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Sometimes, efforts to spur entrepreneurship fail to bring about change. Here’s why

“There are countless hard-working organizations and individuals striving to transform Miami’s low-wage, tourism-dependent commerce into a more dynamic and diverse economy that produces higher paying jobs,” says Jacqueline Bueno Sousa. “Yet, our efforts sometimes fail to bring about change.”
“There are countless hard-working organizations and individuals striving to transform Miami’s low-wage, tourism-dependent commerce into a more dynamic and diverse economy that produces higher paying jobs,” says Jacqueline Bueno Sousa. “Yet, our efforts sometimes fail to bring about change.” MCT file

Let’s speak in generalities. Because when it comes to understanding our economy and efforts to create and grow local businesses, it is important to keep in mind those things that are generally true – as opposed to creating policy by focusing on a few anecdotes.

Five years ago, I helped launch the Florida SBDC at FIU, the small business development center within the FIU College of Business, which works with about 1,000 small-business owners and entrepreneurs each year with the goal of helping them grow and succeed, stepping down last month as the founding regional director. I would like to share the unique perspective this experience has provided.

There are countless hard-working organizations and individuals striving to transform Miami’s low-wage, tourism-dependent commerce into a more dynamic and diverse economy that produces higher paying jobs. Yet, our efforts sometimes fail to bring about change. Why? Here are some thoughts and observations:

Idealizing entrepreneurship has created false expectations: A sure sign that a business is in trouble even before it starts is when a would-be entrepreneur says he or she wants to start a business in order to have more work-life balance. The reality of life as an entrepreneur could not be further from that image. Unless you are talking about a lifestyle endeavor, which is not truly a business enterprise but a form of self-employment, starting and growing a business requires grueling work hours and unmitigated sacrifice. For entrepreneurs, the costs too often include divorce, bankruptcy, home foreclosures, and alienation from loved ones. While we should not idealize entrepreneurship, we definitely should respect entrepreneurs for the sacrifices they often make. To improve entrepreneurs’ long odds for success, it’s important that they have the necessary knowledge and skills – as well as realistic expectations.

Innovation does not equal entrepreneurship: Recently, it seems that the words innovation and entrepreneurship have become synonymous. Many programs are promoting innovation as a method for achieving business growth and job creation. However, innovation is not entrepreneurship, which is evident from the countless patents that never see the light of commerce. Innovation certainly can be of great benefit to a business — in so much as it provides a competitive advantage. If it does not add value to the business nor the customer, too often the effort of creating innovation is little more than an academic endeavor. Instead of focusing on innovation, entrepreneurs should focus on resolving consumer problems and improving products and services, a process that may — or may not — lead to innovation.

The start-up bandwagon has pluses and minuses: The enthusiasm in Miami surrounding startups has been energizing. If nothing else, Miami now is widely associated with something other than tourism. Many national publications have noted Miami’s ranking as a leader in business starts. Until recently, it was rare to see the words “Miami” and “business” in the same sentence in the national press. The concern is that the push for startups also has prompted many individuals to start a business who really should not be doing so – at least not yet. These include people with little experience in the industry in which they plan to launch a company, a dearth of management experience, little chance of accessing capital and with undeveloped financial skills. No wonder that Miami also ranks near the bottom in scaling businesses. We want to help individuals fulfill their dreams of starting a business; but we also want to improve their chances for success. Would-be entrepreneurs carefully need to assess whether they have the capability to operate a business. Starting a business is easy. Growing a business is difficult.

The “We need VC capital” myth: Read any article about Miami’s inability to grow its startup businesses and you will see the inevitable comment that a lack of venture capital is to blame. Definitely, more capital is always welcome, and access to capital is crucial for a growing business. However, a lack of venture capital does not prevent businesses from scaling. FIU business professor Dileep Rao, who has studied and analyzed unicorn entrepreneurs from the last 60 years, found that the overwhelming majority — 76 percent — scaled without any venture capital at all. Another 18 percent received venture capital only after the business already had been growing rapidly.

We mistake public service for economic development: We often confuse economic-development programs with business-oriented public service programs. The first engage in activities primarily to produce jobs and increase economic output. The latter have the noble and worthwhile task of assisting businesses that need and want help, regardless of the likelihood that the business will help grow the local economy. We absolutely need such public-service programs – we just should not expect the same economic impact from them. In Miami-Dade, establishment without employees outnumber those with employees five to one. Furthermore, between 2005 and 2015, the number of non-employer establishments in the Miami area rose 55.9 percent, almost three times the national rate. Not all business ventures create jobs. In fact, few do.

Of course, there are exceptions for every point made above. No doubt, there are many examples of the entrepreneur who started all alone, with scarce business knowledge, and little more than an idea, five dollars and the sheer will to succeed. We all love those stories. We read them so much we start believing they represent the norm. Unfortunately, when it comes to launching and growing businesses, such anecdotes are the exception and not the general rule.

With entrepreneurship, anything is possible — but not anything is probable.

Jacqueline Bueno Sousa is Director of Operations, Florida International University Executive and Professional Education. For five years, she was regional director of the Small Business Development Center at FIU.

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