7 minute read 21 Apr 2021
Young businesswoman in office examining cables at light bulbs

What makes an entrepreneur successful over the long term?

By Sascha Stahl

Head of Family Enterprise Switzerland & Liechtenstein | Program Leader EY Entrepreneur Of The Year®

His daily job includes listening, thinking and networking. In private life, art, culture, travel and his dachshund motivate him.

7 minute read 21 Apr 2021

There is almost no other topic that is more popular in economics and management literature than the issue of the underlying reasons for the long-standing success of companies and the doers behind them.

In brief
  • Continuing to manage inherited assets entrepreneurially makes up a major part of our economy.
  • If an entrepreneur acts alone, then building synergies is one of the most pivotal building blocks of their actions.
  • The last third of success depends on every individual themselves

The world outside of these books looks somewhat different. For over 30 years, EY has been organizing a competition for entrepreneurial achievements, and its candidates have since been linking up with each other in a global network. Thousands upon thousands of candidates give a pretty accurate picture of what brings about long-term, economic success. For starters, there’s one thing we can already tell you: It is rarely due to divine isolated acts and human works of wonder. Rather, a complex mechanics of character, environment, and zeitgeist are what characterize success over the decades.

In response to the age-old question of 'whether a person's future can be written' comes an age-old answer: A third of our lives is predetermined from birth, we learn a third from our environment, and we ourselves create the last third. That sounds quite esoteric, which is why it is hard to believe that a company's future success can be observed using very similar segmentation.

1.  Seed capital

It's not something that entrepreneurs like to hear, but it is no different in Switzerland than anywhere else in the world: Three-fourths of business assets are inherited assets. In other words, you have a far greater chance of becoming rich if you were already born rich. Only about a fourth of national cumulative business assets come from first-generation companies. And even then, you need to subtract assets from non-business activities to be completely accurate. These include, for instance, assets from capital investments, real estate, and stock markets. This leaves us with roughly 10% of what we regard as entrepreneurship in the classic sense: Companies that are founded by doers and grown are the backbone of our economy.

Since 1998, EY Switzerland has been awarding entrepreneurs in four categories: Services and trade, industry and high-tech, startups, and 3rd-generation companies. Over 1,000 candidates have entered the competition during this time, of which roughly 200 were awarded as finalists and winners. Most candidates are interconnected with each other as EOY alumni, which allows EY to observe and keep track of many companies’ future development as the organizer.

Statistics prove what we see in practice as well: Only a small percentage of finalists and winners are child prodigies whose companies enjoy long-term, lasting success over decades without seed capital from their families. Many startups get off to a promising start, but only time will tell how resilient their visions are. Very few manage to pull off that founder’s story of growing an empire virtually out of the blue.

The vast majority of consistently successful ventures have family seed capital. It can be financial in nature, such as inherited money, the acquisition of the company itself, or available capital within the family. It can be social in nature, such as important connections to potential financiers. Or it can be mental in nature, such as your identity as a founder which allows you to fail without subsequently incurring financial ruin. We will cover this aspect in greater detail below.

2. The environment

As we know from extensive pedagogical experience, learning from our environment is at least as elementary as learning from cognitive information sources. When you are born also plays an important role here, although the learning process continues beyond the first years of life and accompanies people until the end of their lives. Entrepreneurs are not just born either. They are shaped and influenced and are a reflection of their environment, which they sometimes chose, which sometimes came about by chance, or which has gradually evolved due to the type of business.

Candidates for Entrepreneur Of The Year come from every region of the country; all industries are represented and, in terms of company size, range from 20 to 200 million in revenue, with the obvious exception of the startups category. But the field of those entrepreneurs approximately reflects what we call mid-market, i.e. the 'M' in the Swiss SME landscape.

One thing we have observed in many consistently successful candidates is an impeccable intuition for choosing their environment. And this is due to a particular reason: Often times, entrepreneurs are focused on the objective of their business activity early in their lives and, accordingly, they begin to build the necessary networks and social connections even earlier. Many of them are guided by a vision, a business goal on which they base their actions and endeavors, and which accordingly results in an ecosystem that makes this economic goal a reality. Of course, many people do that, but entrepreneurs are more directly exposed to the inherent risk of their actions and therefore must quickly develop a keen sense for sustainable relationships. Oh, and on a side note, this is why many startups with good ideas still fail after a few years.

