How to escape the catch-22 of entrepreneur coaching?
Entrepreneurs need entrepreneur coaching services, but they don’t ask for them. In addition to that, their accountants ask the wrong questions. A catch-22, but can you escape from it?
Table of contents
- Survival of entrepreneurs
- Entrepreneurial problems
- Faster, better entrepreneurs
- Entrepreneur coaching affects growth
- The expectation paradox of entrepreneur coaching
According to Eurostat and the U.S. Bureau of Labor Statistics will approximately one in two entrepreneurs stop their business within 5 years. However, the lucky half that survives the first 5 years doesn’t always write black numbers either. The accountants or financial advisers of entrepreneurs can confirm this. In the field of entrepreneurship, entrepreneurs struggle mainly (but not exclusively), for example, with Marketing, Market Orientation, and Financial Management. Certainly, this lack can be influenced positively by entrepreneur coaching.
Entrepreneurship coaching immediately gives the entrepreneur a sense of improvement. Thus reinforcing the knowledge and skills gap, and ultimately leading to the company’s growth.
Just as entrepreneurship can be taught, entrepreneur coaching can be learned. Likewise, accountants and other financial professionals, who often – incorrectly – think they have not been cut out for coaching, can learn this.
Survival of entrepreneurs
In Europe and the USA, about 50% will stop within five years. Of the 100 starting entrepreneurs, about 22% put the ax down within 2 years. Those are the hard numbers. The graph below shows the percentages for the countries in Europe.
_.png&oldid=516219){kind=link}
The chances of survival for all European countries are falling drastically. In the early years to even less than 40% for the United Kingdom. It has been balancing around 50% for years, so a recurring trend.
But are things going smoothly with the rest? If you ask entrepreneurs, they all say that things are going well and that growth was planned. However, accountants and financial specialists know better. There are problems behind every business – growing or waning. If there are not business problems, there are personal life or private problems. Although they survived that critical half, they still struggle to keep alive.
Entrepreneurial problems
If it goes wrong, where does it go wrong? The top five key entrepreneurial qualities that entrepreneurs lack most of the time.
- Marketing as a skill
- Market orientation
- Financial management
- Independence / decisiveness
- Planning and organizing
Without these qualities, different scenarios are possible. An enterprising business owner turns a lousy plan into a flourishing business. But the opposite is not the same: a small business owner with a lack of entrepreneurial qualities does not shift a good strategy into a thriving business.
We tend to think that this is part of doing business. Someone who is not well prepared can expect an early closure of the company. Rightly so or not. In any case, research shows that working systematically to set up and run a company helps to focus and work more efficiently. Proper planning considerably increases the chances of success.
Planning and organizing systems are different from having a business plan. The unruly practice of business owners shows that only 40% of beginning entrepreneurs have a business plan. Even fewer actually do something with their plan of action. The business plan is an instrument and not a document.
Accurate self-knowledge
Research with the entrepreneurial mindset tool E-Scan, which measures the most essential entrepreneurial qualities, shows that only 28% have accurate self-knowledge. The vast majority have a less good self-image, but make numerous decisions based on this, with all the negative consequences that follow.
Every entrepreneur has an image of himself. But how accurate is that self-image? Does that image closely match reality? If you ask the entrepreneurs themselves, they say they score high. But you and I know that entrepreneurs tend to overestimate themselves.
Self-overestimation
As entrepreneurs become more accustomed to making decisions in uncertain situations, their risk of overestimation increases (Cooper et al., 1988). A group of nearly 3,000 entrepreneurs was asked in that study to estimate their chance of survival. From this group, 81% indicated that they expected the chance to be at least 70%. A third of this group even said they were 100% sure to become a successful entrepreneur. The statistics give a different reality. Such over-optimism can lead to making the wrong choices.
Of course, an experienced entrepreneur or serial entrepreneur is convinced of his product or service. He believes in the success of his (business) plans, regardless of whether they are on paper or not. Otherwise, he better not start. Yet there are plenty of entrepreneurs who try to radiate self-confidence, but deep down doubt the feasibility of their future vision.
If you ask entrepreneurs with staff to estimate how enterprising they find themselves, on a scale of 0 to 100, then they score themselves an average of 68. We measured it accurately, with an entrepreneur scan, and the average stalled at 57.2 (the overall average Entrepreneurial Index is 49.7).
