Stress and the Entrepreneur

Davy Brinkmann

Greg Ringle

Dr. Gasper

Finance 402-Spring 2002

Introduction

The ownership and management of an entrepreneurial entity comes with both stress and emotional strain that falls on the entrepreneur and the entrepreneur’s family. How these issues are dealt with can have a significant impact on the ultimate success of the entrepreneurial venture.

A majority of new entrepreneurs assume that starting a new business will solve both their professional and personal problems (Norman, 2002). These individuals fail to realize the unexpected stresses and burdens that entrepreneurship will place on them and their families.

Preparing for Entrepreneurial Reality

The factors or goals that motivate many individuals to become entrepreneurs are often unrealized during the infancy and growth stages of the small business cycle. Identifying the difference between lofty goals and reality is the first step in combating the aforementioned unexpected stresses and burdens.

The table below will highlight some misconceptions about being an entrepreneur (left column). In the column to the right, the realities of being an entrepreneur are listed.

Goals	Pitfalls
Being your own boss	Clients end up being your boss
More free time	Longer working days (average 12-16 hrs)
Increased financial status/freedom	During the initial/growth stages of the business cycle, an entrepreneur may just make enough to break-even or fail.

Sources of Entrepreneurial Stress

Once a prospective entrepreneur understands the reality of managing a small business, the sources of stress associated with this profession must be determined. By determining these prospective sources of stress, entrepreneurs can better prepare themselves for their occurrence.

Four factors are directly related to entrepreneurial stress, these include: loneliness, immersion in the business, people problems, and the need to achieve (Norman, 2002).

After understanding the sources of entrepreneurial stress, specific stresses should be identified. Understanding these specific types of stresses will be beneficial in preparing for and dealing with them.

Entrepreneurial Stresses

Small businesses have particular stresses in and of themselves. These need to be addressed by the entrepreneur, as well, in order to successfully manage and sustain the company.

As opposed to most large businesses, small businesses are more adversely affected by both the personal lives of their owners and the current trends of the economy.

-State of the economy

Unforeseen shifts in the market and economy may affect small businesses to a greater degree due to dis-economies of scale. Because a small business deals in small volume and quantity, economic shifts have a proportionally larger effect on factors such as price, net earnings, and savings (Dusen, 1D).

Small companies do not benefit from the economies of scale available to major corporations and businesses.

-Information Overload

Another stress innately involved in operating a small business is the reality of information overload. Dealing with this reality can be a significant source of stress for the entrepreneur. Four steps can be used to deal with information overload.

First, business decisions should be based on the math (measurement of the cost of operations, and performance measures); next, use basic time management skills (business week and personal week); followed by: determining a filing system, and finally, allow employees, suppliers, and customers to help you (Holloran, B6).

1. Base all prospective business decisions on the math

2. Use basic time-management skills

3. Determine a filing system that compliments your type of business

4. Allow other people to help you. (Don’t be proud)

- Succession of the Company

Another stress associated with being an entrepreneur is the determination of a successor. A large corporation may have a large pool of applicants and/or qualified people, whereas a small business owner, after choosing the successor, must also create a succession plan.

The pool of possible successors to the business may be smaller due to the fact that the motivation, financial outlook, and the personal and professional stresses that go along with running a small company are not appealing to everyone.

If no person within the entrepreneurs’ immediate family wishes to accept the role of successor, the owner may have to deal with the business closing or leaving family control. For the entrepreneur who has invested years of time and energy into the business, this may be a traumatic experience involving high levels of stress. All these factors add to the difficulty of finding a successor.

- Personal Life vs. Professional Life

Being that the entrepreneur is the main driving force behind the small business; their personal life is directly linked to the company. Both personal and professional stresses need to be confronted in order for the business entity to operate.

Some problems that arise due to the stresses associated with an entrepreneurial enterprise are: stress related medical payments, stress related disability payments, workshops, and physical drain (Holloran, C6).

Effective ways to deal with these problems include stress-reducing workshops, health-club memberships, or even massage therapy. The possible results of neglecting to deal with personal vs. professional related stresses are decreased productivity, poor attitude at work, and increased workers compensation filings.

- Family Life vs. Professional Life

So far we have discussed the personal and business stresses associated with owning a small business. Once a decision has been made to start a new business, the family life of an entrepreneur becomes an influential player in the success of the small business.

With the start up of a new business, family life is immediately altered. Entrepreneurs must recognize this fact and take appropriate steps to account for it. Issues that arise in spousal relationships, couples working together, and family businesses need to be addressed and discussed.

