Business experience aids entrepreneurs
There are three important reasons why some business experiences can give an entrepreneur a real advantage.
There are three important reasons why some business experiences can give an entrepreneur a real advantage—networks, industry knowledge and opportunity recognition.
First, research shows that one of the most useful predictors of entrepreneurial survival is the size and quality of your network.
The great way to build a network is to spend some time working in an industry in which you would like to start a business one day.
Second, it is important to find out how things are done in the industry in which you want to operate. All industries have a set of unwritten rules and routines and to make things happen within that industry you often have to comply with those rules and routines.
Even if you plan to break the rules and routines with your new venture, it is useful to know what they are before you go against convention.
Third, the scope of opportunity that you see may be limited unless you spend some time working in an industry.
As consumers, we see only a small portion of business problems and challenges that are out there. If you work in an industry, you will be exposed to a whole new set of problems and challenges further up the value chain in that industry.
Because the problems further up the value chain are less obvious, there is often a lot more profit for the entrepreneur who solves such problems compared with the entrepreneur who solves the consumer-facing problems to which everyone is exposed.
There are other ways to enhance your network and get an insight into industry dynamics.
One way is to do an entrepeneurship MBA that provides one of the most useful networks of contacts you will ever develop. The typical class size is 30 people and they come from a diverse range of backgrounds and experiences.
Each person within an MBA class has a network of his or her own that you can access once you develop a relationship with him or her. An MBA will expose you to case studies and intricate business problems across the value chain of a wide range of industries.
In discussing and solving these problems you will learn the dynamics of the industry and be able to recognise opportunities from across the value chain.
Being entrepreneurial is about pursuing opportunities and making things happen despite a lack of resources. Many of the most successful entrepreneurial firms were founded during restrictive funding cycles.
A lack of funds forces the entrepreneurial team to be creative and frugal. It instils a sense of discipline around finances early on in the life of the business and forces the team to do things in innovative, out-the-box ways.
This spirit of frugality, discipline, creativity and innovation in the business lifecycle tends to live on as the business grows and matures.
In time this can be a competitive advantage for the business. A business plan will not make your business successful. I have never seen a venture turn out as predicted in the business plan.
Yet a well researched, logical business plan is a signal to investors and other resource providers that you (and your team) can see the big picture, that you have understood the different elements of the business and are able to relate them to one another and that you are diligent enough to have put effort into understanding what you are getting into.
As such, the process of researching and writing a business plan can be an incredibly useful exercise for an entrepreneurial team.
It forces them to debate and decide on goals for the business, it brings everyone up to speed on the important dynamics in the industry and it helps the team understand where their strengths and potential weaknesses lie.
Therefore it is not necessarily the plan that is important, but the process of planning and how that creates synergy within the team.
Greg Fisher is a senior lecturer at the Gordon Institute of Business Science