Everyday Matters: So, you want to be an entrepreneur?

This article first appeared in Forum, The Edge Malaysia Weekly, on September 11, 2017 - September 17, 2017.
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“I told a girl that my prospects were good,
And she said baby, it's understood,
Working for peanuts is all very fine,
But I can show you a better time.”
—  Drive My Car (1965), The Beatles

 

Well done to the Malaysian SEA Games contingent! They wrapped up the 2017 edition of the games with an unprecedented tally of 323 medals — 145 gold, 92 silver and 86 bronze. Our prime minster declared a public holiday to celebrate their success.

But not everyone was happy with that holiday announcement. Tan Sri Lim Wee Chai, chairman of Top Glove Bhd, the world’s largest rubber glove maker, was quoted as saying in a telephone interview: “The estimated salary cost for one additional public holiday in Malaysia is about RM1.5 billion per day. [An] Unplanned or ad hoc public holiday is disruptive for business.”

I do not think that the good Tan Sri planned to rain on the nation’s parade, but for a businessman, an entrepreneur who is risking capital and other resources, unplanned additional costs are burdensome.

Being an entrepreneur is a serious business. We are not talking about setting up a stand selling trinkets on a beach in Langkawi. We are talking about risking our own money, risking our career, in some cases jeopardising the family’s savings. And these are not trivial issues.

Just as we talk about responsible consumption and corporate responsibility, we must also support the development of the entrepreneurial spirit in a responsible fashion. Fostering the entrepreneurial spirit should not simply mean increasing the number of entrepreneurs; it should also mean inspiring entrepreneurs who are qualified and able to do the job, and to show them the realities of the entrepreneurial challenge.

From the executive launching a major business venture to the stay-at-home mum who wants to open a hijab boutique, anyone with an entrepreneurial spirit needs to understand that entrepreneurship is a tough game, and curve balls such as ad hoc public holidays is par for the course.

Starting a business is too important for an entrepreneur not to be warned about its darker sides. While it is true that entrepreneurship is an endeavour that brings much satisfaction, it also brings many headaches and difficult moments.

Prospective entrepreneurs deserve to be warned about the difficulties that lie ahead. Naïveté can sometimes be a good thing, but for an entrepreneur, it is a dangerous thing. When it comes to entrepreneurship, business experience does not in itself guarantee success.

Which brings me to a burning issue regarding entrepreneurs and the entrepreneurial landscape: Why do businesses fail despite the good ideas and enthusiasm that birthed them in the first place?

Are good ideas and burning enthusiasm not enough to sustain a business? Sadly, the answer is a resounding no. To sustain a business, you need motive.

You see, a product or an idea is not a valid reason for starting a business. The idea may be the purpose of the business, but it is not the motive. Imagine someone who wants to be a writer. We ask her about her motive, and the future writer says, “I have a brilliant idea for a story.” What would you think? That you’re not talking to a real writer. You might also think, “What will become of this writer once she’s finished her story?”

While enthusiasm is the motor that drives the entrepreneur, one must be careful with this force, because it can also be one’s worst enemy. Enthusiasm can blind even the most expert CEO. It is a veil that often hinders the entrepreneur from seeing the realities of life.

Witness a major failure in the automotive industry in recent times: Tata, a world-beating Indian conglomerate led by the highly respected Sir Ratan Tata, wanted to produce the cheapest, most affordable car in the world. A noble objective, without a doubt. And it created the Nano.

To be affordable, the Nano had to be small and devoid of accessories that are taken for granted by consumers: radios, air-conditioning and power windows are optional extras. Despite major promotional campaigns, the Nano did not sell as expected. And the world market Tata was looking at also failed to materialise — made of lower-cost materials, the Nano could not pass the stringent global safety standards.

Without a doubt, a main reason why businesses fail is a lack of objectivity on the part of those who start them up — an inability to recognise things as they really are.

For an entrepreneur to avoid failure, I am convinced he needs to know why other entrepreneurs failed. It will bring him closer to reality.

Studying a success story is nowhere nearly as fruitful as understanding what caused a failure. A success is an opportunity already exploited by somebody else. Why study it? Sure, a lesson can always be gleaned from these inspiring stories, but we have known for centuries that learning from mistakes is more effective. Like key success factors (KSFs), a term coined by business literature, key failure factors (KFFs) also deserve a closer look.

I have empirically researched the need to deal with this subject. Out of curiosity, I looked up “key success factors” on a search engine and found almost 35,000,000 results; a search for “key failure factors” yielded only 632,000 pages.

It is hard to understand this anomaly. According to a recent study, an estimated 95% of global entrepreneurs’ businesses fold before their fifth year. Yet, less than 2% of business texts examine the reasons why they failed.

I know that as a society, we have been trained to dwell on the winners. But would it not be more logical to study and reveal the stumbling blocks that 95% of entrepreneurs trip over than to analyse the stories of the 5% who succeeded?

Many books have been written by leading experts. Many concentrate on drawing up budgets and technical factors such as capital and accounting, or deal with legal terms and corporate structures. Others choose to focus on the successes and world-famous victories of the likes of Tony Fernandes of AirAsia, Chinese IT entrepreneur Jack Ma, Virgin Group founder Richard Branson and the guys who started Google. We have been fed the idea that, by knowing why others are successful, you will avoid failure.

Not true.

Businesses do not fail because of a lack of technical competence; they tend to fail for much more mundane reasons — personal problems, a lack of common sense (yes!), exaggerated expectations, and mistakes that, over time, become real problems that drag the business to its demise.

Maybe there is no universal list of failure factors. But I think we can agree that humans tend to struggle with similar problems. Therefore, knowing what these are would be of great help to a lot of people.

Why? Because in order to apply the success factors, we need to clear the terrain of the failure factors. For example, there is no point in offering excellent service in a restaurant at the top of a well-known building if the lifts break down all the time. The former could be a key success factor, but the latter is a key failure factor.

Author and consultant Professor Philip Kotler once remarked, “Entrepreneurs are the lifeblood of any economy.” By forewarning would-be entrepreneurs about the causes of failure and giving them a dose of reality, I believe we will help raise the quality of entrepreneurship by deterring misguided ventures and increasing the number of informed, successful start-ups.


Zakie Shariff sits on the board of two local universities and has a deep interest in developing strong corporate leaders