What Makes a Successful Entrepreneur?

When I started my small flower selling business in college, I had no notion of the unique way I approached problem-solving. I just saw an opportunity and took it. I began by working for a flower seller and quickly realized that I could make more money if I invested my own capital, found my own wholesaler and set up my own selling venue.

So what was unique about my way of thinking that turned me into a young entrepreneur? And can you tell if a young adult will grow up to be a successful entrepreneur?

A study conducted by professor Saras Sarasvathy from the University of Virginia's Darden School of Business found that successful entrepreneurs all share a common thinking process termed effectual reasoning. When faced with starting a small business, such thinkers set goals based on their available means at a given time. Thus, for example, I sold a gold necklace and took a loan from a friend, who I paid back within a month, forging all my initial earnings. I could have waited until my birthday and asked for a cash gift, but I didn't want to waste time.

Furthermore, effectual reasoners will plan ahead based on the choices open to them at the moment, not those which might open at a later date. I, for example, started by buying flowers from my former boss. I knew the flowers were more expensive than if I had bought them from a wholesaler, but I didn't have the budget to make large purchases yet. Later, after driving to local nurseries on weekends, I found a flower grower who sold me limited amounts of flowers at slightly higher than wholesale prices.

Successful entrepreneurs, Sarasvathy's study finds, all share an additional quality: A sharp ability to improvise based on changing data. I, for example, paid close attention to which flowers sold best depending on the season, then ordered more of them. In times of shortages, however, I would look for similarly shaped and colored flowers, while increasing the price of the sought-after bouquets. In this way, I turned a negative fact to advantage by increasing my profit margin.

A young adult who may grow up to be a successful entrepreneur will approach problem solving in the same way, making extemporaneous decisions based on changing facts rather than sticking to a rigid plan.

To sum up her conclusions, Professor Sarasvathy compared entrepreneurs to Chefs appearing on the TV. program, Iron Chefs. Like the chefs who cook up a meal from whatever eclectic assortment of ingredients they receive, so successful entrepreneurs build a business from the wide array of changing means and choices shifting all around them.

Reference:

Young Money: Enterpreneurs Excel in "Effectual Reasoning" According to New Study.

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