The Psychology of the Entrepreneur: Updated

Posted by Ben Whittacker-Cook on 30/09/2021 10:00:00 AM

This is an update to one of our most popular blogs, this time from a pre-Covid 2013. Despite being almost a decade old, this article will resonate with every CEO, business owner and start-up entrepreneur as they attempt to survive and thrive in the most challenging of global business ecosystems.

Psychology Entrepreneur

On a general level, we readily identify the characteristics of what we think makes entrepreneurs tick; ‘pro’ risk, resilient, brave and so on, but these people are also subject to intense self-criticism and microscopic scrutiny.

And despite tending to see things more positively than others (based on 2013 research) the Canadian Mental Health Association has recently identified that 46% of entrepreneurs believe that their mental health issues interfere with their ability to work, and only one in five (21%) feel satisfied with their mental health less than once a week. What is clear, is that entrepreneurs are complex.

From 2013: A great deal of research has been done into the psychological characteristics commonly displayed by an entrepreneur. One of our Executives in Residence Paul Gregory shares these insights with us. So, do you have the typical entrepreneur personality?

A great deal of research has been done into the psychological characteristics commonly displayed by an entrepreneur. There is obviously no such thing as an “entrepreneurial personality” and there are great variances in the psychological makeup of successful entrepreneurs. There are however some reasonably clear characteristics typical of many entrepreneurs which I have described below.

These are the basis for attributes such as a desire to be their own boss, and also the basis for attributes such as a reluctance, at times, to take professional advice from others which could be helpful.

Firstly what is meant by the word “entrepreneur” as differentiated from being “self-employed” and running your own business?  In terms of this discussion an entrepreneur is often motivated by innovation, growing their own business and making a profit. Whereas in terms of this discussion self-employment is usually based on the owner achieving their own personal goals and their work being their primary source of income.

Attaining achievement

So what are some of the commonly identified characteristics of an entrepreneur?

Firstly they have a need for achievement. This refers to the need to strive hard for success in order to obtain a sense of personal achievement. Entrepreneurs have a tendency to select and work hard at business activities that hold a moderate chance of success, or a great opportunity for personal achievement and satisfaction, but without the excessive risk of failure. Entrepreneurs in my experience will seek challenges but usually will not get involved in businesses where there is very little chance of growth and success. There is little chance of them gaining a sense of personal achievement.

Entrepreneurs sometimes find it difficult to understand why others in their organisation aren’t driven by the same need for achievement that they have. In a successful entrepreneurial organisation it is extremely important that key individuals agree on values, vision and business objectives.

It is however also possible that employees can make a valuable contribution to the business without the same need for success and a sense of personal achievement.

Perception causation

The second common characteristic is having what is known as an internal locus of control. Locus of control refers to an individual’s perception of the causes for events in their life. An internal locus of control means they believe their environment, in this case the performance of their business, is controlled by their own actions. That is, luck and fate don’t determine what happens and success or failure is a result of an entrepreneur’s abilities and experience. 

This can increase an entrepreneur’s comfort in making business decisions. It can however at times also lead to a sense of failure if things take longer, or cost more, than they had expected even if there are good reasons for this occurring.

Ambiguity and Uncertainty

The third common characteristic is a tolerance for ambiguity and uncertainty. This refers to an individual’s ability and comfort to make a decision with incomplete or ambiguous information. Incomplete information regarding markets, cash-flows, competitors and IP development is often typical for an entrepreneurial business. Decisions are required however and entrepreneurs are usually comfortable making them.

Entrepreneurs may in fact find an ambiguous business situation desirable, even enjoyable and if things are just ticking over this may seem boring. At certain points in a business’s growth however a period of consolidation may be valuable to the business, if not particularly challenging to an entrepreneur.

Taking a risk

A fourth common characteristic is what is called a risk taking propensity. That is the entrepreneur actively looks for risky ventures or assignments and has a greater tendency to take risks. An important concept here however is taking calculated risks, not making impulsive or spur of the moment decisions. There is a difference between making a risky but calculated decision and simply taking a risk.

Entrepreneurs have a risk taking propensity but probably don’t see themselves as extremely high risk takers even if others do. They tend to see things more positively than others.

To conclude then this is a brief description of some of the common, but not absolutely mandatory or always exhibited, psychological characteristics of an entrepreneur. There are of course a multitude of other factors of great importance in growing an entrepreneurial business beyond the psychology of the entrepreneur.

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Topics: The Icehouse, Wellbeing, Entrepreneurship, Psychology, Entrepreneurial Strategy, CEO Resilience, Reblog