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Startup study finds leading global entrepreneurs embrace adversity

Brian O'Connell on November 23, 2011 Source: Kauffman Foundation

What do leading entrepreneurs believe about running successful businesses?

Surprisingly, a new study from Ernst & Young says that to successful startup owners, bad news is actually good news, if you know how to handle the situation.

The Ernst & Young study, called “Entrepreneurs Speak Out”, was co-authored by Maria Pinelli, global vice chair, strategic growth markets, and Jean-Pierre Letartre, managing partner, both at Ernst & Young.

In it the authors say, by and large, the world’s leading entrepreneurs “are able to find opportunity in adversity” and have a unique knack for navigating their businesses expertly through five years of high economic turmoil.

The study shows that by embracing adversity, successful business owners actually find more funding for their companies, hire more employees and generate more profits than do entrepreneurs who shy away from adversity.

Take the employment issue. The study, which is run in conjunction with the Ernst & Young Entrepreneur of the Year Award, says that the winners and finalists from this year’s competition have hired 18 percent more employees than non-finalists – at a time when global unemployment increased by 10 percent since 2009.

Then there’s the funding issue, where the Ernst & Young report says that access to funding continues to be one of the primary challenges to small business growth around the globe.

In talking to 1,001 business owners in its run-up to the entrepreneurship award, Ernst & Young says that most are aware that funding is drying up. Here’s a sample from the report:

  • Almost two-thirds perceived that it is difficult for young entrepreneurs to access financing.
  • 83 percent are expecting private equity to have a “medium” or “high” impact on their growth in the next three years.
  • 80 percent are convinced that governments should facilitate access to funding for young entrepreneurs.
  • 53 percent have seen improvement in private equity funding over the last five years; 49 percent for venture capital.
  • 37 percent have experienced deterioration in bank credit.

But the report does find that leading entrepreneurs may know something that others don’t. For example, funding sources in “mature” economic countries is hitting full capacity, so smart business owners are looking outside their own countries for investors, using their governments as sources of information on how to find those investors.

(The study notes, “There is a marked divergence between rapid-growth and mature markets. For the former, access to funding has improved during 2005-10. For the latter, entrepreneurs are faced with increasing challenges to finance their growth.”)

In tough times, leading entrepreneurs are turning to their governments, both local and national, for extra cash. The Ernst & Young report notes that the business owners it talked to don’t always get the cash directly from government sources, but they do get the access to cash from government sources, who increasingly are plugged into the small business funding community.

In fact, 80 percent of entrepreneurs surveyed by Ernst & Young said that governments

have an important role to play to facilitate access to funding for young entrepreneurs. But they also say that governments should not make “winner and loser” decisions, but should create the strongest platforms for relationships between business owners and business investors.

The Ernst & Young study also says that more global business owners on its radar screen are turning to alternative funding sources – like micro-financing and corporate financing – to bring in new sources of money.

All in all, the Ernst & Young study of leading global entrepreneurs is worth a look.  

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