Importance of Entrepreneurship
What makes a good business? If you would have asked me this question a few months ago, I likely would have replied with some form of “if the business is making lots of money.” While this is true, this is only one of many factors that are important in a good business. During the summer, being able to work for a private equity firm has taught me a wealth of knowledge about evaluating businesses.
I spend a portion of my day reading Confidential Information Memorandums about various business service/industrial businesses. Confidential Information Memorandums are essentially marketing materials that banks put together to market a business they are trying to sell to prospective buyers. This has allowed me to gain an understanding of what is important to look at in businesses. Giving me the knowledge to not only be able to add value to any business I work at in the future but furthermore has shown me the value in entrepreneurship.
Companies owned by their founders make up the majority of the companies we buy. Often times, we as students spend time looking to land the perfect job at a prestigious company, however, time and time again I read about entrepreneurs who took a risk to start a business that has rapidly grown and is now doing $10.0 million in EBITDA. The most important thing all of these founders have in common is they took a risk. They did not re-invent the wheel. For example, they started a car wash business but distinguished themselves from the competition via speed and a subscription model. It is not always about thinking of the next Amazon or Facebook, as exemplified by the car wash business. Thus, as a Babson student, I believe we are in the perfect environment to put this into action, as I know many of my classmates already are.
A customer overview, detailed financials, strategic position, market growth, and other factors are all important to look at in business. However, in order to be able to look at in a business, we need entrepreneurs. And I can tell you, the entrepreneur who sells their business for $70 million dollars after spending every day for the past 10 years growing the business feels a lot more reward than the private equity investor who buys and sells the business. Entrepreneurship is not the only path to take, but it definitely should be considered by all of us.