, she says, is a “mum who starts a business to earn extra money for the household while still being able to do the school run”. She adds: “This is a long way from the defy-all-odds swashbuckling heroes who are most associated with entrepreneurship.”

So what can be done? Support mechanisms such as Enterprise Nation are a start, but what about funding? Fear of the financial consequences of failure is a key barrier, making the reintroduction of the Thatcher-era Enterprise Allowance Scheme for the unemployed a strong move.

Yet many people overestimate the financial requirements for a start-up enterprise. Jones says that the best way to start a business is modestly: through cautious planning and by sticking to a strict budget, perhaps while working from home or, at least at first, continuing with the day job.

This is a crucial message. In some ways, too much funding can actually disadvantage entrepreneurs in the early stages of their venture. Grants, for instance, can create unnecessary and potentially fear-inducing liabilities, such as forcing a start-up to operate at a higher level than its income comfortably allows, thereby saddling it with unaffordable costs once the grant has been spent.

An effective alternative is self-financing, and especially ‘bootstrapping’, which involves entrepreneurs – especially nervous ones – starting small and staying within their means. Fred DeLuca, founder of sandwich chain Subway, began with an investment of US$1,000 (£750) and bootstrapped his way to a fortune. He relied on cash flow to expand and never over-extended himself through debt or equity, both of which bring external obligations that can increase both the risk and the fear.

“Just because it is small doesn’t mean the business can’t grow,” writes DeLuca in his book Start Small, Finish Big. “And, while it is small, you will have the time to learn the lessons that are essential to your future success.”

Such sentiments certainly undermine any notions of inequality when it comes to succeeding as an entrepreneur: quite the opposite. Indeed, fearful people of modest means are just as well suited to entrepreneurship as their bolder, more affluent counterparts. They may even be more so, given the need for start-ups to be grounded and sustainable, rather than overnight sensations.

Entrepreneurship can be isolating, however, which can compound fears, erode resolve and increase the failure rate. At Metrocube (an early noughties incubator for dotcom start-ups where I was CEO), our aim was to get would-be entrepreneurs out of their bedrooms and into a community environment where they could swap ideas and favours with a network of like-minded individuals. Fostering camaraderie is also one of the goals at the heart of Enterprise Nation and other collegiate initiatives such as the Institute of Entrepreneurs, run by RSA chairman Luke Johnson.

Networks offer more than just advice and resources. While these are helpful, it is the shared concerns and sense of fellowship that are vital to the lonely entrepreneur, especially if his or her own socio-economic grouping is under-represented in entrepreneurial circles. Mentoring can also be valuable, although care is needed when trying to impose formal structures on individuals who may just be looking for shared experiences, occasional guidance and – most importantly – a network.

Networks, however, are only part of the answer. More importantly, the image of entrepreneurship needs to change so that it encourages both the cautious and the fearful, proving that this most meritocratic of economic sectors is open to all.

Robert Kelsey FRSA is a businessman and author
Robert Kelsey’s book, What’s Stopping You? Why Smart People Don’t Always Reach Their Potential, and How You Can will be published by Capstone/Wiley in April 2011

[pull quote] Entrepreneurialism has nothing to do with hardwired personality traits
[call to action] The RSA’s Social Entrepreneurs Network provides a source of support and advice to Fellows interested in social enterprise. Join in the discussion at www.RSAfellowship.com/group/socialentrepreneursnetwork