Controlling the World versus Buying the World; Why do you want to be an Entrepreneur?

Building a business can have many motivators behind it.  A person may be tired of corporate politics, possibly created a revolutionary technology or decided more money can be made going it their own way.  As an entrepreneur it is important to understand the motivations behind decisions.  These motivations reflect how you may approach making decisions and provides insights to investors and interested parties as to the types of decisions you may make while building your business.

According to Noam Wasserman’s The Founder’s Dilemmas, wealth or control are the top driving motivators for entrepreneurs to build a business.  Wasserman refers to these as “Rich” and “King” motivators where the idea of generating great wealth and maintaining control over what has been created are typically at odds with one another (Wasserman, 2012).  Understanding one’s motivators can help entrepreneurs understand themselves.  Also, those interested in engaging with the business as investors, employees, consultants, etc. are better positioned to align themselves with entrepreneurs of similar motivations.

Entrepreneurs that seek control will likely lean towards ownership and restricting the ability of others to influence the direction of the business.  However, Entrepreneurs that seek wealth will be more open to allowing control to be more shared.  Oddly, the sharing of control can come in the form of distributing equity.  In a sense, giving others access to business equity can drive more value in the company.  Wasserman writes, “My research shows that a founder who gives up more equity to attract cofounders, nonfounding hires and investors builds a more valuable company than one who parts with less equity.” (Wasserman, 2012)

However, the motivation to control the business being built can be a different sort of riches.  Some entrepreneurs find the joy in building and operating businesses to be their happiness.  I have met a few restaurant owners that have told me their margins are thin and they make a fair income, but they were never investing in their restaurants to become rich.  They did so for the joy of cooking and seeing people enjoying the food and experience.  According to Wasserman’s research, it would appear these restaurants would not necessarily be good investments for those seeking to become wealthy.

An article by Jason DeMers (DeMers, 2017) discusses the question of whether entrepreneurship will make a person rich.  Referencing a study by American Express OPEN, DeMers presents that entrepreneurs have a higher average annual salary than the US median household income. (DeMers, 2017) His point being that entrepreneurs do appear to earn more, but it is not a guarantee of wealth.  What I found explained the value of entrepreneurship well in his article was a section entitled, “What Entrepreneurship Does Give You.”  His perspective is that even if wealth is not achieved, the riches include Fulfillment, Freedom, Experience and Contacts. (DeMers, 2017).

Wanting wealth can make an entrepreneur share equity.  Controlling a business can restrict outside investment, but allow stronger engagement.  It is important for entrepreneurs to determine their motivations to building a business.  The good news is that once the motivation is understood, decisions become easier and interested parties can engage more appropriately.  A great starting point for entrepreneurs to understand their motivations begins with asking, “Why do I want to be an entrepreneur?”

 

References

DeMers, Jason. (2017, May 8). Will Entrepreneurship Make You Rich? A Realistic Perspective., Retrieved from https://www.entrepreneur.com/article/293512

Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton, New Jersey. Princeton University Press.

1 thought on “Controlling the World versus Buying the World; Why do you want to be an Entrepreneur?”

  1. Tony,
    I enjoyed the perspective from the DeMers article “What Entrepreneurship Does Give You.” Entrepreneurship is not always about the money or being in control, but merely the joy of providing a quality product or service or the ability to connect with others. I have also met several people in the service industry who have operated their business in that capacity. They like the hometown “mom and pop” kind of business, and they are not looking to expand.

    On a larger scale, Wasserman brings up a significant point about understanding why one wants to start a business. The principle seems minute but is it the cornerstone of the company will proceed. Accessing one’s human capital is also a great way to gauge one’s ability to distinguish if they can pursue wealth or control. If a founder is limited in their knowledge base, they have very little to leverage maintaining control. I am not saying it is impossible, but it would be unwise.

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