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An understanding of human behavior can help entrepreneurs learn more about themselves and determine how to engage with employees, customers, and investors to enhance their company’s success.
Mining the entrepreneurial mind: Why business owners should understand psychology
Nov 17, 2023, by Emma Bartlett

Starting a company is never easy. Whether you’re forming a business plan, mapping finances, or creating a market strategy, a successful launch requires meticulous work and dedication.

While a significant focus on the business side of things is necessary, School of Health and Behavioral Sciences’ Psychology Professor Ronald Deluga, Ed.D., explains that an understanding of human behavior can help entrepreneurs learn more about themselves and determine how to engage with employees, customers, and investors to enhance their company’s success.

Climbing into the entrepreneurial mind

Deluga notes that social, cognitive, and personal factors often influence an individual’s decision to become an entrepreneur.

“Entrepreneurs tend to be self-confident and enthusiastic about their ideas. They are very articulate and extroverted people with high levels of energy and never seem to get tired,” says Deluga, who looks at entrepreneurial characteristics and behaviors in his 300-level “Applied Psychology” course.

A strong sense of passion keeps entrepreneurs going, and Deluga adds that many of them have interesting personalities — such as Apple co-founder Steve Jobs and Tesla founder Elon Musk. While many positive characteristics accompany entrepreneurs, these leaders can also be demanding, difficult to work for, bad at listening to others, and not good at knowing when to quit.

“Maybe their idea isn't as wonderful as they thought,” Deluga says. “At some point you have to cut your losses and move on, but entrepreneurs can be reluctant to do that because it undermines their self-confidence in the idea.”

Entrepreneurs also face an inevitable level of risk since one in five businesses fail within their first year of operation, according to the U.S. Bureau of Labor Statistics. Despite the chance of failure, these business owners are comfortable with taking the chance of high risk, high reward. Deluga adds that entrepreneurs focus on the future instead of the past and, if they make a mistake or something doesn’t go as planned, they try to learn from it and reevaluate their strategies.

“They don't beat themselves up as much as maybe the rest of us would,” Deluga says.

Focusing on investors, customers, employees

According to Deluga, entrepreneurs make good first impressions and are likable to the point where it seems like a person’s known them forever. To top this off, these individuals can also be extremely persuasive, which is helpful when looking for investor and customer buy-ins.

“They're really good salespeople in terms of convincing others of the merits of their ideas,” Deluga says.

When entrepreneurs pitch their business idea in hopes of procuring funding, their persuasive abilities can sometimes outshine the feasibility of their idea or product. Deluga notes how Elizabeth Holmes fits the mold of convincing venture capitalists and private backers to invest $700 million in Theranos, her blood testing company that claimed to identify conditions such as cancer and diabetes. Holmes was later accused of fraud and sentenced to prison in 2022.

“When people talked with her, she was so convincing that it seemed like she had it down,” Deluga says.

Once entrepreneurs secure funding and launch their business, creating a healthy and successful environment for employees is key — especially when the workplace is filled with a diverse set of personalities.

Deluga suggests entrepreneurs elevate enthusiasm and let employees take stock in the company as a way to bring people together. He adds that entrepreneurs should be open to listening to others since a know-it-all attitude can irritate people and discourage individuals from speaking up when their boss is making a mistake.

“Entrepreneurs can really benefit from listening to the people they're working with because they also have great ideas to contribute,” Deluga says.

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