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?”
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.