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Starting a business could make you rich. But that doesn’t mean you’ll be satisfied.
Researchers have long known that entrepreneurs generally feel much more satisfied than people who work for somebody else. And studies have suggested that the key factor in making them feel that way is money—the more the better.
But in recent years, research in psychology and economics has begun to provide a much more nuanced look at the connection between entrepreneurship and fulfillment. Yes, money is important. But profit and loss only begin to explain how entrepreneurs feel about their business.
For starters, researchers say, an entrepreneur’s past—everything from the level of schooling to employment history to track record with other startups—affects satisfaction with the latest business. More highly educated entrepreneurs, for instance, often end up less satisfied because they have such high expectations about their chances for success and potential for income.
Meanwhile, although entrepreneurs are typically driven by a desire for autonomy, many often neglect other crucial emotional needs that can end up making them miserable on the job.
Here’s a closer look at these and other factors that are more likely than money to make an entrepreneur feel fulfilled on the job. Or not.
One of the main reasons entrepreneurs start businesses in the first place is the allure of professional freedom. They love the idea of ditching the boss and bureaucracy, and relish the chance to decide for themselves what work they do, when they do it and whom they do it for.
But research shows that pursuing autonomy above all else can leave an entrepreneur dissatisfied. Founders who focus on setting their own rules tend to ignore other factors that matter in job satisfaction, such as variety in the kinds of work done; doing a job from beginning to end and seeing an identifiable outcome; and getting feedback about their performance.
In a 2009 study, Leon Schjoedt, an associate professor of management at Indiana University South Bend who researches entrepreneurial behavior, studied a large group of founders and nonfounders. Both groups were asked about the level of the above four factors that they experienced in their jobs, as well as about their job satisfaction.
Mr. Schjoedt confirmed that entrepreneurs derived satisfaction from autonomy to a greater degree than nonentrepreneurs. But he also found that they highly valued variety and feedback—although they didn’t necessarily realize they needed those things to be happy.
That discovery becomes all the more important given another finding: Entrepreneurs feel these factors more intensely than salaried employees at the same organizational level. When the three job characteristics they care about most are present, entrepreneurs are more satisfied than salaried workers would be; when they’re not, they’re more unhappy. Mr. Schjoedt believes this is because entrepreneurs are on the front line of business, with the opportunity to have more exposure to the sources of these feelings.
A crucial takeaway, he says, is that entrepreneurs cannot expect to be satisfied simply because they work for themselves, even though he found many of them think that’s enough.
Knowing that, Mr. Schjoedt offers several pieces of advice for entrepreneurs. If entrepreneurs feel that their job lacks variety, he suggests seeking new but related opportunities to extend their business. The founder of a Web publisher might start adding additional services to a firm, such as copy editing or advertising. Mr. Schjoedt says this strategy is a relatively safe way to add new, possibly more interesting, tasks to a job without abandoning the original firm or extending into an area that is too far from an entrepreneur’s skill set.
Feedback can be particularly tough for entrepreneurs to get, since they often work alone. In those cases, Mr. Schjoedt advises founders to assess their own work constantly. The best way to do that, he says, is to break jobs down into small parts. For instance, broad questions such as, “How is my startup doing?” or “Am I doing the right thing as a founder?” are hard to answer. Founders would do better to ask themselves smaller questions with concrete answers, such as, “How effective was the sales meeting?” or “Did traveling business class to pitch the company pay off?”
ENLARGE
A top degree can leave founders frustrated.
Another finding that has emerged from the past few years of research is that an entrepreneur’s history shapes his or her expectations. And whether or not these expectations are met determines how satisfied the founder will feel.
When it comes to schooling, for instance, more of it doesn't always lead to greater satisfaction. Researchers in the Netherlands have found that entrepreneurs with high levels of general education—say, from an Ivy League university—actually end up less satisfied with the income their startups generate than those who had more practical, specific professional and educational experiences.
The reason: Many Ivy Leaguers overestimate their abilities, only to end up disappointed when they don’t find quick success or earn what they think they deserve. “People tend to have high expectations when they are highly educated,” says Ingrid Verheul, an assistant professor of entrepreneurship at the Rotterdam School of Management, who co-wrote the 2011 Netherlands study. “They expect to be good at things. They have higher opportunity costs, and often expect to be working higher-level jobs.”
On the other hand, entrepreneurs who had training in relevant fields were more satisfied with their eventual incomes. So, too, were those who had experiences with financial management. These people seemed more likely to form a more realistic picture of what it would take to run a business, as well as the income they were likely to get.