Dr. Martijn Driessen
It’s about whether the entrepreneur is entrepreneurial enough for the industry in which he or she does business. Every entrepreneur has strong and weak entrepreneurial qualities. And these are reflected in the behavior that the entrepreneur shows and ultimately in the business results. So how well does the business strategy fit the entrepreneur’s entrepreneur profile?
Entrepreneur coaching: faster, better entrepreneurs
But can small business coaching change anything about the lack of certain qualities in an entrepreneur? The coaching program of the Chamber of Commerce does indicate this. In this coaching program, the competencies of all participants have been greatly improved. With a pre and post measurement, the qualities show the highest significant increase. The main results in the table below clearly show this. For example, networking, as an essential skill of the entrepreneurial personality, has increased by almost 100%.
| Entrepreneurial competencies | Coaching result |
|---|---|
| Networking | +96% |
| Confidence in own entrepreneurial mindset | +76% |
| Marketing and sales | +68% |
| Finance and Cash flow management | +48% |
| Growth strategy and strategic thinking | +37% |
Certification
Participants of the business coaching program were allowed to select their coach themselves, an essential precondition for business success. Besides the coaching services they received in more than one coaching session, they were also asked to follow training courses and attend network meetings. The coaches were self-employed running a coaching practice. Furthermore, they all received an Entrepreneur Coaching Certificate after a five-module training.
The main aim of this program was to increase the survival rates of entrepreneurs. So, not more business owners, but better entrepreneurs.
The pre and post-measurement of entrepreneurship were measured with a scientifically validated E-Scan. This analysis demonstrated the growth – or the absence thereof of the participant’s entrepreneurial mindset. Three interesting success points emerged.
Faster start
Just a little over half (51%) of all aspiring entrepreneurs who participated in the coaching program actually began their entrepreneurial venture. Also, 35% of all participating start-up entrepreneurs started their businesses within 9 months. For comparison: In the Netherlands, an average of 20% start their business within 12 months.
Greater profit
Profit growth was achieved in half of the companies that already had their own business at the start of the coaching program. Besides, not every company had a profit increase as the primary goal of their business coaching.
Survival
Follow-up research has also been carried out, and the percentage that still exists after 5 years for this group of participants with one year of entrepreneurial coaching is 89%. Average survival rates in the EU after 5 years are 49%. So only 11% of this group quit within 5 years.
Entrepreneur coaching services affects growth
Entrepreneur coaching immediately gives the CEO more confidence in his own entrepreneurship, and this affects other important entrepreneurial qualities. In turn, this has an indirect effect on business growth (Crompton, 2012). The positive change is directly noticeable in the entrepreneur’s feelings, among other effects of entrepreneurship development. They experience coaching as a sounding board that stands next to them, provides structure, and helps to keep an overview.
The hard (financial) effects are, of course, only measurable after the end of the coaching. After all, it takes longer for results to become measurable. But the exciting thing is that the impact on the entrepreneur is there way earlier. The entrepreneur quickly reports feelings of improved results because of the listening ear and the independent sounding board that an entrepreneur coach offers.
Coaching may seem a little soft, and the accountant who is considering offering coaching to his ideal clients has an attitude of first seeing, then believing. However, in entrepreneur coaching, this goes the other way around: entrepreneurs first have to believe before they can see it.
The expectation paradox of entrepreneur coaching services
Entrepreneurs need small business coaching, but they don’t ask for it. So, how paradoxical as that may sound, accountants, on the other hand, ask the wrong questions, which blocks them from ever getting behind the coach question. Besides, the entrepreneur has difficulty articulating his coaching question clearly. That’s a catch-22, a paradoxical situation that looks inescapable.
On the one hand, entrepreneurs are happy with their accountants, while on the other, they expect more from their CPA. When asked what they expect from their “remote CFO,” they answer:
- Someone that – really – understands my business.
- A buddy with whom I can spar; who thinks along with my leadership.
- Somebody who is proactive and warns me about new developments.
This blog shows that it pays off to pay attention to the personal development of the entrepreneur. Even more so, the accountant needs to influence the entrepreneurial spirit of his ideal clients positively. If he would rather not want (to learn) that, make sure there is an external business coach available.
Keep reading: Read more about the entrepreneurial personality.