Entrepreneurs have some of the most stressful jobs. They must grapple with uncertainty and being personally responsible (and liable) for any decision they make. They have the longest working hours of any occupational group. And they have to rapidly develop expertise across all areas of management from finance, marketing, procurement and operations to human resource management in the process of starting and managing their business.
To understand entrepreneurs’ happiness, I conducted a comprehensive and systematic review of 144 empirical studies of this topic, covering 50 years. Here are the five key findings that sum up the highs and lows of being an entrepreneur.
1. It’s not all about pay
Work on the economics of entrepreneurship traditionally assumed that entrepreneurs bear all the stresses and uncertainty associated with their work, because over the long term they can expect high financial reward for their effort. Yet the evidence shows that entrepreneurs earn less than they would if they, with their particular skill set, were working as employees.
When you ask entrepreneurs how they measure their success, happiness often comes out on top, alongside autonomy. Income features much less prominently.
2. Highly stressful
At the same time, there is substantial evidence that entrepreneurs face myriad stressors that diminish their happiness. High workload and work intensity, as well as financial problems facing their business are top of the entrepreneurs’ stress list.
Although they diminish entrepreneurs’ happiness, some stressors have an upside. While they require more effort in the here and now, they may lead to positive consequences such as business growth in the long term. Some entrepreneurs appear to interpret their long working hours in this way – as a challenge – and therefore turn them into a positive signal.
3. Autonomy is both good and bad
The autonomy that comes with being entrepreneur can be a double-edged sword. Entrepreneurs can make decisions about when and what they work on – and with whom they work. Having the freedom to make these decisions is one of the key motivators for the majority of entrepreneurs to start a business in the first place.
But, as the saying goes, there can be too much of a good thing. Recent research into how entrepreneurs experience their autonomy suggests that, at times, they struggle profoundly with it. The sheer number of decisions to make and the uncertainty about what is the best way forward can be overwhelming, especially when the constant high workload means that there is little time to carefully think through decisions. Then there’s the fact that investors and other stakeholders can significantly limit entrepreneurs’ autonomy.
4. It’s not only personality traits
There is evidence that people with certain personality traits such as self-belief or emotional stability are more likely to succeed as entrepreneurs. And, in turn, these personality traits are associated with higher levels of well-being. But studies that consider personality traits and autonomy at the same time are scarce.
Nonetheless, autonomy still seems to be the biggest reason for high levels of job satisfaction among entrepreneurs. Plus, the personality traits that are most characteristic for entrepreneurs are relatively specific and malleable such as self-belief and initiative taking. This kind of entrepreneurial mindset can be trained.
Emerging research also finds that the nature of people’s work can shape their personality. This, intriguingly, suggests that people can develop an entrepreneurial personality through their work as an entrepreneur.
5. An addictive mix
The evidence review confirms that, by any stretch of imagination, entrepreneurs’ work is highly demanding and challenging. This, along with the positive aspects of being their own boss coupled with an often competitive personality can lead entrepreneurs to be so engaged with their work that it can become obsessive.
So the most critical skill of entrepreneurs is perhaps how they are able to manage themselves and allow time for recovery. Prolonged exposure to work that is as intense as that of entrepreneurs takes a physical toll on peoples’ bodies. Hence future research into recovery strategies of entrepreneurs can help them manage their highly stressful, albeit satisfying, jobs.
Entrepreneurs’ well-being matters
Entrepreneur happiness matters not just for the entrepreneurs’ themselves, it also matters for their partners’ and children’s well-being. Plus, happy entrepreneurs are less likely to give up and close their firms. They are in a better position to recognise opportunities and be more effective at work, which culminates in more successful businesses.
Many features of the world of work today reflect challenges faced by entrepreneurs – high levels of uncertainty, intense work demands and personal responsibility among them. So understanding entrepreneurs’ happiness affords us with a glimpse into how we all may manage the demands of this new world of work.