Regulation and taxes are are often considered the biggest barriers for entry-level entrepreneurs, but in a survey of 30,000 Americans, researchers at Duke University’s Fuqua School of Business found most potential entrepreneurs give up before taking even simple steps to vet their ideas.
Professors Victor Bennett and Aaron Chatterji found that one-third of respondents reported having a business idea in the past five years; less than half of those people got as far as pitching the idea to friends or researching similar businesses online.
The findings are published in the Strategic Management Journal. The data suggest that guiding entrepreneurs early to vet business ideas could be just as important as helping with complex planning later in the process, or easing regulatory burdens on business.
“We need to put together a more structured process and help people understand the steps so they’re not lost in the ambiguity of what to do next,” Bennett said.
“People might need more basic advice about how to manage their time and how to meet critical milestones,” Chatterji said. “For example, if you’re working with someone else on a business idea, how often should you meet with them? Policies to provide mentorship and structure for aspiring entrepreneurs could be as important as efforts to create favorable regulations and tax policy.”
Bennett and Chatterji – both of whom have served as senior economists on the White House Council of Economic Advisors – surveyed total of 30,409 American adults aged 23 and older in cities across the U.S. in 2015, 2016 and 2017. They gathered demographic and professional information and asked respondents about any business ideas they had considered in the previous five years, and what steps they’d taken, if any, to pursue them.
They found potential entrepreneurs weren’t getting as far as the researchers expected.
“We were surprised there were very early steps where people were falling off -- things like talking to someone that they didn’t already know, or searching the internet to see if there was already a business doing the same thing,” Bennett said. “That seems to suggest that a big factor that is stopping entrepreneurship is just execution. It could be that people don’t have time after a long day at work, or that time management is really a problem.”
The researchers also found that of the people who said a lack of financing derailed their business idea, only 7 percent said they had actually sought financing.
“So we think there’s a perception that there are barriers that might not actually be there,” Bennett said. “Having a more structured process that allows people to move forward is going to be important for us to get more entrepreneurship.”
The findings illustrate a need for standard step-by-step recommendations for moving from an idea to a functioning business, including ways to weed out ideas that don’t make good business sense.
“A large percentage of our entrepreneurs never actually talk about their business idea to someone they don’t already know,” Chatterji said. “A best practice would be talking to experts in the field who aren’t afraid to disappoint you.”
[Editor’s Note: This is an update to a Duke Fuqua Insights article originally published in 2017.]