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Entrepreneurs’ survey

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Over the past decade, entrepreneurs have become increasingly important – and visible – players in the global economy. Liberalisation, privatisation and economic reform in many countries around the world have democratised entrepreneurship, creating a fertile environment for the development of new business ventures. Today, the world’s most successful, and wealthiest, entrepreneurs are just as likely to originate from India, China or the UAE as they are from the more established markets of the US, UK or Japan.

But while the broad trend around the world has been towards a more conducive environment for entrepreneurship over the past decade, recent turmoil in the financial markets has altered the landscape for the funding and development of successful ventures. Today, entrepreneurs must contend with contracting credit, declining consumer and business confidence and a sluggish forecast for growth in OECD countries. Even in fast-growing emerging markets, such as China and India, economies are expected to cool as a result of declining demand for exports. In combination, these factors will undoubtedly create more difficult conditions for many entrepreneurs over the next few years.

For some entrepreneurs, a challenging economic environment is a time of opportunity. The characteristics that we most associate with entrepreneurs – risk-taking zeal, self-belief and the ability to think differently from the herd – come into their own at a time when more conservative businesses are pulling back from investments and avoiding risk. While success is far from guaranteed in these conditions, entrepreneurs should recall that previous downturns have been fertile breeding grounds for the strongest ideas and enterprises.

The Economist Intelligence Unit on behalf of Barclays Wealth recently published a study examining the current environment for entrepreneurship around the world, and exploring the determinants of success for entrepreneurs in both good times and bad. Based on a global survey of more than 2,300 high net worth individuals, including almost 1,200 entrepreneurs, the report also investigated the impact of recent financial turmoil on the world of entrepreneurship and asks if the current environment should be seen as one of opportunity, as well as just adversity.

Perseverance is now more essential than ever now

Every start-up faces its share of barriers, obstacles and nay-sayers, but in more challenging economic times, these problems are all the more difficult to overcome. The most traditionally recognised entrepreneurial traits – a willingness to take risks and creativity – can help entrepreneurs to steer round some of these challenges, but a thick streak of tenacity is also required to succeed in the current environment.

As a result, survey respondents rate perseverance as the single most important quality required by today’s successful entrepreneurs. ‘Tenacity is hugely important to succeed as an entrepreneur,’ says Sherry Coutu, a Canadian serial entrepreneur and active business angel investor who now lives in the UK. ‘You can always find people who tell you that your idea or your business won’t work, and who don’t believe in your business. Tenacity is the key to success.’

Making money is not the main motivation

In the public imagination, entrepreneurship is often linked with financial success. The survey suggests, however, that money does not play as important a role in motivation as many would believe, with just under one-third of respondents saying that the possibility to make large sums of money is an advantage of being an entrepreneur. While there is no doubt that money is vital for an entrepreneur to achieve his or her vision, our research suggests that it is more an indicator of success rather than the prime motivation.

Conditions improving in some regions..

Respondents cite the Middle East and North Africa as being the region that has seen the biggest improvement in the environment for entrepreneurship over the past decade. Although conditions vary from country to country, it is clear that ongoing economic reform and political support for enterprise is leading to widespread change, fuelling many new opportunities for entrepreneurs both within the region and internationally. Asia-Pacific also performs well on this measure, no doubt reflecting the strong economic development and liberalisation that is taking place in the region’s powerhouses of India and China.

..but concerns remain in others

The more mature markets of Western Europe and North America remain highly attractive regions for entrepreneurs, thanks to their strong institutions and availability of capital. There are grumbles among some entrepreneurs, however, that certain aspects of the business environment are becoming more difficult. Almost 40% of respondents from North America and Western Europe say that the regulatory environment has deteriorated in their region over the past decade, while a similar proportion have concerns about the cost of doing business.

The credit crisis is bad news for IPOs

Conditions for exits have become less favourable in recent months as the impact of the credit crisis has filtered through to the real economy. When looking to exit their business, the most important factors for entrepreneurs in the survey are the value of the business, the point in the business cycle and the level of interest from buyers. In the current climate, all three will have deteriorated, so it is likely that any who were planning a sale will be putting plans on hold. That said, only a minority of entrepreneurs create a business with an exit in mind. For most, the motivation is to build a successful business over the long term.

Testing times

But despite these difficulties, the study finds there are grounds for optimism about the current state of entrepreneurship. For many entrepreneurs, a testing economic climate can be the time to create winning ideas. ‘If we look at history, the most interesting innovation always comes out of a crisis,’ said Davide Sola, associate professor of strategy at ESCP-EAP European School of Management, in a recent Economist Intelligence Unit webcast. ‘People seem to react quite positively to adversity. And the reality is that innovation, most of the time, is the result of creativity, and creativity is triggered much more when there are a lot of difficulties around you.’

It is in the nature of entrepreneurs to use their perseverance, risk-taking zeal and creativity to overcome obstacles and see opportunity where others see only adversity. Indeed, there is a strong argument to be made that the current financial crisis, rather than impeding innovation, may actually encourage it.

Contributed by Barclays Wealth and Economist Intelligence Unit and appeared in the Spring 2009 edition of the Channel Islands Stock Exchange Bulletin Board.

Please click here to read the full edition

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