Born for success? Find out what sets entrepreneurs apart
Have you got the entrepreneurial gene? We examine the psychology of business success with Geoff Rohrsheim, who’s built and sold a series of companies, and Andreas Rauch, Professor of Entrepreneurship at The University of Sydney Business School.
When Geoff Rohrsheim started his first company his wife was pregnant with their second child. “We were also paying off a mortgage,” he says. “Looking back, it was a crazy thing to do.”
For Rohrsheim, the risk paid off. In 2008, he sold Strategic Data Management (SDM) for $8.3 million. He and his partner, Jamie Potter, then went on to sell Kloud Solutions to Telstra for over $40 million. Today, through Hatch Creations, they both incubate and commercialise Australian technology businesses.
“After I sold SDM I wondered why more people don’t do what I did,” Rohrsheim says. “I realise now that not everyone has the same tolerance for risk.”
There’s always a way
Andreas Rauch, Professor of Entrepreneurship at The University of Sydney Business School, has found that other biases and psychological traits are also important predictors of entrepreneurship.
“Some scholars talk about conscientiousness or extroversion, but my research shows that more specific traits such as the need for achievement, self-efficacy and proactivity are more predictive,” he says.
“There’s also a lot of evidence that entrepreneurs are very optimistic. They believe they can accomplish more than is possible in a given time. They’re confident of a positive outcome even when the likelihood is very small. And they may also have an unrealistic idea of how quickly they can win customers.”
In Rohrsheim’s experience, it helps to believe anything is possible.
“I never accept that something can’t be done,” he says. “There’s always a way, though sometimes the solution will be too expensive or take too much time. That’s when you need the strength to stop. I’ve had a couple of failures along the way and another of the traits I’ve noticed in myself is knowing where to draw the line.”
Surprisingly, Rauch has also found that some traits can be developed and changed.
“You can, for example, train yourself to have more self-efficacy and motivation to achieve,” he says. “Setting yourself tasks you’re very likely to accomplish can help you build confidence and equip you to take on bigger challenges.”
Two years of pressure
Having a great idea is one thing. Getting a business up and running creates a different set of pressures and demands.
“It’s very important to reflect on the realities of the first couple of years,” says Rauch. “For example, are you sure you’re capable of working 60 hours a week without a break?”
You also need the physical and mental resources to live for that time without income.
“This can take a toll if you’re used to the lifestyle that comes with a regular job,” says Rohrsheim. “You can also feel very isolated. Since my first venture, I’ve worked in partnership with Jamie, and it really helps to have someone who can share the burden.”
Rohrsheim is often asked why he keeps on starting businesses after two successful exits. “For me it comes down to a natural drive to solve problems and do things better,” he says. Those whose first businesses don’t succeed could be driven to keep on trying.
“Entrepreneurs can have the right abilities and a disposition that might be helpful, but you also need a good market opportunity,” says Rauch. “For all his skill and aptitude, Bill Gates could only start Microsoft because he happened to be in the right place at the right time.”
The size of the prize
Rohrsheim advises would-be entrepreneurs to consider the size of the prize.
“By that I mean, if your project worked, how much money could you realistically expect to make?” he says. “Then add up all you could earn at a regular job in the time it takes to get started. Is there enough of a difference to make all the pain and suffering worthwhile? It’s easy to get caught up in the excitement and be distracted by the promise of a shiny, new toy – we’ve done it ourselves a couple of times. If we’d applied this thinking from the beginning, we’d probably have made a few different decisions.”
And there’s always the chance you’ll end up with nothing.
“It’s true that many ventures fail, but not nearly as many as people think,” says Rauch. “The widely-quoted figure of 90 percent or more is way too high. In many cases, founders just decide to close their business down because they’ve been offered a really good job, or have found better opportunities elsewhere. The number that actually go bankrupt could be as low as 30 percent so, statistically, you have a higher chance of succeeding than failing.”
He advises his students to evaluate their opportunities, resources and the market – but adds that no-one can ever predict every risk.
“I also remind them that there are no guarantees in the corporate world,” he says. “If you want to be an entrepreneur there comes a point where you have to say, given the information I have, I’m going to start now.”