Predicting entrepreneurial success

Entrepreneurs are an important part of economies globally, in both developed and developing countries. In many developed countries, small and medium sized enterprises (SMEs) make up 95 to 97% of total enterprises (Benzing, Chu & Kara, 2009; Stefanovic, Prokic & Rankovic, 2010). As such, it is important to identify the factors that most often predict entrepreneurial success. Although difficult to determine, the identification of these success factors could help entrepreneurs to grow their businesses and have the best possible chance of success.

Entrepreneur's motivations

People have many different motivations for starting their own business, and these motivations can vary based on factors specific to each individual or because of external, environmental factors such as the specific context of the country they’re in. Research has found four main motivations for entrepreneurs to start businesses: extrinsic motivators, intrinsic motivators, the desire for independence or autonomy, and family security factors (Benzing, Chu & Kara, 2009; Stefanovic, Prokic & Rankovic, 2010). These motivations are important as they are also predictive of entrepreneurial success (Chattopadhyay & Ghosh, 2002).

Extrinsic motivators are the external stimuli that motivate entrepreneurs. They are most frequently economic reasons (Benzing, Chu & Kara, 2009). Financial gains and societal recognition are powerful extrinsic motivators.

Intrinsic motivators originate from within, compelling entrepreneurs to embark on their ventures out of passion, a desire for impact, and a sense of fulfilment (Benzing, Chu & Kara, 2009; Stefanovic, Prokic & Rankovic, 2010). The intrinsic motivation to make a difference or pursue a genuine love for the work becomes a source of resilience during the inevitable challenges of entrepreneurship.

The desire for independence and autonomy is also a driving force for many entrepreneurs (Benzing, Chu & Kara, 2009; Stefanovic, Prokic & Rankovic, 2010). The freedom to make critical decisions and shape the business is an exciting prospect for many entrepreneurs.

Finally, entrepreneurs often undertake the challenge of building a business with the primary goal of providing financial security and stability for their families.

These motivators are all predictive of success, but may vary due to the specific socio-economic and political context of the country in which the business operates. Entrepreneurs’ motives may be dictated by income and employment opportunities within their specific context, so it is important to take this context into account when looking at success factors for entrepreneurs (Benzing, Chu & Kara, 2009).

Success factors

Research on entrepreneurial success factors has identified three main areas that predict entrepreneurial success. These factors are the psychological and personality traits of the entrepreneur, managerial skills and previous training, and external environmental factors (Benzing, Chu & Kara, 2009; Stefanovic, Prokic & Rankovic, 2010). There are many factors that predict entrepreneurial success, each falling under one of these broad categories

1. Psychological and personality traits

Certain psychological and personality traits serve as the foundation for entrepreneurial success. Resilience, the ability to adapt, and a high tolerance for uncertainty are important qualities for navigating the unpredictable business landscape of entrepreneurship (Benzing, Chu & Kara, 2009; Tomy & Pardede, 2018).

A growth mindset, creativity, and a willingness to learn from failures contribute to an entrepreneur's ability to innovate and develop (Benzing, Chu & Kara, 2009; Awaid Ahmad Tipu & Manzoor Arain, 2010). Other important attributes are a desire for independence, a competitive nature and a positive attitude toward risk (Benzing, Chu & Kara, 2009; Nieuwenhuizen & Kroon, 2002; Stefanovic, Prokic & Rankovic, 2010).

Ingenuity is also predictive of entrepreneurial success (Nieuwenhuizen & Kroon, 2002). The ability to be creative and innovative is important, but creativity has to come along with knowledge of the industry and industry specific skills (Nieuwenhuizen & Kroon, 2002). This creativity and knowledge are what underlies ingenuity.

2. Managerial skills and training

Entrepreneurs must possess a diverse set of managerial skills to successfully navigate the challenges of business ownership. Effective communication, strategic thinking, financial acumen, and strong leadership skills are prerequisites for steering a venture towards success (Benzing, Chu & Kara, 2009; Nieuwenhuizen & Kroon, 2002; Stefanovic, Prokic & Rankovic, 2010). Additionally, a commitment to continuous learning and adaptation to industry trends ensures entrepreneurs adapt in the face of changing market dynamics (Awaid Ahmad Tipu & Manzoor Arain, 2010).

Previous experience and education are also important predictors of entrepreneurial success (Chattopadhyay & Ghosh, 2002; Rashid, Ngah, Mohamed & Mansor, 2015; Wadhwa, Aggarwal, Holly & Salkever, 2009). The skills learned through these previous experiences are vital for building a new business and many entrepreneurs point to these as key success factors (Wadhwa, Aggarwal, Holly & Salkever, 2009).  