In spousal relationships the distribution of power (identifying the “bread winner”), balancing time and attention between work and family, and the sharing of information regarding the business are all topics that are potential stress causers. Entrepreneurs usually put in 12-16 hour workdays. Balancing personal and family obligations with such a work schedule is stressful in itself.

Priorities must be determined before starting up an entrepreneurial enterprise. Also, financial gains are not realized immediately in a small business. This puts further economic stress on the family of an entrepreneur.

In the case where couples work together in a small business, three issues usually arise that, if not dealt with, lead to stress and the eventual termination of the business entity. As a result, the sharing of power, communication, decision making, resolving conflicts, and the separation of work and home-life need to be addressed and discussed. These issues are applicable not only to couples working together, but also for the family business where several members of the family are involved in running the business.

Combating Entrepreneurial Stress

Developing ways to combat the above mentioned stresses is the next step an entrepreneur must take. Acknowledging the existence of these stressful/emotional factors prepares the entrepreneur to deal with them. “Keeping your eye on the ball” or focusing on the long-term goals of the business deters the effects of short-term stress. Developing coping mechanisms will also provide the means to deal with these stresses. Through networking, getting away from it all, communication with employees, finding satisfaction outside the company, and delegating work, an entrepreneur can alleviate much of the stress associated with managing their business (Gardner, E11).

In order to both enhance the positive reactions and reduce the negative reactions to stress, there are nine steps that an entrepreneur can take.

First, the entrepreneur must understand that while the outcome of a decision cannot be controlled, the decision making process can. Next, positive thinking about challenge and commitment is necessary. Also, an entrepreneur must prioritize and focus on only one or two problems at a time. Through seeking outside objective viewpoints and feedback, setting realistic expectations, avoiding perfectionism, knowing the risks you are willing to take, establishing order in your personal life, and various relaxation techniques, both business and personal stress can be reduced. This would be beneficial for both the entrepreneur and the business entity (“Determination”, 22).

Negative Effects of Stress

If the entrepreneur does not take the aforementioned steps to deal with this stress, the negative physical effects of stress may adversely affect the small business owner. The negative physical effects of stress occur when an owner of a small business shows an exaggerated response to a minimal stress load. As mentioned above, operating a small business produces many stressful situations, including managing budgets, financials and processes, as well as satisfying employees and customers.

Stress management can be achieved through a series of activities that lead to the recognition and handling of those truly stressful situations (Holloran, C6). These stress-reducing/managing activities are mentioned in the “Combating Entrepreneurial Stress” section of the paper.

Conclusion

An entrepreneur must determine the most effective ways to manage the stress that occurs when trying to balance business and personal life. The ability to manage this stress, combined with mental, physical, and emotional stamina, enables entrepreneurs to persevere in tough times and excel in good times.

Negative and positive reactions can result from trying to deal with this type of stress. The negative effects include: denial, anger, and depression. Positive effects are: acceptance and turnaround, coping with the stress, and gathering information and support (“Determination”, 22).

Managing time, balancing personal and business life, and dealing with small business economics are all traits that must be mastered by the entrepreneur. Being able to prepare for, identify, and manage the stresses associated with being an entrepreneur and operating a small business is essential. Those who are able to identify and manage these stresses have the ability to sustain the life of their entrepreneurial entity.

Glossary of Terms

Anger: Feelings of hostility within an existing situation, usually

short-term.

Clinical Depression: A state of sorrow as a result of a chemical imbalance.

Copreneurs: Two or more individuals (i.e. husband and wife) working together as entrepreneurs.

Denial: The refusal of acceptance that something exists.

Depression: A state of sorrow as a result of experience(s). An overall

state of being that may exist over a longer period of time

(than anger).

Economies of scale: Reduction in a firm’s per-unit costs that are associated with

use of large plants to produce a large volume of output.

Information overload: The overwhelming sensation felt by an enormous inflow of

information that must be processed in a relatively short

period of time.

Networking: The creation of strategic alliances with other individuals/firms.

Article Reference List

“Determination to succeed beats red tape and disasters.” Farmers Guardian 18 Jan. 2002:

22.

Dusen, Christine. “Business on a small scale: Entrepreneur’s struggles never end.” The

Atlanta Journal and Constitution 29 Jan. 2002: 1D.

Gardner, Lawrence. “Small Business: Are you feeling stressed out? Well, you’d better

deal with it.” Crain’s Detroit Business 10 Nov. 1997: E11.

Holloran, William J. “Information overload stresses to many business owners.” Daily

Press 9 March 1999: B6.

Holloran, William J. “A primer on handling the stress of owning a small business.” Daily

Press 5 Sept. 2000: C6.

Norman, Jan. “Business owners cope with stress/Workplace-Entrepreneurs seek ways to

relieve stress of work for themselves and employees.” The Orange County