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Successful Entrepreneurs have Clear Ideas

Louise Witt - Successful entrepreneurs have something that unsuccessful ones don't have: the vision thing. Robert Baum, an assistant professor of entrepreneurship at the University of Maryland's Robert H. Smith School of Business, studied fledgling small-business owners and found that those who have a clear idea of how their companies will prosper are often more successful.

Baum studied about 120 entrepreneurs in central Pennsylvania over a three-year period. Each envisioned running a business with 25 to 50 employees. Every six months, Baum and his assistants would talk to the would-be entrepreneurs about their progress. Only 35 were able to turn their business ideas into startups. Baum found that those who were successful were dreamers with grand schemes. "People who have a vision for a promising business that might employ 10 to 100 people are the kind of dreamers who make it," Baum says. "The intensity of the vision is important."

Baum, whose paper, "Entrepreneurs' Start-up Cognitions and Behaviors: Dreams, Surprises, Shortages and Fast Zigzags," won an award from the National Federation of Independent Business earlier this year, talked to FSB.com about the five characteristics of successful entrepreneurs: vision, intuition, ability to secure financing and business partners, willingness to change short-term goals, and the flexibility to be experimental. But Baum stressed that vision is crucial. Without it, most entrepreneurs fail.

Why did you undertake the study?
The basic research question is why some people who want to start a company are able to actually pull it off. If you look at statistics, 60 percent of high-school graduates want to start a business at some time in their lives, but, of course, 60 percent don't do that. People who make it all the whole way to a startup do something different.

A lot of people say, "I always wanted own my own business, whether it's a bicycle shop, a bar, or a craft brewery." When I talk to people, I hear, "I wanna, I wanna, I wanna." But the ones who have fleshed out the details over those three years were the ones who were successful. They had vision and a clear idea where they wanted to go with a lot of details.

Why do you consider successful entrepreneurs dreamers?
If you look at the extreme personality of dreamers, they are people who have pictures of the future in their heads. It's like being a tennis player and seeing yourself 10 years down the road accepting a trophy. Others who play tennis don't want to do that. They play and have fun. It's the same thing with small-business owners. There are a lot of people who can't wait to get to the weekend, have fun and watch DVDs.

What other attributes are important?
A lot of them are willing to make intuitive, fast decisions. It's what we call the automatic compressed experience. They're willing to go ahead and make a decision without all the information that they may need. They're also not afraid to borrow—not just money, but people. They'll say, "Come work for me. I can't pay you much now, but I'll pay you a lot later." That's borrowing that person. The vision thing is good leadership. People who have intense pictures in their minds of what they are going to do, can speak with such enthusiasm that they are able to attract people to work for them, even if they don't have enough money to pay them. People are willing to say to these entrepreneurs, "I'm willing to work for you because I believe in what you're doing."

We all know goals are important, but what makes successful entrepreneurs' goals different?
Let's say they're benchmarks. A person with an intense vision of where they want to be in five or 10 years will have certain benchmarks. They'll say, "I want to have my first sale in six months." The vision of what they want to do in five to 10 years doesn't go away or lose its intensity. But they're willing to change their benchmarks along the way. They'll say, "I didn't do my first sale by Christmas, but I'll do it by end of February." They have a rigid vision, but they're willing to change their benchmarks.

And the last thing is the willingness for experimentation. Most entrepreneurs are short on money. Most are willing to take small steps along the way to a big dream or vision. They'll take a small tentative step, or make a small investment and watch how it turns out. If it turns out badly, they'll make a change.

What would an unsuccessful entrepreneur do?
We had a number of big corporate executives who were trying to start their own businesses. Working from a big-business viewpoint, they throw all the resources and all the money at a venture that they possibly can. They start too big.

What questions should prospective entrepreneurs ask themselves before they start their companies? They have to big dreamers, but they have to dream about a business that has potential. There's a whole systematic way to review a business's potential. It involves a market study with real potential customers. A focus group is one way to do this. Other ways are with questionnaires or online surveys. Then, you have to create a written business plan and take it to some financiers. That's a whole other thing, learning where to find the money if you don't have it. And most people don't. The great tragedy is that young people have the best ideas and the old people have the money. It's backward.

Can someone learn to be a dreamer?
I don't know. That's like asking whether people are born leaders or taught to be leaders. Are you born an entrepreneur or can you be taught to be one? Are you born a dreamer or can you be taught to be a dreamer? My answer is both. We've had 500 people go through our entrepreneur classes. Many came with ideas for a new business and ended up with a totally new idea. So, you can learn how to be creative.

One way to be more creative is to get in touch with your irritation. I ask students to compile their complaints about poor service, things that break, or software that they need. They come in with a complaint and talk about it. They realize that many new products are formed out of dissatisfaction.

Louise Wit is a writer based in She has writes small business and entrepreneurship.

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