Want to Be an Entrepreneur? Take A Test to See If You Have the Right Stuff

Stephen DeAngelis

February 08, 2010

This is the first in a series of posts about entrepreneurs and entrepreneurism. As an entrepreneur myself, I’m obviously biased about how I view entrepreneurs as a group. Even before the Great Recession, I was touting entrepreneurship in developing countries as one of the key ingredients for fostering development. After the recession began, I touted the benefit of helping entrepreneurs establish businesses and create jobs in developed countries as well. French politicians apparently view entrepreneurs in the same light as I do. As a result, they have made it much easier for entrepreneurs to start businesses [“Budding French entrepreneurs cash in on start-up scheme,” by Jennifer Thompson, Financial Times, 5 January 2010]. Thompson reports:

“For years Yvette Karmouche dabbled in selling books, clothes and other items online. But a year ago she stepped things up a notch and is now building what she hopes will be a fruitful second career. The 42-year-old marketing assistant is one of the thousands of small traders to take advantage of France’s so-called auto-entrepreneur regime, a new system for the self-employed that radically simplifies the process of setting up a business. ‘French society had not evolved in a way where self-taught people could become entrepreneurs – the experience simply did not exist,’ says Ms Karmouche. But ‘the auto-entrepreneur system has opened the doors for people like me’.”

America has been lauded as country of entrepreneurs. France has not — which is surprising given the fact that “Jean-Baptiste Say, a French economist, is believed to have coined the term entrepreneur.” Thompson continues:

“France is not a nation renowned for its risk-taking budding business tycoons. Business initiative has too often been stifled by a thicket of bureaucracy and some of the highest taxes in western Europe. Now anyone wanting to begin trading merely has to fill in a simple form online to declare their activity to tax authorities. They are exempt from VAT and France’s onerous business tax for a period. And the burdensome social security charges that weigh so heavily on small, growing businesses in France are no longer calculated on estimates of earnings but on the actual revenue achieved – as long as turnover remains under a certain limit. As a result the financial costs – as well as the bureaucratic hurdles – that have weighed on small traders have been significantly lightened. Close to 300,000 people have registered as self-employed under the new system, set up a year ago this month, according to the Auto-Entrepreneur Observatory, a gathering house for statistics on self-employment.”

At a time when many companies are shedding jobs, those 300,000 people in France represent growth rather than decline. I’m sure not all new ventures have succeeded — they never do — but enough of them have that France considers the new program a success.

“Hervé Novelli, secretary of state for small and medium enterprises, believes that these new small traders have generated business worth more than €380m ($550m, £340m) for the economy. For Pierre Kosciusko-Morizet, co-founder of PriceMinister.com, one of France’s largest e-shopping sites, the revamped process has heralded a period of entrepreneurship in the country. ‘There is no excuse for people saying it is too complicated,’ he says. ‘In France, traditionally the labour law has been quite rigid, but this system has made it more flexible.'”

It could be argued that the recession forced some out-of-work people to begin their businesses, but France’s auto-entrepreneur regime played an important role in the decision process for many of the new entrepreneurs.

“In a recent survey of 1,000 auto-entrepreneurs, 42 per cent of respondents cited ‘simplicity’ in the bureaucratic process as a key advantage in managing their new activity. ‘The numbers involved demonstrate that France is a nation of entrepreneurs,’ says François Hurel, director of the newly created Union of Auto-Entrepreneurs. Marc Olivier, head of the Federation of E-Commerce and Distance-Selling (Fevad), concurs. ‘Ultimately it is a triumph of realism over bureaucracy,’ he says. ‘What we are seeing is a real change in mindset. In some ways it is a sign of revolution for entrepreneurship in France.'”

Pierre Kosciusko-Morizet, co-founder of PriceMinister.com, a large French e-shopping site, believes that individuals with a penchant to be entrepreneurs are much more likely to follow their instincts when the process is simplified. “It means that people who wouldn’t normally participate in this activity now do so,” he says. “They jump in and learn how to swim.” The fact of the matter is, however, not all people have the right stuff to be entrepreneurs. A researcher in the United Kingdom has developed a test to help identify individuals with the right characteristics to become entrepreneurs [“Attitudes-to-Enterprise test identifies likely entrepreneurs,” Gizmag, 21 January 2010]. The Gizmag team reports:

“A test that could help identify the next generation of entrepreneurs has been devised by an academic at Kingston University in South West London. As well as spotting students who are more likely to start their own business, the Attitudes to Enterprise test also aims to find out which young people show a flair for self-employed enterprise or through running their own community project. Researcher Rosemary Athayde of Kingston’s Small Business Research Centre developed the test to find budding business leaders among school pupils aged 15-18 and to evaluate whether schemes for young entrepreneurs had any impact on pupils’ ambitions. She has also adapted the test to suit undergraduates.”

In order to create the test, Ms. Athayde had to identify characteristics shared in common by most entrepreneurs.

