Chapter 5: Fears and Barriers to Entrepreneurship
Entrepreneurs, despite their positive mindset, often encounter fears and barriers that can hinder their progress towards their goals. The most common fears fall into the following categories: failure, stress, risk, and ego. We are all different, so some of these fears may be more prominent than others and, of course, there may be others to add to this list. While everyone is unique and has their own fear, let’s look at some of the most common fears that entrepreneurs have and examine ways to overcome them.
Failure
Failure is something to be cognizant of as an entrepreneur. Failure is subjective and can vary from person to person. Perspectives and statistics on the failure rate of entrepreneurial ventures differ because of this. Similarly, failure can also vary for each business. It can mean that a business doesn’t make enough money to pay its bills, leading to its closure. Poor marketing initiatives, inadequate management, financing hurdles, and poor business planning can contribute to this, among other things.
However, there can be other reasons as well. Many businesses close while being profitable and financially healthy. Failure can also mean that the business is no longer operating, but it doesn’t provide information about the reasons behind it. It’s important to note that a business must make money to survive, so a true business “failure” could be the inability to cover expenses.
On the other hand, businesses may close for other reasons, such as retirement, selling to someone else, or closing to start a new venture (Headd, 2018). These reasons tell a different story than low sales or lack of funding.
Harvard Business Review wrote more about the topic: How Fear Helps (and Hurts) Entrepreneurs (hbr.org)
Business Failure Statistics
Based on the Bureau of Labor Statistics, only 50% of businesses survive for five years or more, and even less, 33%, make it past the ten-year mark (Chamber of Commerce Team, 2024). These statistics highlight the difficulty of starting a business. There are numerous obstacles that make it challenging to succeed, far outnumbering the factors in their favor.
Entrepreneurs don’t want to start something that will intentionally lose money. However, it is important to note that the various statistics on failure may differ because of the different definitions of failure and the tendency to group all businesses together. Comparing a space exploration startup to a local bakery are two completely different businesses in two completely different industries.
Trough of Sorrow
Before a venture fails and closes its doors, or before it picks itself off the ground and succeeds, many times the entrepreneur will go through a hard time known to many as the Trough of Sorrow. The Trough of Sorrow is a feeling that entrepreneurs get where they feel burnt out or have depressed feeling. See Figure 5.1 for an illustration on the start-up curve. The first adrenaline rush has worn off from the launch. Perhaps they feel as though nobody likes what they’re doing (customers, employees). It’s hard to know if things will work out. Entrepreneurs likely will encounter failures along their journey, and when they do, it is critical to have a plan to get out of the Trough of Sorrow and recover as quickly as possible. When one is in the Trough of Sorrow, they need a way out!
Learning From Failure
Failure can be extremely beneficial if one takes the time to learn from it.
However, when individuals fail, they often become emotional, and these emotions hinder their ability to learn from their failures. Research shows us that when we fail, most of us focus on one of two things (Dembling, 2023):
- Loss orientation: Spending time looking back on the failure itself, grieving.
- Restoration orientation: Looking forward, not focusing on things related to the failure.
The studies tell us that if we continuously focus on the failure (loss orientation), negative thoughts and memories can become stronger and negatively impact us further, thus stopping us from learning from the failure (Vemanini, 2023).
Research also shows us that if we ignore and focus on nothing related to the failure, in the long run, this has the potential to lead to psychological and physical problems.
Entrepreneurs do not benefit from solely focusing on failure or solely focusing on something other than failure. So, what should they do? Research states that entrepreneurs should switch back and forth between loss orientation and restoration orientation as shown in Figure 5.2. This allows entrepreneurs to learn more from the failure experiences (Models of Grief Integration: Dual Process Model, n.d.).
Airbnb’s Trough of Sorrow
Airbnb, initially a struggling start-up, transformed into a $25 billion company through innovation and perseverance. Founded in 2008 by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk, the company began as a simple idea to rent out air mattresses in their apartment to conference attendees. Despite early financial struggles and skepticism from investors, they persisted by leveraging creative solutions, such as designing and selling limited-edition cereal boxes to raise funds (Agarwal, 2016).
The founders of Airbnb got out of their Trough of Sorrow and dealing with their failure by recognizing they were failing and then going out and doing something different that didn’t relate to the failure, like talking to their customers. Gebbia said (Kohrmann, 2013):
We used to travel and actually stay with our customers. It was the ultimate enlightened empathy–you were so close to the people you were designing for that it informed you in a way that, you know, an online survey never would. So by being so close to our customers we were able to listen to their needs and then design a product that they loved.
