Obstacles to the Growth of Entrepreneurs

In my role as an entrepreneur and as the founder of several successful home based business organizations, I have been asked many times why all the contrasting advice on economic principles and strategies? Often, entrepreneurs do not appreciate the complexity of economics and business decisions. The average entrepreneur has only a limited amount of knowledge of the world economy. Consequently, they do not understand how markets interact with one another. Unfortunately, an entrepreneur cannot make informed decisions unless they understand the principles and economics of markets and entrepreneurship.

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Obstacles to the Growth of Entrepreneurs

In my role as an entrepreneur and as the founder of several successful home based business organizations, I have been asked many times why all the contrasting advice on economic principles and strategies? Often, entrepreneurs do not appreciate the complexity of economics and business decisions. The average entrepreneur has only a limited amount of knowledge of the world economy. Consequently, they do not understand how markets interact with one another. Unfortunately, an entrepreneur cannot make informed decisions unless they understand the principles and economics of markets and entrepreneurship.

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Why all the differing advice on planning and strategy? Because the number of decisions and issues that entrepreneurs of modern businesses face is very vast. The average entrepreneur may ask, What market are we in? Or, How should we exploit our core strengths or core competitive strengths?

Successful entrepreneurs must constantly ask themselves what strategy they need to be in business and what tactics they plan to use to exploit their assets and potentials. The best strategy for any entrepreneur is one that is consistent with the overall personality of that entrepreneur. Otherwise, that entrepreneur may adopt a tactical, reactive, or reactive strategy which may not serve them well in the long run.

For instance, some young company owners will adopt a “defensive” style when faced with tough competition. These young entrepreneurs may follow a protocol that consists of putting out a “defense” offer coupled with a counter offer. Some defensive entrepreneurs will cut their losses and walk away. Some aggressive entrepreneurs will dive in and attempt to dominate the market with a superior product or service. Such aggressive strategies result in less revenue and fewer customers.

There are also other strategies that start-ups may adopt. Some start-ups start with a “hybrid” or “competitor” strategy. These companies combine aspects of several earlier strategies in order to increase the odds of early success. This strategy can produce faster growth and cost savings, but disadvantages such as poor brand recognition, less credibility with customers, and lack of support from existing competitors make it a less than ideal strategy.

Other start-ups will try to emulate other companies that have already reached success. Unfortunately, many entrepreneurs do not take the time to evaluate the strengths and weaknesses of their new venture. They often put tremendous pressure on the entrepreneurial team to create products that are simply derivatives of the features and functions of existing products. This is a major shortcoming because new ventures require innovative ideas and techniques.

In addition, many young company owners focus too much on short-term profits rather than long-term viability. In their haste to achieve growth goals early in a business cycle, they often compromise their future viability for short-term gains. This often results in the death of promising ventures that were able to attract sufficient funding from investors.

All of these problems were addressed by Josef Schumpeter in his classic treatise, Business Culture and the Entrepreneur. Although he called his work “theory”, the reference is to reality and the gradual rise of competitive economies. Schumpeter maintained that entrepreneurs possess the ability to think critically and adapt quickly to changing circumstances. Indeed, the ongoing relevance of his work is evidenced by the current state of the economies of almost all developed nations.

But entrepreneurs also face two pitfalls that threaten their success. The first is inexperience. Entrepreneurs have usually operated in a specialized field from very early ages. Most, if not all, have started out as apprentice or assistant engineers, technicians, or manufacturing workers. While this experience prepares them to overcome obstacles and rise above problems, it also limits their creativity and reduces their ability to grasp new concepts. Experienced entrepreneurs also become contented with their preexisting social network of colleagues and fellow entrepreneurs.

The second problem faced by young entrepreneurs is an organizational structure that is too tightly woven. In a network of talented entrepreneurs, an entrepreneur needs an organizational framework that can encourage, support, and keep them focused. No matter how appealing the idea of creating a social network of small entrepreneurs may be, without a clearly defined chain of command, it will quickly lose focus and crumble into chaos. Just as the young George Washington wrote letters to alert his officers of his plans for the war, so must an entrepreneur write a “war plan” for his company. A social network requires a chain of command. A poorly designed company will quickly lose focus and find itself at the mercy of its less than capable leaders.

Finally, entrepreneurs must rely on their strengths. If they are skilled in marketing, they can use this skill to create lucrative networks of contacts. If they are skilled in mechanical design, they can use their knowledge to create a highly efficient design process. But, even if these entrepreneurs lack the technical skills needed to manage their businesses, they can apply their technical skills to the organizational structure in which they operate. By combining their technological and leadership skills, these young entrepreneurs can achieve the greatest results.

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