Numerous Entrepreneur Of The Year finalists and winners who have grown their businesses’ success over the years and decades learned early on to scrutinize which people joined them for which motives. They make very deliberate choices and often tell that to their counterpart as well, because it is better to explain to people the reasoning behind a business-based foundation with the goal of shared success than a personal preference of likeability or antipathy, as is the case in personal life. Because of this, one of the striking characteristics of entrepreneurial success is the quality and close integration of an ecosystem behind this success.

3. Standalone value creation

Your own contribution to success, the creativity, the need to build something—this is what is often valued by the public as entrepreneurial character. It is the field where economics and management literature thrives and where founders become saints and alchemists. Autobiographies also need to meet this human need for legends and myths; hardly any author admits that two-thirds of their success is due to forces that they can hardly influence.

And yet: The entrepreneurial gene is a phenomenon that can be observed worldwide, and we see it in virtually identical form in candidates for Entrepreneur Of The Year around the world, regardless of the culture, region, and industry. There is always this delicate balance between creativity and that eagerness to complete a mission, between risk tolerance and market intuition, between a customer focus and a drive for recognition, between that innovative spirit and the desire for change. All this can generally be found in people who are driven by extraordinary energy, great determination, and a distinct sense of duty for what they deem right and necessary.

This entrepreneurial gene is clearly visible in entrepreneurs with long-term success. In this regard, it would also be part of one’s initial mental seed capital. But unlike your birthplace and the people who life puts in your path, you can develop, foster, and train this gene. You can foster very specific entrepreneurial talents from a tendency to do things. We see this in countries that provide a school and educational system that does not just limit itself to general education and imparting information encyclopedically but rather recognizes and fosters intrinsic motivation. It is not a coincidence that successful companies build their own in-house academies so that they themselves can develop precisely this important economic resource. They would rather not rely on the state’s judgment, and they also take action in this regard for the next generation’s success.

The direct responsibility of entrepreneurial endeavors is another circumstance that fosters the entrepreneurial gene. If you have to take responsibility for your actions under your name and with your money, you feel greater pressure to ponder them and to adapt them to the forces of your environment, i.e., the market, the customer, the supplier, and your own workforce. This contemplation shapes a person, and it does so to a far greater extent than someone who can hide behind the compliance and processes of corporate structures. It is a scientific field that still provides an extensive field for study.

It may sound like a crude summarization to reduce long-term entrepreneurial success to three causes—and from the pool of profane popular wisdom at that. But luckily, we are once again living in times where we remember this knowledge and value it as a robust treasure trove of experience. And this is precisely what we can do as well after 22 years of Entrepreneur Of The Year in Switzerland: Profit from the perspective of having seen 1,000 candidates and roughly 200 finalists and winners. Our observations are commensurate with the formula: a third of our lives is predetermined from birth, we learn a third from our environment, and we ourselves create the last third.

Continuing to manage inherited assets entrepreneurially makes up a major part of our economy. And, of course, it is an extremely important part that secures, develops, and passes on long-standing company knowledge. But this endeavor is never an isolated act; rather, it has a familiar tradition—knowledge that protects and defends the entrepreneurial family.

If an entrepreneur acts alone, then building synergies is one of the most pivotal building blocks of their actions. The ecosystem that an entrepreneur builds is a virulent part of their long-term success. And that is precisely why it is so important for us as a society to support every aspect of the economy that provides our founders with fertile ground for their entrepreneurial future.

Summary

The last third of success depends on every individual themselves. It is the entrepreneurial gene that is found all over the world but particularly thrives in places where entrepreneurship is supported. We at EY are doing our part to support entrepreneurship with the Entrepreneur Of The Year award. 

About this article

By Sascha Stahl

Head of Family Enterprise Switzerland & Liechtenstein | Program Leader EY Entrepreneur Of The Year®

His daily job includes listening, thinking and networking. In private life, art, culture, travel and his dachshund motivate him.