Thursday, 04 June 2009 08:55
By Evelyn Pyburn
At a time when a worldwide economic downturn tops most people’s list of concerns, it’s appropriate to be recognizing the kind of people who will eventually resolve the problem – entrepreneurs. These amazing people, who are being recognized during Small Business Week, are just the tip of the iceberg, in Montana. From corner to corner, the state abounds in similar hard-working, creative souls engaged in every kind of business imaginable, and some you can’t.
The fact that two of Montana’s entries into the US Small Business Administration’s (SBA) annual competition, were not only regional award winners, but were top national contenders, speaks to the caliber of Montana’s small business owners. But, then, Montana SBA entries have been top national contenders on a consistent basis, far beyond its per capita expectations.
When it comes to entrepreneurship Montana is no slacker. According to a recent report, Montana is the most entrepreneurial state in the nation – with double the ratio of entrepreneurs per capita compared to the national average. (An average ratio of 1.7 per 1000 people with a ratio of 2.0 in 2007, compared to the national average of 0.8).*
Montana has long been noted as a small business Mecca, but since the Research and Analysis Bureau of the Montana Department of Labor and Industry announced these statistics, many people have been asking why. It’s a good question to ask, given the importance of entrepreneurship to a vibrant economy; although, it can no longer be assumed that everybody understands why entrepreneurship is important.
Many people seem to believe that consumption sustains an economy, more so than its ability to produce. So, perhaps it must be stated that unless the innovators, risk-takers and producers in a society feel confident about being able to do the things they do, like an engine running without oil, the economy seizes up. It takes entrepreneurs to create jobs, even for government funded jobs, which rely on profitable, taxable businesses to fund such programs. And, as has been broadly recognized, small entrepreneurial businesses create more jobs in this country than do large corporations.
In addition, the high levels of production and new technology, which elevates the standard to which we have become so accustomed to living, comes from the genius and hard work of entrepreneurs and the people they employ.
The entrepreneur gets attention because no economy thrives without them. Conglomerates and corporations, for all their size and market share, do not push innovation, nor do they adapt well.
It’s true that most entrepreneurial efforts fail in their first five years, and even those that make it don’t often forge any new frontiers. But it is from a handful of those upstart new comers that important pillars of the economic future are forged. And, no one can predict who they will be. While economic developers strive to encourage future business for a community, they can only chase after those who are already successful, because they have no idea who will really be the businesses of the future. People invest in the stock market every day trying to play that guessing game.
There could be no predicting about a school teacher in Wolf Point, Montana who had an idea about how to hold a pane of glass. Who would have bet that Woodspowr Grip would turn into a multi-generational, worldwide exporter?
Who would have anticipated that the observation of a need in the market for quality silver products, by a man making trophies and plaques on a part time basis would become, Montana Silversmiths, a world premier manufacturer of jewelry?
How about the insight of an insurance broker who had an epiphany about how computers could help businesses and organizations manage medical claims. When he started, no one knew that EBMS would be one of the largest employers in Billings today.
Without a doubt there will be huge, successful businesses in 25 years, which are just now starting. No dignitaries stood at their door on opening day. Located in someone’s garage, struggling to pay the rent or to get their next month’s supplies, their potential is unrecognized by anyone, except themselves.
But these are the jewels of success that sustain an economy. What do we do to optimize the chance for each one to be successful?
What they need the most is a minimum of hurdles (few regulatory barriers), a stable legal and economic environment (a government of equitably enforced laws rather than the unpredictable political whims of men), freedom to choose and to negotiate, knowing their contracts will be recognized by society and courts, and to hold certain that what they earn will in the end be theirs to keep (strong property rights and low taxes).
Nationally, the rate of entrepreneurship has been declining over the past few decades. Since 1948 the rate has fallen from 12 percent to 7, reducing by almost half the level of entrepreneurial businesses. That trend should be ringing some alarm bells, and it has prompted a lot of efforts to teach entrepreneurship. But, some people question whether entrepreneurship is something that can be taught. Not everyone seems cut out to be an entrepreneur.
So from whence does this aptitude come? Is it a genetic trait or a product of education and environment? The answer seems to be, both. Entrepreneurs have inherited personality traits that drive them to seek challenge and to succeed, as well as having learned skills.
People seem to delight in trying to understand the nature of entrepreneurs, much as they are enthralled with understanding the phenomenon of the American cowboy – and perhaps for much the same reason. Like cowboys, entrepreneurs inspire with a can-do and independent attitude that underscores the heroic. Understandable, perhaps, when one considers that the primary means of human survival is our ability to reason through challenges and to adapt to change. That we should be hard –wired to respond positively to individuals most exhibiting such traits shouldn’t be too surprising.
Researchers have identified the qualities common to successful entrepreneurs as having a motivation for achievement rather than for power or money, the habit of hard work, independent thinker, unhappy when forced to conform, and strong leadership abilities. And, while knowledge and skill are very important, a college degree is not necessarily a prerequisite. In fact, “Too many college degrees may be a handicap rather than an asset.”
A successful entrepreneur is someone who is sharp or shrewd, the possessor of a keen mind that can assess alternatives and outcomes accurately, because while engaged in high-risk endeavors in one sense, the success of an entrepreneur depends upon his ability to minimize risks. Entrepreneurs are not compulsive gamblers, but they do have a high tolerance for uncertainty.
It seems that necessity may be one of the greatest driving forces behind entrepreneurism. When jobs become scarce, when people are forced to become creative in order to survive, many who otherwise would not, turn to entrepreneurial endeavors. That may help explain the high entrepreneurship rate in Montana. Montana has passed through its share of lean times, when jobs were hard to find. The number of new business licenses skyrockets during such times.
Another factor that surely must have an influence in Montana, is that typically jobs in the state pay lower salaries than the national average. One way to circumvent that reality is to become your own boss.
That Montana remains close to its agrarian roots may also play a part, since most farm operations are entrepreneurial and even when fields of endeavor change, children of entrepreneurial parents are more likely to be entrepreneurial themselves.
And then there are the rigors of living in a state like Montana. Not only does the close one-on-one with nature cultivate a higher level of self confidence and independence, but the outdoor nature of the state probably attracts people of a more independent, nonconformist character.
In “The Illusions of Entrepreneurship,” author Scott Andrew Shane, identified the typical entrepreneur as a married white man in his forties, who may have attended, but probably didn’t complete college. His business is most likely to be a low-tech endeavor, like a construction company or an auto repair shop. His startup is likely to be in an industry in which he has worked for years. His goal is not to make it “big,” but to support himself and his family in a satisfying way.
Having said that, he is much more likely to be a “she”, nowadays, than in the past; and more recently the trend is that, man or woman, entrepreneurs are often older when they take their first entrepreneurial plunge.
As a breed apart, entrepreneurs are really not all that rare. If you aren’t one of them, then look around, chances are your neighbor is. Said Shane, “Each year in the US more people start a business than get married or have a child. And as much as 40 percent of the US population will be self-employed for some part of their work life.”
The key is – how to ensure that their endeavors flourish to a degree that they create jobs, and that they keep percolating, through the market place, their ideas and experimental efforts. The key is – to keep people, like these SBA award winners, pursuing entrepreneurial efforts. We bow to them, and wish them continued success.
* Different studies base their data on different definitions of an entrepreneur and on different criteria such as excluding or including the self-employed, who have no employees. Conclusions from one study to another are not easily comparable.