It isn’t that Ivy League types do any better or worse than people with more specific educational experiences, says Ms. Verheul. Rather, she says, income satisfaction is in many ways tied to how people think they stack up to their peers. In the Ivy League, peers may go on to earn huge salaries in high-level management, which could make the typical entrepreneur’s salary seem small. People educated in more specific fields see their peers go into similar businesses, so they set more realistic expectations.
A similar dynamic is at work with people who started businesses with lots of initial capital, Ms. Verheul says. According to the study, those who begin with a lot of money are likely to expect high financial returns. When their returns aren't as high as expected, they aren’t satisfied.
Serial entrepreneurs often judge their prospects poorly.
People with experience launching businesses might seem to have a handle on what it takes to run a company, and be able to set more realistic expectations for themselves. Yet research shows they often end up less satisfied than first-time founders.
The key problem: Serial entrepreneurs fail to recognize their own limitations. For entrepreneurs whose businesses thrived in the past, “the problem for these people is that the market is so dynamic, it changes,” Ms. Verheul surmises from her findings. “Serial entrepreneurs need to realize that their old winning concept might not win this time around. Not realizing this can likely take a toll on satisfaction.”
Even if a serial entrepreneur earns more than he or she did at a previous venture, it could be much less than they had expected, which could result in lower satisfaction.
On the other hand, entrepreneurs whose previous businesses failed may overestimate the value of their past experience going into a new firm and be dissatisfied when it doesn’t perform up to expectations, says Ms. Verheul. Separate research in the Journal of Business Venturing shows that experience with failed ventures doesn't have a positive impact on performance of new ventures.
Why someone became an entrepreneur matters.
The reason an entrepreneur left a salaried job makes a big difference. If someone is forced into going solo, they’ll probably feel much less satisfied than someone who chose to take the step. In a 2009 study called “I Can’t Get No Satisfaction,” two researchers asked 1,547 early-stage entrepreneurs how satisfied they were with their businesses.
Even when they made the same amount of money, entrepreneurs who had been forced into the role because of unemployment were 12% less satisfied than those who founded a business to take advantage of an opportunity. What’s more, entrepreneurs who had been unemployed for longer than 12 months before founding were 17% less satisfied than opportunity entrepreneurs.
Opportunity entrepreneurs are like artists or musicians, says Stephen Hicks, a professor and executive director of the Center for Ethics and Entrepreneurship, at Rockford University in Rockford, Ill. They are intrinsically motivated to launch their firms. If they get paid for their work, that is an added benefit and not a prerequisite for satisfaction.
Entrepreneurs of necessity lack that feeling of free will. Mr. Hicks’s suggestion is to look at the situation like another involuntary shock—a breakup. “When you get dumped, just as when you get fired, you carry with you all of this psychological baggage,” he says. “You might feel disoriented, your self-esteem might be damaged.”
Starting a new relationship—or launching a startup—might not feel like a choice. But “it is an awakening, and you can make the most of it by embracing the journey.”
Mentors can do a lot of good. And bad.
A seasoned adviser can help entrepreneurs feel satisfied with their startup. But they have to come in at the right time, and approach their role in the right way.
In a 2015 study, Étienne St-Jean, a management professor at the University of Quebec at Trois-Rivieres, analyzed data from over 300 early-stage entrepreneurs and their mentors. The professor found a significant relationship between mentorship and self-efficacy—the belief that you can accomplish what you set out to do. This increase in self-efficacy had a direct, positive relationship to entrepreneurial satisfaction.
That said, mentors must come in very early on, Mr. St-Jean says. Two or three years into a firm, many of the most important decisions have already been made. For a mentor to come in at this point—especially if the business is struggling—is almost certainly too late to help either side develop a sense of satisfaction. The decision-making process is typically ossified by then and, what’s more, much of the early money has already been invested, so both sides find their hands tied, which isn’t very satisfying.
The style of mentoring also matters. In an earlier study of the same group of entrepreneurs and mentors, Mr. St-Jean measured the mentors’ intervention style. Experiential mentors tended to ask questions that might prompt protégés to come up with their own solutions to problems. Directive mentors tended to tell them what to do. Mr. St-Jean also measured the involvement of mentors, categorizing them as involved or disengaged.
The strongest correlation was between experiential, involved mentors and job satisfaction, and the least between directive, disengaged mentors. In fact, there was a 25% difference in job satisfaction between entrepreneurs with these two types of mentors.
“Entrepreneurs want to be autonomous in their decision-making,” says Mr. St-Jean. “That’s one of the reasons why they probably quit their jobs, because they don’t want to have a boss, they don’t want to have someone telling them what to do.”
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