WHY DO ENTREPRENEURS START THEIR OWN BUSINESSES?
Since the financial crisis of 2009, the number of people in self-employment in the UK has grown by about a million to 4.84 million workers and now accounts for 15 per cent of the workforce. In fact, the latest Labour Market statistics show that self-employment accounted for 27 per cent of all of the increase in employment during the period 2009-2018.
Whilst some have argued that this is partly down to the increase in companies servicing the so-called “gig economy” such as Uber and Deliveroo, the vast majority of those taking the plunge to work for themselves have done so for positive reasons.
According to research into this area, the main driver is the identification of a new business opportunity which is often related to an area in which the future entrepreneur is currently active, possibly through employment or their personal interests.
But there are also a range of other factors which may encourage an individual to set up their own business.
It can be due to a need for recognition, either through a sense of achievement to be gained from running one’s own venture or gaining the social standing achieved by many successful entrepreneurs within their local community.
However, contrary to popular thinking, financial success from entrepreneurship is not the most important motivation behind starting a business.
According to a survey of the fastest growing businesses in the USA, only 10 per cent rated this highly. In contrast, a third became entrepreneurs because it suited their skills and abilities whilst 18 per cent just had an idea they wanted to try out.
In addition, entrepreneurs today get considerable encouragement to start a company, ranging from an inspiring conversation from meeting other businesspeople at networking events to new incubators being set up to help them develop their ideas.
Another important factor is that in recent years, governments have seen entrepreneurship as the panacea to their economic problems following the global recession a decade ago.
In the UK, this ranges from supporting financial initiatives such as the Start-Up Loan scheme and the Business Angel Co-Investment Fund to working to promote enterprise education in schools. This can all help with the process of transforming an idea into a real business that can survive and grow.
Of course, not all entrepreneurs are positively motivated into becoming their own boss and a proportion of new businesses are initiated not as a result of an opportunity in the market-place for a new product or service.
Instead, there are so-called “necessity entrepreneurs” who are forced to start their own venture due to a lack of other alternatives or because of negative factors such as a lack of job satisfaction with current employers. Such influences also include unemployment, the limitation of financial rewards from conventional jobs and job insecurity.
Others are pushed into self-employment through career limitations and setbacks, the inability to pursue their own ideas in a conventional job, and being labelled a ‘misfit’ who doesn’t fit into an established organisation.
Therefore, whilst some people start their own business as an alternative to improve their earnings or to do what they want to do, it is also a way to escape a boring career or a frustrating working environment. This suggests that, positively or negatively, what largely drives people to entrepreneurship is independence i.e. not wanting to work for anyone else.
To do so, entrepreneurs accept the social and psychological risks as well as the high number of working hours required to develop a successful new venture in order to satisfy the need to be one’s boss.
Whatever motivates entrepreneurs, they have to demonstrate a great amount of determination, effort and commitment to get to the point where they start and manage their own firm.
In fact, setting up a business also requires taking financial risks and gambling a secure career can be a challenge when the stability of a family and having a mortgage to pay needs to be considered.
With those starting a business tending to be in their mid to late thirties, some would question why a successful employee within a company would leave an interesting job which gives important responsibilities, a good salary and numbers of benefits, especially if it is to enter an uncertain new venture?
However, despite these challenges, we have seen an increasing number of people take the plunge into entrepreneurship every year and it is a step which can ultimately result not only in financial rewards but, more importantly, personal fulfilment of a dream to work for themselves, the creation of new jobs and making a real difference to the local economy.