Merchant Advance Blog

Blog Article: Serial Entrepreneurs: If At First?

 

Earlier this month at the blog, we reviewed  Megan McArdle’s The Up Side of Down – a book that takes a unique perspective on the social, psychological and economic lessons that we can learn from failure. McArdle’s book, which we judged helpful to the small business owner overall, thrives on its use of examples culled from big business to the machinery of the medical world. It does not necessarily speak specifically to the big question that a small business owner or entrepreneur may have if their business fails: “should I invest in another try?” As it turns out, there may be significant evidence that you should. In a study published in March of this year, Francine Lafontaine and Kathryn Shaw investigate the behaviours and business models of serial entrepreneurs: namely, those who elect to make repeated attempts to open small businesses. Lafontaine and Shaw find that the number of serial entrepreneurs overall is fairly small:

 

“Of the almost 2.3 million retail businesses of small owners of new businesses in our data, only 25 percent are started by owners who have started at least one business before, and only 8 percent are started by an owner who is still operating at least one other business started earlier.”
 

The vast majority of small businesses surveyed in the Lafontaine-Shaw study were started by people with little to no prior experience. However, the study points out that serial entrepreneurs, those with past experience, are seven percent less likely to exit a new business. Not only that, but the more times a given serial entrepreneur has tried, and perhaps failed, to launch a new business, the better the odds that their next venture will perform better and stay in business longer. The study even concludes that having businesses start, fail and start again in sequence offers more benefit to future success for serial entrepreneurs than trying to open multiple stores at once and hoping to keep them all running successfully.

Previous studies have called serial entrepreneurs “overoptimistic” – they commit one of the major errors that McArdle identifies in her book, because they are too driven by emotional factors and are thus not willing or able to see the lessons behind the failure of their businesses. Lafontaine and Shaw may have new information that proves McArdle’s advice all the more insightful: statistically, it appears getting up and dusting yourself off really can be a process of learning and improvement that will have measurable effects on the longevity and success of your next business venture. Here are some other intriguing conclusions from Lafontaine and Shaw’s study that may influence your thoughts about becoming a serial entrepreneur:

  • Serial entrepreneurs are less likely to see improvement in urban areas: this may be due to increased competition.
  • Franchise businesses benefit less from serialization than independent retail businesses.
  • Even if the next business a given entrepreneur opens is of a different type (say, a laundromat, then a food store), the benefit to future success remains high.
  • Restauranteurs benefit the most from previous restaurant experience, and the least from other kinds of previous experience. These entrepreneurs should stick to what they know!

Through their research, Lafontaine and Shaw have shown that serial entrepreneurs in any line of work are learning valuable general business skills that are meaningfully transferable to the success of their future efforts. Along with the insights provided by McArdle’s excellent book, it seems that there are many reasons for the business owner who may feel like trouble is knocking at the door to keep an optimistic outlook. Failure happens – but it is what we do next that really matters.

Vancouver Office | (604) 757-4602

1500 West Georgia Street, 20th Floor Vancouver, BC, V6G 2Z6 Canada

Toronto Office | (877) 370-8850

10350 Yonge St, Suite 101 Richmond Hill, ON, L4C 5K9 Canada

© 2017 Merchant Advance Capital Ltd. All Rights Reserved. Privacy Policy