The accidental entrepreneur

Why is it that with so much information at our fingertips, the failure rate of businesses in South Africa, and new businesses in particular, remains unacceptably high?

By Derek Fox

In his book The E Myth Revisited Michael Gerber brings a sobering reality to the debate on the unacceptably high rate of business failures. Gerber’s view is that business by its very nature is complex; he theorises that we all have three personalities — the entrepreneur, the manager and the technician. The skills of the technician and the manager are what we use in our daily lives as employees to earn our livings as sales people, administrative employees, managers, etc. When we decide to go into business for ourselves, we set aside the mindset of the technician and the manager and think instead from the perspective of the entrepreneur. It is also then that we lose focus and neglect to consider all the requirements and components needed to make a business successful.

At the heart of the challenge is what you are most comfortable with — being an employee or being an entrepreneur. The reality is that not everyone is cut out to be an entrepreneur and more importantly, there is nothing wrong with being an employee if that is what you feel most comfortable with. Likewise there are people who are more comfortable being entrepreneurs. Yes, it is exciting to open or buy a business, but sadly the euphoria and glitz and glamour of owning your own business does wear off; leaving you wondering whether you really wanted to be in business for yourself or whether you would have been more comfortable staying employed. 

Keep in mind that there are many people who do not have the luxury of choice to stay employed because the companies they worked for have closed down, downscaled or right-sized their workforce. In a challenging economic market made even tougher by government requirements of B-BBEE, these individuals now find themselves in a situation where they need to replace their income, but are unable to find jobs. Their only remaining option is to venture into the world of business — to start/buy a business/franchise. By far the majority of these people are employee-minded individuals who, but for circumstances they now find themselves in, would never have considered owning a business; we call them Accidental Entrepreneurs. Forced to take action, these individuals invest their pensions and retrenchment package pay-outs in a business they believe they will be able to manage. Accidental Entrepreneurs typically do not seek out professional advice; they might attend a franchise exhibition, but most often they are referred to a business by a friend or colleague. 

The South African business market is littered with ‘broken’ businesses, previously owned by Accidental Entrepreneurs. Buying a business that is already on skid row and then not having the skills to fix it, is a common occurrence that only serves to exacerbate the horrific statistic of business failures. It conveys nothing but misery for the Accidental Entrepreneur who, in addition to losing his business, might also lose his investment while owing large sums to the bank and the landlord. 

When the Accidental Entrepreneur (eventually) realises that he/she really does not want to be in business, they double their efforts to find employment, and when they do, they immediately employ a manager to run the business in their stead.

Now, there are managers and there are managers, but there is a common adage amongst business owners that managers are damagers; you just need to limit the damage. After all, the manager is still just an employee who will work to get paid at the end of the month. That being said, there are capable, committed management staff in the market, but it is important to reference your applicants properly; something that the Accidental Entrepreneur in their haste out the door often neglects to do. 

The business’ future becomes clear when our Accidental Entrepreneur becomes an absentee business owner and goes back to a life he is more comfortable with; that of an employee. With a manager in charge who is only moderately motivated by his salary and probably not equipped to manage the business, the business is unlikely to make money and may even end up costing money — this is when the business gets put on the market to sell and so the cycle is complete. If the business proves not to be saleable, the Accidental Entrepreneur closes the business, becoming yet another statistic. Far more damaging, however, is the impact and possible financial devastation suffered by the Accidental Entrepreneur, his/her family and employees.

If there is an answer to the employee vs entrepreneur debate, it must lie in the worldwide statistic that there are far fewer entrepreneurs than there are employees — probably for good reason. Franchisors, business brokers, accountants and attorneys who are in the business of selling businesses and advising would-be business owners, should emphasise the importance of possessing entrepreneurial will, want, skills and flair. Individuals who lack these traits should be cautioned against pursuing business ownership. 

Being in the right business is very rewarding and will give you a job for life; after all, you are probably not going to fire yourself. Well-bought and well-managed, a business will provide for your family and afford you a decent lifestyle. It should, however, be a conscious decision based on thorough research to ensure that you are right for the business and the business is right for you.