Ever wanted to start your own business? In this article, John Hayes looks at reasons why people decide to set up their own companiesHave you ever thought about starting your own business? A growing number of those who study change management not only think about it, they actually do it.
People have different motives for founding their own business. They might want the freedom to develop and implement their own ideas without being constrained by a supervisor or the rules and procedures that regulate how things are done in many large organizations, or they might want the freedom to make a lifestyle choice and earn a living doing something they enjoy. Another motive is the desire to accumulate wealth. Some might be motivated to grow a profitable business that will provide them with a comfortable living, or they might have a more immediate desire for wealth and hope to grow a business that they can sell on quickly for a substantial profit.
A critical first step for any business founder is the development of a viable business proposition that has the potential to create value for customers, sufficient rewards for other stakeholders (such as employees, suppliers and investors) and adequate profit for themselves.
Motives can affect the kind of business a person will seek to establish. Where their ambition is to sell a business on for profit it is important that they grow assets (such as intellectual property, a strong brand, loyal customers, plant, property, and competent staff) that will have value when they have moved on. Where their ambition is to generate a good income over the long term, or to facilitate a desired lifestyle, the creation of valuable assets might be less important.
How the business founder identifies and develops their business concept can also affect the kind of business they will create. Some will engage in a systematic search to identify a viable business proposition, but others may just stumble across an idea that provides the basis for a new venture.
Systematic searches often focus on the budding entrepreneur’s previous work experience, a hobby or some other interest. While this type of search can be a rich source of business possibilities, it can often lead to the creation of a new venture that imitates an existing business. Imitative ventures can be successful, but a downside is that they have to fight with competitors for a share of an established market. An alternative focus is to search for a product or service that satisfies a customer need that few others have recognized. One way of doing this, discussed in the chapter on value innovation in The Theory and Practice of Change Management, is to look across the boundaries that define established markets. For example, when considering the purchase of a car for commuting to work, commuters might weigh the relative value of alternatives such as taking a bus or hiring a taxi. Thinking about the space between the boundaries that define these options can point to new opportunities, such as ride hailing.
Some business founders only consider the possibility of setting up their own business after accidently stumbling across a promising opportunity. For example, Jay Sorenson had the idea of producing and selling insulated cup sleeves after dropping a paper cup of coffee in his lap because it was too hot to hold. Similarly, Alexandre Grandremy and Gary Cohen, students at ESSEC Business School, developed France’s first peer-to-peer car rental service after Grandremy began to regularly borrow Cohen’s car because the business school, on the outskirts of Paris, was relatively isolated. Grandremy and Cohen soon realized that other students might also be interested in sharing their cars, so they began to develop the technology that created the car sharing equivalent of Airbnb.
Identifying and developing the business concept is only the first stage of the business founding process. For more information about what else the budding entrepreneur has to attend to look at Bhave’s process model of enterprise creation and Klofsten’s ideas about the prerequisites for the survival of any new venture, both discussed in The Theory and Practice of Change Management.