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What Makes a Successful Entrepreneur?

A paper from Ernst and Young dug into the qualities that make a successful entrepreneur across all different types of companies.
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"While start-ups often attract considerable public attention and are critical to building the entrepreneurial ecosystem, it is high-impact entrepreneurs who are the power behind our economy." This is, at least, the conclusion of Ernst and Young's annual paper called "The Vital Entrepreneur." 

For the paperErnst and Young combed through the company's 250 Entrepreneur of the Year finalists to identify common traits. The paper broke down the group into six company categories--private, public, family-owned, women-owned, venture capital backed and private equity backed companies. The paper then identified the strengths unique to companies in each category. 

Here is a breakdown of the paper’s findings for each category:

Private companies

Of the EY Entrepreneur of the Year finalists, 88 percent were private companies. This group experienced 33 percent revenue growth and 26 percent job growth on average over the past fiscal year. According to the paper, the factors most important this success were independence, flexibility and freedom. The paper continued that as private companies are not required to disclose financial information to the public, these companies had greater freedom to focus on long-term goals with less pressure to deliver short-term performance. 

Venture-backed companies 

The VC-backed finalists saw 70 percent revenue and 47 percent job growth over the 2012 fiscal year--probably part of the reason the paper identified the VC model as “one of the best options to fund the early and scale-up stages for innovators that are disrupting incumbents and creating new market niches.”  The Ernst and Young paper identified that beyond the funding, these companies receive from VCs, the relationships with VCs offer companies expertise, connections and experience. 

Private equity backed companies

Though the revenue and job growth percentage in this category was lower than the VC-backed business, the paper stressed that these companies are rewarded by the partnerships with private equity companies--such as geographic expansion, access to broader networks, and standardization to name a few. Additionally, of the entire pool of finalists the PE backed firms as a group had a higher median revenue than 50 percent of all the finalists. 

Family-owned companies

This category accounted for 50 percent of tall the finalist in the EY Entrepreneur of the Year competition. Why? According to the paper, resilience. Of this group, most of the companies were private, so they were free of the short-term pressures of the public markets and able to adopt a longer-term view, which affects their decisions as well. Another important thing to note is that 61 percent of these companies reported funding their companies through bank loans, 58 percent through re-invested earnings while 12 percent reported using private equity and two percent reported using venture capital. The emphasis on bank loans required most of the  companies in this category to manage growth relative to cash flow. 

Women-owned companies

This category was a bit smaller than others--only 11 percent of the finalists in the paper were female-owned companies. These companies, however, had a median revenue growth rate of 20 percent per year and a median job growth of 18 percent per year over the last two years. According to the paper, these companies were younger than others in the pool of finalists (median age of 9 years) and tended to be smaller--making them more agile and able to respond more quickly to changes in the market. 

Public companies

“The Vital Entrepreneur” highlighted operational rigor as the greatest strength of the group. It added that the commitment to continual advancement reflective of market changes and goals by the public companies is what led to continual growth by these companies. Additionally, public companies are able to attract and hold on to top talent by being able to offer higher compensation and better perks (think stock options and equity) to employees that other types of companies cannot.




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