Universities had begun teaching entrepreneurship. Incubators were selling low-cost space and services for startups. And self-help clubs and roundtables were inviting entrepreneurs and investors to gather routinely for networking, help and support.
Plus, franchising was hot — coinciding with a shift away from big companies toward smaller, more nimble niche businesses.
Eager new players had arrived on the scene: baby boomers craving adventure; women needing flexible careers; and sidelined workers — displaced by corporate downsizing – seeking more stability and control.
Meanwhile, our national mood was cheering enterprise, elevating entrepreneurs like Michael Dell, the college dropout who started Dell computers, to hero status.
That Fortune magazine story on Feb. 12, 1990, ended on a high note — a call to action for aspiring entrepreneurs:
“More than ever,” it declared, “America embraces enterprise, supports it, and indeed ... demands it.”
Three decades later, however, we discover what has actually transpired: That entrepreneurship in the U.S. is on the decline – and has been for a while.
From 1980 to 2011, based on the number of new firms created, entrepreneurship declined by about 50 percent, according to census data.
And now what’s even worse: The coronavirus pandemic that’s still raging may accelerate entrepreneurship’s decline.
The perfect storm
How did entrepreneurship get so upside-down?
Different economists share different reasons for the downturn, such as declines in population growth; big companies getting bigger and suppressing competitors; regulatory burdens; and other economic, cultural and demographic factors.
Here are more observations about what has likely contributed to the decline:
· The wrong mindset. The initial hype about entrepreneurship in the 1990s motivated people to rush in with a desire to “get rich quick.” They came with high expectations but few preparations. Entrepreneurism, as it turns out, was harder than they thought. Bad-news stories amplified small-business risks and failures, which caused potential entrepreneurs to shy away.
· After-effects of the Great Recession. As families saw jobs, homes and fortunes lost after 2008, more people became risk-averse.
· The blessing – and the curse – of technology. Computers and the internet made business easier, lowered barriers to entry and opened new markets of possibility – but all that increased competition, too.
· The loss of faith in free enterprise. Some people stopped believing in the American Dream, that upward mobility is possible for everyone who sacrifices, takes risks and works hard. There arose a distrust of businesses and the people who run them. As a result, the reputation of capitalism and free enterprise in America continues to suffer.
These collective, colliding forces have bred uncertainty and fear – enough to dampen entrepreneurial courage – the first, most fundamental trait that entrepreneurs must harness and possess before they are able to take a risk, start a new business and do the hard work required to earn their own success.
Entrepreneurial courage has been part of my vocabulary since 1972 when I joined Winsupply Inc. – an organization that exists to build entrepreneurs in construction wholesaling.
Entrepreneurial courage, in fact, is the essence of our philosophy to “eliminate obstacles and provide support to help courageous, capable, hardworking entrepreneurs succeed.”
This philosophy embodies a truth that is universal:
Without entrepreneurial courage, people with potential who are capable and hardworking will not take a risk on themselves.
Instead, would-be entrepreneurs will do something else, whether that’s settling for steady, salaried employment and the financial security at a big company, or going to work for a nonprofit, the ranks of which have grown significantly in recent years.
A shot in the arm
America was built by entrepreneurs, with proof laid out in stirring detail by Alan Greenspan and Adrian Wooldridge in their 2018 book, “Capitalism in America: A History.”
But will America’s legacy continue?
Today, Nov. 17, is National Entrepreneurs' Day. If we want to drive more economic prosperity now and in the future, America needs more entrepreneurs. That’s because entrepreneurship improves productivity, spurs innovation and creates jobs, according to the Center for American Entrepreneurship, which reminds us that:
· New businesses keep markets competitive by bringing something new and improved, which challenges established businesses.
· Entrepreneurs are the primary producers of innovations needed for creative destruction: when old ways in the economy are destroyed to make way for new ways that drive a better quality of life for all of us.
· We need new, young businesses because they are the ones driving net job creation.
If the end game we seek as a nation is more entrepreneurs, we need to begin by reviving entrepreneurial courage.
Here are three ways that aspiring entrepreneurs can eliminate overwhelming fear and uncertainty, find their entrepreneurial courage and give themselves a better shot at success.
1. Adopt the right mindset.
“Get rich quick” cannot be the mindset of someone contemplating a new business. Instead, your mindset needs to be just the opposite. The right mindset requires going slowly – very slowly – and doing what is necessary to mitigate your risk.
Going slowly means testing your business idea first so you can preserve capital and use it wisely. Online sites like Etsy and GoFundMe are great ways to run a few tests, get some initial data, and then evaluate and adjust before investing too much time and money all at once.
Embracing the opposite of a “get rich quick” mindset will help you grow within your capital structure – and not go beyond it.
2. Boost your financial acumen.
Any new entrepreneur must accept this fact: In today’s world, it is suicidal to start a business and manage it with a spreadsheet. Instead, you must learn to speak the language of finance. That means you need to be able to analyze and comprehend financial statements that include – at a minimum – a profit and loss statement and a balance sheet.
The health of any business can change in an instant. Financial statements give you insights you just can’t get with a spreadsheet. They can help you decide whether to effect some change immediately in response to a trend – before it’s too late – or continue to do what is working well based on what your financials say.
If you attempt to start a business without access to financial statements, it’s like driving down the road with the windshield painted black: The picture you get will be incomplete, and you’ll be managing your business in the dark. You won’t know what’s really going on.
3. Find a partner who brings more than money to the table.
If you are someone who is thinking about starting a new business, you’ll probably seek counsel from an outside board of advisers. In addition, you may want to consider an equity partner who not only brings the capital you need – but also skills that you don’t have.
Let’s say you are the one with the technical know-how behind a new venture. Perhaps you would benefit from someone with skin in the game eager to deliver management support or a service you need – like e-commerce fulfillment – to help your idea succeed.
An equity partner who is not a “yes” person but a devil’s advocate – someone willing to ask you difficult questions and challenge your ideas and plans – will quickly become a valuable asset as business decisions are made. A person like this will offset your weaknesses and complement your strengths.
Make no mistake: Compared to other countries, the U.S. remains one of the best nations for starting a business – from high-tech to the trades – because small-business help is so readily available. But without entrepreneurial courage, people with entrepreneurial potential may remain on the fence forever. If that happens, the losses would truly be tremendous: not only for these people themselves, but for our country as a whole.
On National Entrepreneurs' Day, let’s revive entrepreneurial courage.
Let’s do more to inspire people with potential to take a risk on themselves so we can build a nation with more entrepreneurs: people who can invent our future and drive more economic prosperity for all of America.