Entrepreneurship is all about taking calculated risks. So how should you weigh the decision to leave the security of a management role to start your own business? The deciding factor for most people is job satisfaction. How do you appropriately balance your risk and opportunity?
Weighing Your Choices
As research shows, wealth isn’t the biggest draw for most would-be entrepreneurs. Instead, the most common drive is the desire for independence, mentioned by 35 percent of new entrepreneurs. Second, is being passionate about a business idea, specified by 32 percent². Intrinsic motivations like these are a good reason to pursue entrepreneurship, because business success and financial rewards are so unpredictable. “Choosing to become an entrepreneur is like playing the lottery,” says Thomas Åstebro, professor of strategy at HEC Paris. “There is a frightfully small chance that you will succeed, but most often you will fail.” Åstebro recommends that would-be entrepreneurs ask themselves three questions. Will they enjoy it, despite long hours, high stress and lost sleep? Can they afford to lose the money they’re investing? And will they be able to bounce back into employment if their business fails? “If you answer yes to all three questions you will have fun, and you will not – hopefully – come out hurting too much,” he says.
Also read: Why should you become an entrepreneur?
“More and more established firms are looking for a way to renew their business, new sources of innovation, new ideas,” Sihem Jouini, associate professor at HEC Paris, says. “They are thinking: why don’t we encourage our own people to propose and suggest innovation?” Successful intrapreneurs require the flexibility to operate as an insider and an outsider simultaneously. “They have to cope with the ambiguity and uncertainty, to fit within existing frameworks and to think outside it. But they will leverage their network, leverage their knowledge, build on what they know about the firm and who knows what.” Companies with an entrepreneurial culture are more likely to be receptive, she says. If yours has launched internal incubators, contests or participative innovation projects, it may be ready to hear your intrapreneurial pitch.
While the security of having a firm behind you is attractive, it’s still essential to make contingency plans in case your idea doesn’t work out. You should also be able to demonstrate the benefits of the work you’ve done – an experiment doesn’t have to prove your hypothesis in order to be a success. “This is a problem, one of the main critical points: how big firms accept failure,” says Professor Jouini. “My advice for entrepreneurs is to emphasize the learning acquired, the options explored for the firm, the preparation for the future, the exploration of different options. So even if it fails, it generates knowledge, it generates learning, it generates new capacities. “But it has to be driven by learning from the beginning. It can’t be that you fail and then you raise the learning issue.”
² Source: Table 9 in Hurst, E. Pugsley, B. 2011. What Do Small Businesses Do? Brookings Papers on Economic Activity 43(2): 73-142
Click here download the HEC Paris White Paper:
LEARNING FROM THE EXPERTS: HOW TO START YOUR OWN BUSINESS