Most of the success of entrepreneurs in business, more so in small businesses where individuals are more often than not the sole decision makers, depends upon the behavior and conduct of the individual entrepreneurs. The majority of business decisions and business actions in small ventures; be they in relation to deciding upon the project idea, obtaining finance, arranging for machinery, equipment, and office space, hiring staff, meeting clients and customers, arranging for deliveries, obtaining collections, and meeting outside people falls upon entrepreneurs. Whilst employees do take care of some of these responsibilities that fact that the small entrepreneur has to wear many hats, from that of receptionist to those of financial managers and sales directors is common knowledge (Hupala, 2008).
It also needs to be realized that whereas business organizations attempt to moderate and optimize the behavior of their employees through a slew of management and HR techniques, the same is not possible in the case of entrepreneurs who go mostly by their various motivators for taking decisions.
The behavioral determinants of individual entrepreneurs and the decisions they take thus play a major role in the success or failure of small business enterprises.
Choosing of Project
Appropriate choice of projects is by far the most crucial feature of the development of a small business. Projects need to be chosen with the greatest of care, considering the knowledge, background and skills of the entrepreneur, the scope and the extent of the project, the various issues that need to be sorted out and the resources available with the entrepreneur (Lewis, 2008).
Entrepreneurs will be governed by their behavioral determinants during the selection process; their personalities, abilities, attitudes, values, and emotions will all influence process selection. Also without the benefit of impartial advice it is very easy for entrepreneurs to choose projects that are overambitious, need talents and expertise that are not available with them and require resources greater than what they command. Successful entrepreneurs thus need to make sure that they are not swayed by over optimism, and overconfidence.
People who are naturally timid and introverted may similarly decide to be extra-conservative and choose projects that are too small in scope to be truly profitable. It is thus best to choose projects with the help of good business consultants who are able to take a clear and impartial view of the strengths and weaknesses of individual entrepreneurs and are able to advise them to make the right choice. Business plans, especially those relating to marketing, production and finance need to be done with great care and entrepreneurs with strong mental ability, knack for figures, and learning tend to do better than others (Lewis, 2008).
Choice of Finance
Individual behavioural determinants can also play a strong role in the choice of project finance. Whilst finance for entrepreneurship comes from various sources, i.e. personal savings, loans and contributions from friends and relatives, mortgage of personal assets like jewellery and housing and bank loans, they carry different terms regarding payment, interest, and penal provisions like seizure of assets. It is a common failing of entrepreneurs, who are by nature extroverted, ambitious, positive and confident to overestimate incomes, sales, and profits and underestimate expenses, only to get rude shocks after the initial difficulties that are integral to entrepreneurial activity arise (Hupala, 2008).
Miscalculation and wrong forecasting of financial results can also lead entrepreneurs to increase their exposure to financial risks, take loans at high rates of interest and severe repayment terms, increase the outlay of their projects, and engage in unnecessary expenditure on inessentials (Bannock, 2005).
At times small entrepreneurs have been prone to use credit card funds for financing businesses at exorbitant interest rates, an option that is essentially extremely risky and can land borrowers into immense payment and repayment difficulties. Such motivations mostly lead from personality traits and occur more with people inclined to take risks and who act more on impulse than after rational thought and can lead to difficulties that can adversely affect the progress of business.