In a treasure trove of data on entrepreneurs, two Bentley management professors unearthed perplexing truths about how people start businesses. Even now, having penned numerous articles and book chapters on the topic, they wonder at the paths that entrepreneurs take. Logic and neat patterns need not apply.

Tatiana Manolova (left) and Linda Edelman conducted their analyses on data from the landmark Panel Study of Entrepreneurial Dynamics (PSED). Sponsored by the Ewing Marion Kauffman Foundation, the National Science Foundation, the U.S. Small Business Administration, and the University of Michigan, PSED fixed a scientific spotlight on “nascent” entrepreneurs, that is, those actively engaged in creating businesses. The study followed 830 individuals from 1998 to 2000 and a second set of 1,200 subjects from 2005 to 2006.

Mining the Details

The resulting datasets are chock full of details, such as the composition of founding teams and the number of customers that companies have. Tasks undertaken during the startup process – from purchasing equipment to securing daycare to opening a bank account – emerged as well. One surprise was the length of the startup phase in some cases.

“Two-thirds of study subjects still didn’t know whether they had a going concern two years after starting,” reports Edelman, an associate professor of management who received her DBA from Boston University. Indeed, “some have been trying to start their business for up to 50 years.”

Manolova, an assistant professor of management and fellow DBA graduate of Boston University, cites the average 1,500 hours and $10,000 that entrepreneurs invest in the startup phase. “That’s a lot of sweat equity down the drain.”

Consequently, the Bentley team advises entrepreneurial hopefuls to set some deadlines. “Go in knowing how you’ll determine when you’ve reached closure with the startup phase,” says Manolova. “And be prepared to walk away if you haven’t made a sale at that point, or met another reasonable milestone.”

First Things First?

The role of planning threw another curveball at the inquisitive duo. “Planning does not appear to be a significant predictor of success for nascent entrepreneurs,” says Manolova. “A lot people make their first sale before they start their business.”

“We’re strategists by training, so we’re linear, logical thinkers,” notes Edelman. “We assumed that when intentions come first, followed by a sale, a business would be much more likely to succeed. But with emerging businesses, that’s not always the case.”

The professors expanded on their work in an article for the Academy of Management Learning & Education (2008). Specifically, they analyzed the overlaps and gaps between entrepreneurial processes in practice and those taught in widely used textbooks.

“We looked at startup behaviors, hoping to find a sequence and a set of activities that would predict success,” Edelman explains. “But the findings show no particular order, and no particular actions. It seems instead that, simply put, the more tasks you do over a reasonable period of time, the better off you are.”

“Textbooks lay out the startup process as if it’s linear: from idea to business plan to securing funds,” says Manolova. “But entrepreneurial success doesn’t always rely on following a logical path.”

Management educators, take note. Observes Manolova: “The insight strongly suggests that textbook readings should be supplemented as much as possible with case studies and experiential exercises.”