Late-night commercials for real estate investing and other business opportunities make it seem so easy: Invest now, work hard, and you can pursue the freedom and wealth you’ve always wanted. While most small business owners know nothing is really that simple, there is also one glaring omission from the traditional call to start up your own revenue stream. Even the most appealing “side hustles” sometimes aren’t started because of a bold risk to pursue something greater—they’re started out of necessity.
A recent report by the National Women’s Business Council leads with the truth some of us have been living personally. Necessity drives entrepreneurship, and it doesn’t solely come out of a want for more money. Women in particular have found themselves stepping out of the traditional employment infrastructure to start their own business, citing reasons other than cash flow as the driving force. Common motivators for becoming an entrepreneur include:
- Lack of paid leave to care for family or themselves
- No access to affordable or subsidized child care
- Rigid work arrangements
The report acknowledged that money isn’t everything – and isn’t always the reason we quit jobs to start new career paths.
While these obstacles aren’t unique to women (men are taking on more and more caregiving roles), many of the most popular MLM’s (multi-level marketing) and turnkey businesses out there are clearly marketed to women who find themselves in the hard spot of choosing between a career and caregiving. Growing investment opportunities often speak the language of the caregiver, incorporating the promise of fun and friendship into the traditional messages of unlimited income potential.
When Opportunity vs. Necessity Matters
The NWBC report did emphasize that many small businesses happen because they must. For every story of entrepreneurial success that boasts of someone with a bright idea, taking a risk, and working to see a personal mission fulfilled, there is a business story that simply came out of having “no better choices for work.”
And we’ve seen this before. In the Great Depression, a lack of jobs drove both men and women into a bleaker version of what we see today. There were no Tony Robbins conferences to pump up young and ambitious go-getters with a dream and some shoestring startup funds. You just had men and women, trying to feed families, and willing to work all hours of the day, doing anything to survive. Was it self-employment? Yes. But it’s typically not what we strive for. There were similar trends during the Recession, and the cycle will most likely occur again and again.
Push Vs. Pull and Performance
When the term “necessity entrepreneur” was coined in 2002, it was with the knowledge that there are two ways to get someone to form a business. You can pull them into it with the lure of riches, independence, fame, and a legacy. You can also push them, by threatening mounting debt, unpaid electric bills, and fear of never getting ahead.
Push can launch just as many businesses as pull, but is there a difference in how these entrepreneurs perform? Definitely. In fact, studies have confirmed pull businesses make more money overall than push businesses. Sales were greater and personal wealth was more defined. It may be the proof we always suspected that “opportunity” businesses are natural petri dishes for ideas, prosperity, and profit.
There is also a connection between how prepared pull entrepreneurs are for the start-up life and their success. Most businesses founded on a dream and some seed money come from owners with higher education, more business experience, and greater network of colleague connections. Compare this to the mom who quit her day job because her work won’t accommodate a caregiving schedule; she will likely to do what’s needed, but without the preparation and support system of a traditional entrepreneur.
Can Necessity Businesses Succeed?
While “success” is certainly in the eye of the beholder, it would seem that opportunity businesses are poised to do best. This doesn’t mean, however, that those pushed into being the CEO of their own company are doomed to fail.
A quick look at many of the LinkedIn profiles of “startup” founders show what many of us suspect. They are connected, often friends with other entrepreneurs, and working on two (or more) startup projects at any one time. Their interests are varied, and their working habits at full-throttle. If they aren’t starting another company, they are sitting on the board of a few. It’s likely that by simply taking part in such a high number of new businesses, they can win at the numbers game.
Compare that to a push entrepreneur, who is likely balancing the needs of a small business with a family. The focus will usually be on one company, started with fewer funds, and growing at a much slower rate. Can they make it? It’s an uphill climb, but definitely possible.
Many startup founders with limited cash, such as Kaare Long of Cue Creative, turn to providing services with low overhead costs vs. offering tangible widgets for sale. The Canadian single mother of two went from living off government assistance to starting a thriving business – a “push” situation in its most classical form. Her marketing and public relations firm generates enough income to support more than just herself. She employs a handful of creatives for her team, including a videographer and graphic designer.
A Helpful Tip for Push Entrepreneurs
While women make up the bulk of the category of “necessity entrepreneurs”, the key to helping them succeed is universal. Moms, dads, childless professionals, and retirees will continue to be searching for the perfect blend of pull opportunities that meet the often-precarious needs of the situations they find themselves in. Where is the best place to start?
Organizations such as the SBA are dedicating more of their resources to helping those at a disadvantage. Their loans and funding opportunities are often specifically targeted to necessity businesses. They also provide training for even the most novice entrepreneur. This combination of funds and education might be enough to cover the gaps often experienced by those who find themselves thrust into starting a small business – and often as a last resort. They may struggle more, but their goals are possible.
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