By Joe Johnson, PhD
Entrepreneur. Investor. Startup Expert.
There are many emotions connected with starting a business for the first time. I remember feeling excitement, anxiety and liberation when imparting on my first entrepreneurial venture. But fear is also a very common experience and it can be so stifling that it prevents a new venture from getting off the ground. Read on to find out if you are experiencing the fears most common to new entrepreneurs. Then learn why you shouldn’t let them stop you.
Entrepreneurship and the Fear of Failure
Fear is an inherent part of entrepreneurship. It is a phenomenon that is embedded into everyone’s subconscious self and has a great impact on decision making. Within the business world, the most common fear is the fear of failure (Bosma et al. 2008). This concept includes the instinctive assessment of threat in apprising situations where there is a chance of failure (Conroy 2001). This fear ultimately stops many promising entrepreneurs from launching startups.
A study conducted by the Global Entrepreneurship Monitor showed that nearly half of the UK population identify fear as a barrier to starting a business. It is clear that while many people have great business ideas and potential, there’s a psychological wall that is keeping some budding businesspeople from taking the plunge.
What about failing is so threatening to people?
Most Prominent Types of Fears
While the fear of failure is the most common for entrepreneurs, fear can be broken down and analyzed further. In the report of the FACE project Delphi Results, Dr. Jan Brinckmann broke down the fear into categories based on her study. Do any of these ring a bell for you?
Financial Related Fears
Financial loss is a primary fear in entrepreneurship because of the wider implications involved. Losing money can mean making material sacrifices, but can also impact the home and any other assets one owns.
Bankruptcy is feared by any entrepreneur because it not only has the ability to collapse the business, but affects credit and future opportunities. According to a survey by Gallop Business Journal, a massive 87% of Americans prefer the security of a steady income, something that is not guaranteed when working for oneself.
Career Related Fears
Building a career takes time, dedication and sacrifice. Fear of losing one’s long term efforts by attempting to start a business only to fail, is another category of fear common amongst entrepreneurs. It can be demoralising or even impossible to return to a previous job should the new venture not work out. Nobody wants their professional achievements and academic successes to be in vain.
Competence Related Fears
Incompetence is a third common fear. It’s important to have the right resources, information, knowledge and abilities to be able to start up and keep afloat a small business. A lack of any one of these would surely impact the success of the business negatively.
According to a survey, 49% of Americans feel they have a good business idea but don’t know where to begin. During the startup process, many entrepreneurs may feel isolated from the industry, with very few contacts or connections to turn to. Fear of this incompetence stops some entrepreneurs in their tracks. These are thoughts like “I don’t know what I am doing” or “I am not entrepreneur material”.
Loss of Freedom Related Fears
Starting a business takes time, money and energy. A person who is considering this venture often becomes fearful that financial freedoms and social engagements will suffer. For any social butterfly, this threat can be enough to distance the thought of becoming an entrepreneur in the first place. When surveyed, 47% of Americans felt that work-life balance would be a concern when beginning a business.
Social Perception or Embarrassment Related Fears
‘Social perception fear’ can involve a preoccupation with what others think of the business itself. It can entertain an anxiety that the business idea might be perceived as crazy, out of touch or too far afield. Plus, if it fails or struggle, the fear of embarrassment can be overwhelming.
Friends and family may fuel this by casting doubt on the venture, or even mocking it. Another layer of this is the fear that the entrepreneur will be seen as a failure if the venture does fail. This fear is compounded if friends and family invest in the business.
These are the most common fears face by entrepreneurs and as you can see, they are all variations of different types of failures such as being ill equipped, losing things you care about, and being seen as a failure. Agreeably, these are undesirable outcomes that anyone would want to avoid.
I can personally relate to all these fears. My first major entrepreneurial failure came when I was 21 years old. I have experienced two other major startup failures in my entrepreneurial career. However, the key is to overcome these fears, even if they are real fears.
If you do, it could also result in the exact opposite of these fears, which could mean more freedom, more success, more competence, and taking your career to a level that you never may have reached otherwise. How do you get a hold on fears in order to overcome them?
Factors that increase and reduce entrepreneurial fears
Factors that Increase Fears
The study by FACE (Entrepreneurship Failure Aversion Change in Europe) has shown that there are some significant factors that lead to an increase in the aforementioned fears. These are good to know in order to help you identify if you are at a higher risk for fear so you can identify and overcome it.
A person with family responsibilities such as dependents, is far more likely to be fearful of starting a new business. A lack of personal finances to invest into the startup is also cited as a top fear, as well as a lack of support or encouragement by immediate family members. The end result that is most terrifying to new business owners is that they could end up without any money, which in turn leaves their family to suffer. These fears, while understandable, do not have to be debilitating.
Factors that Reduce Fears
On the other hand, these factors contribute to the reduction of fears. The FACE study also showed that early wins can be the stepping stones to further success. This means creating simple short term goals which, once achieved, can be expanded into bigger ones.
Another top fear reduction factor is the importance of a supportive family. This assists in the development of confidence and a sense of safety. Lastly, it is important to understand that failure is in a startup venture is okay. It is not only okay, it is often instrumental to success.
For example, many of my biggest successes have come after major failures. It is through failures that I have been able to learn and improve my skills and ultimate results. This is one of the biggest lessons entrepreneurs have to accept. The entrepreneurial mindset should be a learning process, not a one-time shot.
In fact, Silicon Valley venture capitalists see failures as an asset, not a liability. It may be the only place on earth that sees prior failures as a good thing vs. a bad thing, but they have figured out that their capital gets a better ROI with entrepreneurs who have gone through the process of failure than people who haven’t. When I invest in a new startup, I want to see if the entrepreneurial leader has gone through major failures and what he or she has done to learn from them before I decide to invest in their new idea.
Understanding that failure is often part of the process and that it can lead to better things is important in reducing the fear of failing. Take it from Winston Churchill who said
“Success is the ability to go from failure to failure without losing your enthusiasm.”
Moving Past Your Fears
Fear is a normal and necessary emotion but it can also ruin a new business before it has even started. Or worse, once it has. But fear can be turned around and used to a person’s advantage. Small goals, family support, and an understanding of how failure can be a stepping stone, can slowly reduce fear and assist in developing a more stable and successful new startup.
In my next post, I will share strategies that you can apply based on my own experiences as well as research from others in the field. Learn how you can reclaim your goals from the fear holding them hostage.
Arnaut D, Ergun U. (2015) ANALYSIS OF FEAR AS BARRIER TO ENTREPRENEURSHIP. International Journal of Economics, Commerce and Management. United Kingdom
Bosma, N.S., Jones, K., Autio, E. and Levie, J. 2008.Global Entrepreneurship Monitor; 2007 Executive Report, Babson College, London Business School, and Global Entrepreneurship Research Association (GERA)
Brinckmann, J REPORT OF THE FACE PROJECT DELPHI RESULTS. FACE Entrepreneurship Failure Aversion Change in Europe.
Bharadwaj Bada, S and Ott, B. Many Potential Entrepreneurs Aren’t Taking the Plunge. (Online). Available at http://www.gallup.com/businessjournal/181592/potential-entrepreneurs-aren-taking-plunge.aspx (accessed 1 August 2016)
Conroy, D. E., Kaye, M. P.and Fifer, A. M. (2007). Cognitive links between fear of failure and perfectionism. Journal of Rational-Emotive & Cognitive-Behavior Therapy, 25, 237-253.