By focusing on building trust within the community, implementing robust safety measures, and continuously improving user experience, Airbnb grew rapidly. Their ability to adapt, coupled with strategic marketing and leveraging technology, enabled them to disrupt the traditional hospitality industry and achieve significant success. They maximized their learning from the failure and made changes that positively impacted their company.
The most realistic entrepreneurs expect to fail and then deal with it. They continue to look for opportunities and learn from their mistakes. This is why many entrepreneurs believe that making early mistakes is key, so they can build on this foundation later.
Pause and Reflect
- How do you define failure for a business?
- What companies have you seen learn from their mistakes and grow?
Risk
Oftentimes, the word “risk” is associated with entrepreneurs. That word can be scary for some and may deter someone from becoming an entrepreneur. An important characteristic of entrepreneurs is that they are more comfortable with the risk, mainly because they minimize the risks that they take. To believe that all entrepreneurs are risk-takers is a myth, which is covered in the previous chapter.
Let’s explore the common fears associated with risk. While there are many sources that list a variety of risks entrepreneurs take, we will focus on the four major categories as shown in Figure 5.3.
- Financial risk is when individuals put a large portion of their savings or resources at stake, which can result in losing them if the venture fails. It may also require entrepreneurs to personally take responsibility for the company’s obligations, potentially leading to personal bankruptcy. This is why many people are hesitant to risk everything to start a new business.
- Career risk refers to the ability to find another job or return to a previous job if the venture fails. This risk is usually faced by individuals who have a well-paying job with good benefits in a reputable organization.
- Family and social risks can occur because starting a business demands significant time and energy. Having less time for family and friends may affect personal relationships. Entrepreneurs might worry about what their loved ones and social circles will think if their venture fails.
- Psychological risk can occur when there are setbacks and failures that entrepreneurs take full responsibility for. Sometimes these mental and physical hardships can be challenging to overcome.
Remember, entrepreneurs understand risk and look for ways to mitigate it as much as possible. Regardless, there are still many types of risks that entrepreneurs take, and they all have the potential to cause fear.
Pause and Reflect
- Which type of risk is most worrisome for entrepreneurs?
- Which type of risk would worry you most?
Stress
Some of the most common reasons someone pursues entrepreneurship is for wealth, independence, and creativity (Johansson, 2019). While these reasons sound noble and inspirational, entrepreneurs can pay a high price working to achieve these things. Start-up founders are twice as likely to have depression and three times more likely to suffer from substance abuse according to research by Michael A. Freeman (Muenster, 2019). According to research by Frontiers of Psychology, stress is greater for entrepreneurs than for other workers (Schroeder, 2023).
Stress is caused by external factors like financial or relationship problems or internal factors such as feelings of failure or uncertainty about the future (Pedersen, 2022).
According to Mayo Clinic, stress affects health even though we may blame other things. Headache, sleeping troubles, feeling unwell, and lack of focus are just some ways stress impacts one’s body. Stress that is not dealt with can lead to high blood pressure, heart disease, stroke, and many other conditions (Mayo Clinic Staff, 2023).
But stress in small doses can have some positive affects like increasing motivation, building resilience, and even helping to promote bonding, all of which can help entrepreneurs (Selna, 2018).
Sources of Stress for Entrepreneurs
- Loneliness: Entrepreneurs can feel lonely despite being surrounded by people all day. They often lack confidants and have limited time for friends and family due to long working hours. Additionally, their participation in social activities decreases, leading to a sense of isolation and loneliness.
- Immersion in Business: Entrepreneurs often find themselves unable to take a break from their businesses. They become fully engrossed in their work and have little time for anything else.
- People Problems: Entrepreneurs rely on collaborating with various individuals such as employees, customers, and bankers. However, working with others can be frustrating, as they may not do things exactly the way entrepreneurs would or work at the same pace. These differences could lead to conflicts, resulting in failed partnerships.
- Achievement Drive: Entrepreneurs often try to do too much and are always striving to improve their work. They are aware of the dangers, like compromising their health due to overwork, but struggle to stop because of their strong drive to achieve. They fear that if they slow down or stop, their competitors will swoop in.
Tips on Managing Stress
- Engaging in Classic Stress Reduction Techniques: Meditation, regular exercise, and healthy eating are behaviors that can reduce or help manage stress.
- Acknowledging Stress: Entrepreneurs must acknowledge their stress level and develop personal coping mechanisms.
- Networking: Sharing experiences with other business owners and hearing about different triumphs and errors are therapeutic. This can combat the “loneliness” source of stress.
- Taking Breaks: Many entrepreneurs say a holiday/vacation is a must. Even if vacations are limited because of real business constraints, short breaks should still be taken. This can combat the “immersion in business” source of stress.
