The Entrepreneurs Paradox

I haven't seen too many successful entrepreneurs. Maybe thats because they say that 90% of entrepreneurial ventures bite the dust! Many claim success in the short term, but few have that what we in management jargon call 'a sustainable business model' to remain in operation despite the trials and tribulations of business.

To cite a personal example, Dad ran a business which had to be folded in the tech meltdown of the early 2000s. We weren't in tech, but the far reaching effects of the tech bubble and some bad decisions had a double whammy effect on what was an unsustainable business model.

However ever since I took a keen interest in business management somewhere around my second year of engineering, I have come across business which have pulled through tough times and in some cases earned super normal profits in good times! What's the secret of their success?

Before I get into that let me explain the entrepreneurial mind. From what I have observed, their mental makeup is to move fast and nimbly at that. And when you actually ponder about it, you will realise that you can't move fast unless you are nimble! Another striking feature that I have come to appreciate is their concept of opportunity cost. If they can earn a higher percentage elsewhere, successful entrepreneurs have sold businesses that return less. No sentiments, no emotions, nothing. Contrast this with entrepreneurs who try to flog their existing business in the eternal hope that good times are around the corner. Lastly, they like to keep things operationally simple.

So have you got a clue of what I'm talking about? There is one metric that can capture all that is said in the above paragraph, but it is bloody subjective. Return / Effort can be as subjective a metric as you can get. It differs from one entrepreneur to another and thats the beauty of it all. Whether it is Nikunj in Mumbai, Mansur in Bangalore or Ramesh here in MDI, I have found this to be a commonality in their thinking. And last of all, today the master confirmed my thoughts. After the class on 'Behavioural Finance and Business Valuation' (BFBV) I decided to read Warren Buffet's 2004 letter to his shareholders. His commentary on MidAmerican, where Berkshire then owned 80.5%, confirmed my thoughts on entreprenuers. I don't know if it applies to the same extent in the corporate world, where committments are on a much larger scale and the reputation of many people is at stake when radical decisions are made.

Successful Entrepreneurs are a celebrated lot. The press drools over them and others admire them. Ask the entrepreneur and he will cite hard work, courage and perserverance as the inventory of attributes he utilised to be what he is (I will add common sense). However, It is a paradox that Returns / Effort is a metric to get there!