The Downside of Entrepreneurial Passion

October 2, 2014

 

Passion and confidence are essential traits for any entrepreneur, but these same qualities can also lead aspiring business owners to ruin. If entrepreneurs are too assured and optimistic, they risk losing sight of the enormity of the task they have undertaken. For instance, passionate people can believe so deeply in their business idea that they become blinded to its actual market viability. They are driven by the notion that since they would love to buy this particular product or service, everybody would.

In a recent study of 800 prospective business founders, a substantial portion of participants received recommendations to abandon their ideas due to lack of potential. Twenty-nine percent of this group ignored the advice and kept spending money on their idea; while a further 51 percent continued to invest time in their ventures. On average, these participants ended up doubling their losses before finally giving up. Even if an entrepreneur has a good idea, their unbending belief in the venture can cause them to underestimate the resources necessary to launch. Many entrepreneurs craft business plans that read like best-case scenarios rather than objective analyses. This makes them unprepared for the surprises and setbacks that inevitably befall any new company.

Leadership problems can also complicate matters at a new startup. When multiple founders launch a company, everyone involved begins the project with an enthusiastic, united attitude. As time passes and the business grows, however, one founder’s skills can become more essential than another’s, shifting the power dynamic of the organization. One study found that 73 percent of startups split equity ownership within the first month of founding, which leads to tension as some receive a larger cut than others. If a leadership structure becomes too contested, investors may opt to install an outside CEO. This can strain a startup even further if employees decide to leave out of loyalty to their fired founder. So while it certainly takes a strong individual to start a business, prospective entrepreneurs are advised to heed this advice from Steve Jobs: “Follow your heart, but check it with your head.”

 

Questions:

  1. What should entrepreneurs remember about managing their business passions?
  1. Why do many successful startups often turn to an outside CEO to run the company?

 

Source: Noam Wasserman, “How an Entrepreneur’s Passion can Destroy a Startup,” The Wall Street Journal, August 25, 2014. Photo by Cipaz Ciccio. 

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