Small Business Playbook

10 traits of blue-chip entrepreneurs

Just 5 out of 1,000 people have the potential of a Richard Branson, Mark Zuckerberg and Sara Blakely to start and grow a big business, according to recent Gallup research. That equates to 150,000 "future blue-chip entrepreneurs" now in fifth through twelfth grade.

And the key to turning around the American economy—so these stars can launch more job-creating businesses—is identifying them early, through a testing system similar to the ones we use to spot athletic and academic prowess, and then nurturing their gifts, argued Jim Clifton, chairman of the polling company Gallup, in a new book called "Entrepreneurial StrengthsFinder."


Richard Branson
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Currently, there are only 90,000 businesses with 100 to 499 employees and only 18,000 with 500 employees or more in the United States, he noted, adding that for the first time, the number of businesses being closed outnumbers new ones being started.

Working with researchers, such as the late Harvard professor Phil Stone, Gallup did a national survey of 2,697 business owners and 14,128 people from the general population and pinpointed 10 traits that entrepreneurs need to create job-creating firms so these can be spotted and nurtured. The traits are a "business focus" on financial issues, like profit, confidence, creative thinking, an ability to delegate, determination, independence, knowledge-seeking, promotion, relationship-building and risk taking.

CNBC recently spoke with Sangeeta Bharadwaj-Badal, the primary researcher for Gallup's Entrepreneurship and Job Creation Initiative, who co-authored with Gallup chairman Jim Clifton.


CNBC: What motivated you to write this book now?

Badal: Entrepreneurship has moved to the forefront of a strategy for economic growth. We started studying the role of entrepreneurship to see if amid the chaos and economic recession, we could leverage some of the learnings from entrepreneurship and see if things could be changed.

We knew about 50 percent don't survive past the three-year mark. It's only a small sliver of start-ups—5 percent—that create most of the jobs.

While a lot is known about the external variables that determine a business success—such as industry, location, government policy— the psychology of the entrepreneur has been ignored. That's what led to us trying to figure out how to measure that—how to scientifically quantify that piece.

CNBC: Compare how highly-talented entrepreneurs in the U.S. have higher odds of business success?

Badal: These entrepreneurs in the top 2 percentile are seven times more likely to have a business worth more than $10 million compared with the rest, three times more likely to exceed sales goals and two times more likely to exceed profit goals. These talents have a multiplier effect. The stronger you are in all areas, the more successful you can become.


CNBC: Of the 10 traits, which one is the most important for an entrepreneur to be successful?

Badal: To find this out, we studied a sample of about 155 of the Inc. 500 who took the assessment. The trait they scored highest on was risk taker. Ninety-four percent of the entrepreneurs in the U.S. fall below what the Inc. 500 scored on risk taker. That's how high their score was. The next most important trait was having a strong business focus. Successful entrepreneurs are very focused on profitability. Third is determination. They don't give up. If you put these three together, they have so much drive in achieving the goals they set for themselves. Relationship building was their lowest-scoring trait.

CNBC: Do the most successful entrepreneurs have distinctive behaviors that help them outperform peers?

Badal: They have a high level of social competence and are likely to be the best spokesperson for the company. They also have a focus on controlling their destiny and can imagine the future. All have a high adversity quotient and are obsessed with their business.

CNBC: Can people weak in certain entrepreneurial traits develop them, or are the traits mostly innate gifts?

Badal: It is not an either/or scenario. There are pieces of our personality we are born with. As we experience life, there are areas we learn how to manage and behaviors we can learn how to exhibit, even if they don't come naturally to us.

Talent really speeds up one's ability to master a particular domain. Someone who doesn't have talent or has lesser talent will definitely gain from any support or developmental activity he or she receives. But no matter how hard he or she works, the result of that behavior will only be average. There are many entrepreneurs who are great at designing a product or service but are not focused on profitability. That individual will never magically start thinking about profit in every decision. That's not who he or she is. The answer may be to partner with someone who has that level of talent.

CNBC: Does Gallup have a recommendation on how the testing for entrepreneurial abilities Jim recommends should be integrated into the school system?

Badal: Yes, entrepreneurial testing should become part of the school system. Ideally, every high school should install an early identification system and just make it part of the standardized test package. Every year, schools should test all their incoming freshmen in high school and then provide opportunities to hone and develop their talent. All students should get a developmental report with a group learning session. The high-potential students should get specialized curriculum, internships with local businesses and coaches to help them along the journey.

The result? A more entrepreneurial mind-set among our future workforce and development of everyone's entrepreneurial potential. This will help them, no matter what vocation they choose in life—while those with high potential will get accelerated development toward starting and growing a business.


CNBC: How do you define "entrepreneur"?

Badal: We have a very simple definition: An entrepreneur gathers resources and produces and markets a product or service that yields value for customers. Gallup's Jim Clifton calls this "the art of turning an idea into a customer." Ideas are great but do not create economic energy unless they are commercialized.

CNBC: How are the qualities of entrepreneurs different than the self-employed?

Badal: Both need independence, the ability to do a task really well and to be a business builder. But there are qualities that would be slightly different. When you are trying to build a bigger business, the risk-taking or risk-mitigation piece increases tremendously. A self-employed person has to be a promoter of the business, but the scope of that is different for someone who is building a bigger business.

CNBC: Do you see a future where entrepreneurship replaces the traditional job?

Badal: No. Most of the jobs are not going to be replaced. That is not how everyone is wired. A lot of us need to work for employers and will continue to work for employers. The self-employed are only about 11 percent of the U.S. working population. Many people don't have either the personality or desire to be an entrepreneur, but we do need enterprising qualities in our jobs. The demand for behaving like an entrepreneur even when you are working for an employer is going to increase as we move ahead.