- Communicating With Employees: Create close relationships with employees to identify staff concerns and create plans to address them. Engage employees in resolving the concerns. When they know their leader cares about them and their growth, they will work harder. This helps to reduce the “people problems” source of stress.
- Finding Satisfaction Outside of The Company: Entrepreneurs need to get away from the business and find something else they are passionate about. This helps to reduce the “achievement drive” source of stress.
- Delegating: Entrepreneurs often find it difficult to delegate. However, delegating will alleviate stress and provide opportunities for employees. Determine employees with the necessary mindset and train them to complete the tasks. This helps to reduce the “immersion in business” and “need to achieve” sources of stress.
Pause and Reflect
- What are some ways you manage stress in your day-to-day life?
Ego
There is also a good chance that as entrepreneurs, they will experience some sort of inflated ego – as they should! They have built something from the ground up and they should be proud. So, a bit of an inflated ego is okay! There are positives and negatives to just about everything – and the entrepreneur’s ego is no exception. As a matter of fact, some of the entrepreneur’s ego can prove to be destructive for them.
- Overbearing Need for Control: Entrepreneurs have a strong need to control their own ventures and destiny. For example, they may only work in structured situations where they have created the terms. This obviously has downsides; one is they can see others as a threat, even those within their organization. Wanting to control their own destiny is good, but they must realize they can’t do it alone.
- Sense of Distrust: To remain competitive, the entrepreneur must constantly scan the environment and act upon things seen coming on the horizon, before it is too late. However, this can result in focusing on things that don’t matter and drawing them away from critical business aspects. Scanning the environment and being competitive are good and necessary, but they must be done in a realistic and big-picture fashion.
- Overriding Desire for Success: Entrepreneurs take a lot of pride in being successful. This may cause them to display their success through things like plush offices or fancy cars. This can be dangerous if the individual or the appearance of success becomes more important than the business itself. A desire to succeed can be good, but the entrepreneur must remain humble.
- Unrealistic Optimism: Optimism is key for entrepreneurs, even through bleak times. However, when taken to an extreme, it can lead to a fantasy approach to business. For example, an entrepreneur may ignore important trends, facts, and reports because they tell themselves that everything will turn out fine even though that doesn’t align with what is in front of them. Being positive is important, but the entrepreneur needs to be grounded in reality and not ignore trends, facts, and reports.
These are just some ways that having a big ego can negatively impact entrepreneurs. Note that not all entrepreneurs fall prey to these scenarios, but nevertheless, all entrepreneurs should be aware of these potential pitfalls.
Intrapreneurial Specific Difficulties
The fears and barriers that entrepreneurs face are very applicable to intrapreneurs as well. However, there are some specific barriers that intrapreneurs will face that entrepreneurs will likely not face as much because the intrapreneur is working for someone else.
In general, the obstacles that intrapreneurs will encounter usually come from people and managers acting in a more “traditional” sense and not being comfortable with innovation. There is potential intrapreneurs will face difficulties within their company if leadership doesn’t support being innovative or intrapreneurial.
Those with an intrapreneurial mindset will want to find a place that values intrapreneurial ventures. Otherwise, they’ll experience some difficulties such as the following:
- Angry Coworkers: Intrapreneurs will be trying new things and making changes to the business environment that other employees don’t understand and may not like. People may say things like, “Slow down,” “That’s not how we do things around here,” or “It worked just fine the way it was.” Being an intrapreneur can feel like being a bull in a china shop.
- Lack of Support: Intrapreneurs can start to lose motivation to keep going if they and their ideas keep getting shot down or they don’t feel the necessary support from leadership to move their ideas forward. Intrapreneurs must feel valued for their ideas.
Entrepreneurship is often portrayed in a positive light, but it’s crucial to have a realistic understanding of its challenges. By recognizing common fears and barriers faced by entrepreneurs and intrapreneurs, they can work to overcome these challenges.
Key Takeaways
- Entrepreneurs face common fears, including failure, stress, risk, and ego.
- The “Trough of Sorrow” is a difficult period where entrepreneurs may feel burnt out and uncertain.
- Learning from failure requires balancing reflection on the failure with planning for the future.
- Entrepreneurs face various risks, such as financial, career, family/social, and psychological risks.
- Entrepreneurs experience higher stress levels than other workers due to factors like loneliness and business immersion.
- Entrepreneurs must balance their ego, avoiding pitfalls like an overbearing need for control, unrealistic optimism, and a focus on superficial success.
- Intrapreneurs face unique challenges within organizations, such as lack of support and resistance from coworkers.
The Trough of Sorrow is a feeling that entrepreneurs get where they feel burnt out, depressed feeling.
After a failure or loss, spending time looking back on the failure itself, grieving.
After a loss or failure, looking forward instead of focusing on things related to the failure.