How to Raise a Business Owner

By BARBARA TAYLOR

On Labor Day weekend my husband and I – the only small-business owners at a gathering of family and friends – were asked repeatedly how our business was doing. We were honest and said that it’s a very difficult environment for small business right now and that we feel fortunate to be hanging in there.


One nameless relation stopped clearing the dishes and piped up with the following statement: “If it doesn’t work out, you two can just go out and get jobs like the rest of us.”

There’s one in every crowd, isn’t there?

Yet another relative at a different holiday gathering said more or less the opposite: “At least you guys are out there trying to do something, rather than expecting someone to hand you a paycheck every two weeks.”

As a small-business owner, I’ve become accustomed to encountering both points of view. But it made me wonder how I instill the latter mindset – that you can make your own way in the world and don’t necessarily need to rely on someone else to provide you with an income – in my own children.

People love to argue about whether entrepreneurs are born or made, with many feeling that success in small business is somehow genetic. My husband has five siblings. An entrepreneur raised all six kids, yet only one became a small-business owner. I had no exposure to business growing up, yet here I am on my second venture. Rather than calling it genetics, I think it has more to do with children of entrepreneurs being the beneficiaries of an early education in business.

My 6-year-old is starting to figure out how the world works, and where we all fit in. He knows that his mom and dad run a business together, but I can see that it doesn’t always add up in his mind. Other parents have jobs. They work for somebody, or sometimes one parent works and the other stays home. He doesn’t meet many kids with parents like his. I guess we’re not the norm, which is something children pick up on at a young age.

As my children get older and begin their elementary school education, I keep an eye out for where business literacy emerges as part of the curriculum. So far, I don’t see much, although the basics of personal finance – bills and coinage, and how to count them – begins in kindergarten.

In fact, I’m not sure that we have a real grooming system for raising entrepreneurs and business owners in this country. The ethos is built into our culture – you can do anything with hard work – but it seems business education doesn’t begin in earnest until you choose a major in college. The “land of opportunity” and the “American dream” are synonymous with the entrepreneurial spirit. Yet if you were to stop people on the street and ask them how to start a business, I’ll bet the common response would be something like a) get a friend or relative to loan you some money, and b) try it, see what happens and hope for the best. It’s no wonder that entrepreneurs are perceived as risk-takers and failure rates for start-ups are so dismal.

Certainly a business degree is no guarantee of success. Which brings me back to early education at home. Here are a few qualities that I try to instill in my kids – for success in both life and entrepreneurship:

1. Ability to solve problems creatively.

2. Desire to learn and expand knowledge.

3. Ability to analyze a situation and make good decisions.

4. Self-motivation and belief in your own abilities.

5. Persistence, tenacity and resilience.

I’m always listening for potential opportunities to illustrate general business principles and create awareness of the business behind everyday things. For example, we drove by a construction site the other day. My youngest pointed out the window at an excavator and said, “I want to drive one of those some day.”

“Maybe some day you’ll own a business that helps people build things,” I replied. There was silence in the back seat. I figured what I said either made no sense whatsoever, or perhaps got him thinking about the world in a different way – if only for a moment.

Barbara Taylor is co-owner of a business brokerage, Synergy Business Services, in Bentonville, Ark.

Making Cities Entrepreneurial

Small Business Trends


September 20, 2010 By Scott Shane


There’s an industry of consultants offering advice to city, county and state policy makers on how to generate more entrepreneurs in their locales. Much of this advice is based on research that looks at what’s different about places that have more entrepreneurs from places that have fewer of them.

Many governments are following this advice without looking deeply enough at the research behind it. A brief glance shows four problems with using much of the analysis to develop public policy.

1. The evidence doesn’t always support the theory. Consider, for example, the argument made by economic development guru and consultant, Richard Florida, that increasing demographic diversity will increase entrepreneurial activity. Florida’s own research fails to show that places with more diversity have more entrepreneurs. His diversity index, which measures the share of the population that is gay, and his melting pot index, which captures the foreign born share of the population, have no statistical relationship to the rate of new business formation when other factors are also considered. The theory that increased demographic diversity will lead to more entrepreneurship isn’t supported by the evidence.

2. The causality is often backwards. Again consider Professor Florida’s research. It shows that places with more amenities tend to have more entrepreneurship. But the direction of causality of this relationship is unclear. Does having more amenities lead to more entrepreneurship or does more entrepreneurship result in the creation of more amenities? Because the former interpretation suggests a policy action – build amenities – while the latter does not, policy makers have assumed that more amenities leads to more entrepreneurship and have built amenities in the hope of attracting more entrepreneurs.

3. The studies often focus on only a few types of new businesses. Consider, for example, a new report by Edward Glaeser and William Kerr with the catchy title “What Makes a City Entrepreneurial?”

In their study, the authors defined “entrepreneurship” as the formation of new independent manufacturing establishments with employees. While that definition sounds reasonable, these businesses account for only one percent of all new companies.

Drawing conclusions from a one percent sample wouldn’t be a problem if the places that have a lot of new manufacturing employers also have lots of other types of new businesses. But they don’t. Glaeser and Kerr write, “Our entry metric has a 0.36 … correlation with the 2000 self-employment rates at the city … level.” That is, cities with the highest self-employment rates aren’t the ones that have lots of new independent manufacturing establishments with employees.

Recent research conducted by Larry Plummer for the Office of Advocacy of the U.S. Small Business Administration provides further evidence for why drawing conclusions about entrepreneurship on the basis of new business formation in manufacturing is problematic. Looking at the rate of new independent establishment formation from 1990 to 2006, Plummer found that the rate in manufacturing correlated only 0.33 with the overall rate. Moreover, it correlated only 0.16 with the rate in retail trade, 0.13 with the rate in high tech, and 0.06 with the rate in business services.

Moreover, the top places for new manufacturing business creation are not the same as the superstars for new firm formation in other economic sectors. Of the 20 counties with the highest rate of creation of manufacturing establishments from 1990 to 2006, only one, San Juan, Colorado, was in the top 20 counties for overall rate of new business formation.

4. The factors that stimulate one type of entrepreneurship often dampen others. Consider, for instance, the factors that enhance entrepreneurship in manufacturing and high tech. Plummer’s study showed that places with more college graduates had fewer manufacturing start-ups, but more new high tech businesses. Many would argue that we should increase the number of college graduates in a region, even if that comes at the expense of number of manufacturing businesses started, especially if the rise in the number of degree holders leads to a boost in high tech start-ups.

In short, academic research doesn’t provide strong evidence of specific policies that increase rates of entrepreneurship in a locale. Maybe government officials should take the money that they are using to implement the academics’ recommendations and give it to the entrepreneurs they are trying so hard to create.

Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.