Perception vs. Reality

by Mark Zweig ([email protected]) 923 views 

When you see how the media portray entrepreneurship, you would likely think that entrepreneurship is all about idea generation, startups, and the almost-instant raising of equity capital while the founders remain in control. And from there, it goes on to spectacular success selling the business at a ridiculous price of 10 or 15 times its projected revenue (not EBIT) only a couple of years later.

While this can happen, the odds of it working out like that are about as good as if you regularly bought a Powerball ticket and hoped to win the big jackpot. For every entrepreneurial venture that turns out like that, there are thousands or even tens of thousands of them that don’t. But don’t get me wrong. Plenty of entrepreneurs do very well for themselves and create rich lives in many “pedestrian“ businesses.

Those businesses include all the small businesses that make cabinets, do house painting, provide dental services, sell clothing, serve hamburgers, market real estate, or do thousands of other things we all want and need daily. These make up the bulk of small business success stories.

There is something to be said for going into a business with proven demand. We all know many people want pizza. So it ultimately comes down to quality, service, and differentiation that clients or customers value. And those are all areas where small businesses can excel and beat bigger enterprises.

And why is entrepreneurship always portrayed as requiring a startup? Not that there is anything wrong with a startup and doing things the way you want to—but one could buy an existing business—it could very well be cheaper and easier to finance—especially if it needs work. Another option is to buy a franchise and get a proven business formula in a can.

Mark Zweig

What about the preoccupation with raising equity capital from investors? Most new and existing businesses have only a few owners. My philosophy has always been to fight that temptation and do it all with my resources and debt. I could never understand why someone would want to start a business and then immediately give up control of it to investors. They rarely understand the market or business strategy as well as the founders, yet will want to put their stamp on it (i.e., tell the founder what to do). Then on top of it, VC and private equity investors typically have a limit on how long they want to keep that investment, which implies that they will have to sell the company in the future. Maybe the founder won’t want to sell? Plus, my experience is that undercapitalized businesses are better-run businesses. Necessity is the mother of invention!

So much of success as a business owner comes down to a real commitment to do the work required to be successful. The pop culture view of entrepreneurial success is more based on the idea for the business vs. the work required to make the business viable as a going concern. The “startup” is just that. It’s a start. It doesn’t end there. That’s why it drives me mad when someone tells me they want to “start a startup.” I will inevitably ask if they want to start a real business instead. If so, get ready to work harder than ever because it will take that kind of commitment and obsession.

As a business professor teaching this stuff, I aim to help people see they have many more options than they may have at first realized. And then, I want to give them a realistic view of what it will likely take for them to achieve some degree of success over time. Entrepreneurship is open to all, it can be a vehicle to solve a problem that helps many people, and it provides the owner(s) and employees the opportunity to create an amazing quality of life. And despite the reality rarely matching the public’s perceptions of it, there are many options for getting into it and succeeding over time.

Mark Zweig is the founder of two Fayetteville-based Inc. 500/5000 companies. He is also entrepreneur-in-residence in the Sam M. Walton College of Business at the University of Arkansas and author of the award-winning book, “Confessions of an Entrepreneur.” The opinions expressed are those of the author.