As you may have noticed, I’ve been absent from this column for some months — and while dealing with the disaster at Patisserie Valerie, I doubted my belief in entrepreneurship. But one’s faith in the human spirit is always boosted by meeting young people.
I recently spoke to a 23-year-old who is leaving his job in a big bank to found a start-up. I encouraged him in this because I believe in working for yourself, and because our country needs more bright entrepreneurs. However, I also warned him that he should harbour no illusions: it is likely to be arduous, and may well prove a less profitable career than if he were to stay as a banker.
While building your own business can offer freedom and independence, it comes with many obligations. Your first correspondence once you register a limited company is likely to be a hefty package from HM Revenue & Customs explaining all the regulations and costs of tax, VAT and so forth. These responsibilities only ever multiply.
If you take the bold step of employing anyone, you can expect a new raft of paperwork setting out yet more legal duties. Governments obsess about unemployment and job losses, yet they make life unnecessarily hard for those who take risks and create jobs. And there are myriad other laws that apply to the business owner: health and safety, data protection, planning, insurance, among others. All appear to serve a purpose individually, but for small businesses, this proliferation of bureaucracy is a huge drain on time and money. One wonders how many of the law-makers have actually had to deal with the red tape that they engender.
Sacrifices will be required if a business is to prosper. Owners will almost certainly defer personal income to invest in the company. They may have to mortgage their home or even offer up a personal guarantee to raise capital. They will probably put off holidays and personal spending. Keeping the show on the road takes stamina and fortitude: there will be dark days and sleepless nights — probably for years.
Creating anything from scratch involves luck and relentless optimism, and is vastly harder than working for a large organisation. The loneliness and fear of failure can be overwhelming.
Entrepreneurs often have dysfunctional personal lives because their work is all-consuming, and frequently they forge ahead with their venture despite advice to the contrary from loved ones. Stress and physical exhaustion take their toll. And finally, the vision may turn to dust, ending in bankruptcy — all that effort for nothing, all those hopes destroyed.
Yet there is no holding back men and women who see an opportunity and decide to seize it. If there is a chance to trade, they will take it with both hands in a way that central planners can never understand. In every society that places sensible limits on government and taxation, free enterprise flourishes and enriches the citizens.
The brilliance of open markets is that many thousands of individuals take the plunge and produce goods and services that customers want to buy. This apparent chaos delivers choice and competition, and steady improvements in our overall standard of living.
Despite the pitfalls and dangers of loss, innovators are irrepressible, inexorably evolving technology and adapting to changing tastes. Their efforts are what leads to progress and rising prosperity. All that is essential for this model to succeed are the rule of law, property rights and good infrastructure.
Why do so many voluntarily embrace the entrepreneurial life, with all its seeming drawbacks? I think there are several reasons, but it is not really about making lots of money. Instead, entrepreneurs relish the autonomy and the ability to control their own destiny.
They like the challenge of making a difference, of leaving a mark, of struggling and perhaps winning. They enjoy the creative stimulation of developing and running a business. They prefer to do without a boss and the stifling hierarchy and office politics emblematic of big firms and state entities.
They want the credit for having created something from nothing, and some like the sense of adventure that comes with the territory — the idea that they will win or lose, rather than playing it safe. As the poem Invictus, by William Ernest Henley, puts it: “I am the master of my fate/I am the captain of my soul.”
This is why entrepreneurs throw caution to the winds and go for it.