“‘The test I’ve developed is really about measuring enterprise potential in young people,’ she said. ‘Being creative and intuitive, showing good leadership skills and having a desire to achieve are all characteristics that show an individual is more likely to set up their own enterprise,’ Ms Athayde said. The test, which has been used in the UK, Australia and South Africa, includes 30 questions assessing pupils’ intuition, creativity, leadership skills and desire to achieve as well as the amount of control they feel they have over their future. Ms Athayde has also added six questions on attitudes to risk-taking for a new version of the test aimed at undergraduates which is currently being used by eight London universities, as well as the University of Zagreb in Croatia, and Kettering University in Michigan, USA. Both the school and university tests have a second section which asks the respondents’ ethnic group, gender, parents’ occupation and whether anyone in their family has ever owned a business.”

I’m glad she assessed “the amount of control” test takers feel they have over their future. Most successful entrepreneurs are optimists because they believe they control outcomes and that they can positively affect the future. It’s one reason that entrepreneurs are bigger risk takers than most people. Just as interesting as the test, however, is the fact that Ms. Athayde believes that through education people can be taught to become more entrepreneurial.

“One study compared a group of pupils taking part in a Young Enterprise programme with a control group that did not take the programme. The study found that the enterprise programme improved pupils’ attitudes to self employment. Overall the studies revealed that boys, private school pupils and young black people were more positive about self-employment than other groups. Ms Athayde said: ‘It’s generally self-confidence that gives pupils that extra enterprise potential but the key point is that the test needs to be seen in the context of pupils’ background and culture.’ She hoped the findings would persuade enterprise programme providers and the government to give more thought to how and where enterprise programmes are delivered.”

I’m still not sure that education can alter one’s personality to the extent that a person can go from being a non-risk taker to a risk taker or from being a pessimist to an optimist. I do think that a test like the one developed by Ms. Athayde could be usefully employed to identify potential entrepreneurs so that they can be groomed to become more successful. Such a program would bode well for a country’s economic future. A program that groomed future entrepreneurs could help teach them about dangers to be avoided and the subtleties of attracting capital. The Wall Street Journal asserts that “for entrepreneurs looking to gain credibility, it’s often the little things that count” [“Trust Me,” by Quy Huy and Christoph Zott, 30 November 2009]. Creditability is generally earned through proven performance. Dr. Huy, an associate professor of strategy and management at INSEAD, in Fontainebleau, France and Dr. Zott, a professor of entrepreneurship at IESE, in Barcelona, Spain, focus on how entrepreneurs can gain creditability when they have no track record. They write:

“How do you persuade people to trust you when you don’t have a track record? It’s a question every entrepreneur faces—and it’s especially critical these days as lenders and investors look for reasons not to hand over money. To figure out the answer, we interviewed key figures at 28 entrepreneurial ventures in the U.K., including founders, investors, board members, employees and customers. What did we find out? Details matter. Many entrepreneurs are so focused on building the business or getting their product ready for market that they forget to do little things that send a message of credibility—such as making sure their Web site is polished and professional, or sending follow-up notes after a meeting with potential investors. In our study, the most successful founders were masters at making symbolic gestures that signaled stability and credibility. They might hold meetings in upscale surroundings, for instance, or fill their Web page with testimonials from satisfied customers. Time and again, the entrepreneurs who practiced these tactics landed more funding than those who didn’t. What’s more, this advice isn’t for entrepreneurs only: Executives from established companies could learn some valuable lessons here, as well. With investors more skeptical than ever, executives must use any resource to convince them that they can be trusted—no matter how trivial the tactics may seem to managers with long careers and long-existing companies behind them. We found that there were four areas where the right symbolic gestures were vital.”

The four areas that Huy and Zott identified were: personal credibility, the company’s professionalism, the track record, and emphasizing and building ties. I found that what they had to say was so interesting that I’ll devote another post in this series to their ideas. What they have to say is important because students graduating in the next few years are going to find the job market so difficult that many will opt to start their own businesses [“With Scant Jobs, Grads Make Their Own,” by Toddi Gutner, Wall Street Journal, 22 December 2009]. Gutner reports:

“Faced with an unemployment rate of 16% for 20- to 24-year-olds, a growing number of recent college and grad-school graduates are launching their own companies, according to anecdotal evidence from colleges, universities and entrepreneurship programs around the U.S. … This push toward entrepreneurship among young people is likely to continue as employers plan to hire 7% fewer graduates from the class of 2010 than they hired from the class of 2009, which saw a nearly 22% drop in hiring from the class before, according to a recent report from National Association of Colleges and Employers. The annual average percentage of all job seekers starting their own businesses increased to 9% through the third quarter of 2009, according to Challenger, Gray and Christmas, a global outplacement consultancy. That’s compared with 5% at the end of 2008.”

Gutner agrees that even college graduates are seldom equipped with the tools they need to become successful entrepreneurs. She writes:

“Young entrepreneurs also are likely to face their own hurdles. ‘Having the skill set to become an entrepreneur is different than any thing you learn in school,’ says Susan Amat, the executive director of the Launch Pad at the University of Miami, an entrepreneurship-support program based out of the campus career center. To that end, it’s important for young entrepreneurs to seek the necessary help to get started.”

Too often people believe that starting a successful business will be easy and that both investors and customers will flock to one’s door. Ask any successful entrepreneur and he or she will provide you with a quick dose of reality about the hard work, long hours, challenges, and frustrations that can be encountered. In the end, however, the journey is worth taking if you have the right stuff.