Finally, the ability to manage risk and finances is especially important for entrepreneurs. Managerial ability is often tested in the face of unexpected events, where management skills are necessary to prevent or reduce losses as far as possible and ensure financial stability (Awaid Ahmad Tipu & Manzoor Arain, 2010).

3. External environmental factors

Entrepreneurial success is also influenced by external environmental factors, including economic conditions, market trends, and technological advancements (Benzing, Chu & Kara, 2009; Stefanovic, Prokic & Rankovic, 2010). Entrepreneurs who stay attuned to industry changes, use new technologies, and adapt their strategies to market demands position themselves favourably for success.

Building robust networks, establishing strategic partnerships, and understanding regulatory landscapes are also critical in the ever-shifting business landscape (Van Gelderen, Thurik & Bosma, 2005). A significant predictor of success is the networking ability of the entrepreneur. Creating and maintaining favourable personal and professional networks is essential for building an entrepreneurial venture as these networks become a key resource for entrepreneurs to draw on (Awaid Ahmad Tipu & Manzoor Arain, 2010; Wadhwa, Aggarwal, Holly & Salkever, 2009).

Seven tips for entrepreneurial success

Here are seven tips for entrepreneurial success:

1. Passion and purpose:

   - Start with something you are passionate about. Building a business requires time, effort, and resilience, so having a deep-rooted passion will keep you motivated during challenging times.

   - Align your business with a purpose that goes beyond profit. A meaningful mission can attract customers, employees, and investors who share your values.

2. Continuous learning:

   - Stay curious and commit to lifelong learning. The business landscape is dynamic, and staying informed about industry trends, new technologies, and market changes is crucial for adapting and evolving your business.

3. Adaptability and flexibility:

   - Be prepared to adapt to changing circumstances. The ability to pivot your business model or strategy based on feedback, market demands, or unexpected challenges is a key trait of successful entrepreneurs.

4. Build a strong team:

   - Surround yourself with a talented and diverse team. No entrepreneur can do everything alone. Hire individuals who complement your skills and bring unique perspectives to the table. A cohesive team with a shared vision is essential for success.

5. Customer-centric approach:

   - Understand your customers' needs and provide value. Regularly seek feedback and be responsive to customer concerns. A satisfied customer base is more likely to become loyal and advocate for your business, contributing to sustainable growth.

6. Financial management:

   - Keep a close eye on your finances. Effective financial management is crucial for the success of any business. Monitor cash flow, budget wisely, and make informed decisions based on a solid understanding of your financial situation.

7. Networking and relationship building:

   - Build strong relationships within your industry and community. Networking provides opportunities for collaboration, partnerships, and valuable advice. Attend industry events, join relevant associations, and engage with others in your field.

Remember, entrepreneurship is a journey with its ups and downs. Embrace challenges as learning opportunities, stay resilient, and maintain a positive mindset throughout your entrepreneurial endeavours.

References

Awais Ahmad Awaid Ahmad Tipu, S., & Manzoor Manzoor Arain, F. (2011). Managing success factors in entrepreneurial ventures: a behavioral approach. International Journal of Entrepreneurial Behavior & Research, 17(5), 534-560.

Benzing, C., Chu, H. M., & Kara, O. (2009). Entrepreneurs in Turkey: A factor analysis of motivations, success factors, and problems. Journal of small business management, 47(1), 58-91.

Chattopadhyay, R., & Ghosh, A. (2002). Predicting entrepreneurial success: A socio-psychological study. the Journal of Entrepreneurship, 11(1), 21-31.

Nieuwenhuizen, C., & Kroon, J. (2002). Identification of entrepreneurial success factors to determine the content of entrepreneurship subjects: Research in higher education. South African Journal of Higher Education, 16(3), 157-166.

Rashid, K. M., Ngah, H. C., Mohamed, Z., & Mansor, N. (2015). Success factors among women entrepreneur in Malaysia. International Academic Research Journal of Business and Technology, 1(2), 28-36.

Stefanovic, I., Prokic, S., & Rankovic, L. (2010). Motivational and success factors of entrepreneurs: the evidence from a developing country. Zbornik radova Ekonomskog fakulteta u Rijeci: časopis za ekonomsku teoriju i praksu, 28(2), 251-269.

Tomy, S., & Pardede, E. (2018). From uncertainties to successful start ups: A data analytic approach to predict success in technological entrepreneurship. Sustainability, 10(3), 602.

Van Gelderen, M., Thurik, R., & Bosma, N. (2006). Success and risk factors in the pre-startup phase. Small Business Economics, 26, 319-335.

Wadhwa, V., Aggarwal, R., Holly, K. Z., & Salkever, A. (2009). The anatomy of an entrepreneur: Making of a successful entrepreneur. Ewing Marion Kauffman Foundation.