Self-Employment Steps for Vocational Rehabilitation Counselors: Helping a Consumer Start a Business

Chapter 4:

Tests for Evaluating Entrepreneurial Potential

Many professionals who assist others with starting businesses report that after helping a few people start businesses, they develop a good "sense" of whether or not a person has what it takes to be a successful business owner. However, you may not work with very many self-employment cases. In order to justify your decisions and actions, you probably will feel more comfortable using a more-objective way of identifying self-employment potential.

There are many readily-available tests in magazines, on the world wide web, and in books that purport to determine whether or not an individual possesses entrepreneurial traits or is ready to start a business. Unfortunately, most have been developed primarily through interviews with successful entrepreneurs rather than business owners (business owners and entrepreneurs tend to possess different characteristics, please refer to the discussion in Chapter 2). Also few of these have been tested to validate their effectiveness. Business development and marketing professionals caution against using unvalidated tests to determine whether or not to proceed with a proposed business. Examples of these tests the, Entrepreneur's Inventory (Figure 5) and the Rate Your Entrepreneurial Potential (Figure 6) follow. These tests may be useful as a springboard for discussions about self-employment interest, skills, or for discussing characteristics or readiness. They should not be used to determine support for an individual's proposed businesses by VR. Please use caution if you decide to use them.

Before you use one, judge it for yourself using the following criteria:

Generally the questions are transparent or leading, so people who want to start a business can easily figure out the correct response and appear as if he or she possesses entrepreneurial traits.

Many of the tests require dichotomous responses - either yes-no or true-false. This is problematic because (a) if a person has done something even just one time, he or she can answer "yes"; (b) it does not measure how strong a person's trait is (e.g., a person possesses a trait but may not rate it highly on a scale of 1 to 5); and (c) there is no opportunity for a person to explain his or her answer.

Many of the traits attributed to entrepreneurs may not accurately reflect those of all entrepreneurs or business owners. Generally the traits recognized on these assessments were developed through interviews and surveys of Caucasian males between 30 and 40 years old. These assessments are culturally and sexually biased - use caution when interpreting their results.

Figure 5: Entrepreneur's Inventory

Nonstandardized Test (example 1)

This inventory helps determine your potential for success as an entrepreneur. Follow the directions for each section and for scoring the inventory.

A. Life Experience Index

Place an "X" in the box that matches your response to each statement.

	True	False
1. I have a close relative who is, or was, in business for him/herself
2. I have friends who own and operate a business.
3. I have worked in a small business where I had close contact with the owner.
4. I have owned or been a part-owner in a previous venture.
5. I have worked in a small division of a large business where I had close contact with the division chief.
6. As a child, I was involved in money-making projects such as lemonade stands, paper routes, babysitting, etc.
7. I have lived in three or more cities in my life.
8. I have been fired or quit because of disagreements with my boss.
9. I have work experience in a variety of areas.
10. I have had bosses reject my "better mousetrap" ideas.
11. I am between 30 and 40 years of age.
12. My spouse or family supports my work.
13. My subordinates respect me and work hard for me, even if they do not like me.
14. I find it easy to get along with people.
15. When a problem arises, I usually figure out a way to solve it.
16. I like to do things rather than plan things.
17. What happens to me is what I make happen, not the results of luck of fate.

B. Personality Index

Circle the number on the scale of 1-5 that corresponds to your reaction to each statement where 1 = strongly disagree and 5 = strongly agree.

Compared to others....	SD				SA
1. I have a high level of energy and drive.	1	2	3	4	5
2. I am self-confident.	1	2	3	4	5
3. I usually do not get uptight in ambiguous or uncertain situations.	1	2	3	4	5
4. I set long-term goals and stick to them.	1	2	3	4	5
5. I set realistic but ambitious goals for myself.	1	2	3	4	5
6. I like to set my own standards for performance when I undertake a task.	1	2	3	4	5
7. I like to get feedback on my performance.	1	2	3	4	5
8. I do not believe in perfect solutions, only in the best solution for the situation.	1	2	3	4	5
9. I get as much information as possible before making a decision.	1	2	3	4	5
10. I prefer games of skill over games of chance.	1	2	3	4	5
11. I do not get overly anxious about the consequences of my decisions.	1	2	3	4	5
12. I view failure as a learning experience and am not too discouraged by it.	1	2	3	4	5
13. I like solving challenging problems.	1	2	3	4	5
14. Routine and repetitive tasks bore me.	1	2	3	4	5
15. I ask for help if I need it to accomplish my goals.	1	2	3	4	5
16. My success depends on my performance.	1	2	3	4	5
17. I enjoy situations that require my initiative and depend on me for success of failure.	1	2	3	4	5
18. I am self-reliant.	1	2	3	4	5
19. I am a self-starter.	1	2	3	4	5
20. I feel money is more important as a measure of my success than for what it can buy.	1	2	3	4	5

C. Motivation/Accommodation Index

Circle the number on the scale of 1-5 that corresponds to your reaction to each statement where 1 = strongly disagree and 5 = strongly agree.

Compared to others....	SD				SA
1. I am willing to make work my first priority, ahead of my family and friends.	1	2	3	4	5
2. I am willing to invest (and possibly lose) my life savings.	1	2	3	4	5
3. I am willing to change my standard of living to accommodate the financial needs of my business.	1	2	3	4	5
4. I see building and running a business as an all-consuming way of life.	1	2	3	4	5
5. I like finding creative ways to do things.	1	2	3	4	5
6. I do not like to just do things better, I like to find new ways to do things.	1	2	3	4	5
7. I like working as a team with other people.	1	2	3	4	5
8. I feel comfortable being the boss.	1	2	3	4	5
9. I like to profit from the work of my employees.	1	2	3	4	5
10. I have a firm sense of business ethics	1	2	3	4	5
11. I value honesty, dependability, and reliability over making a quick buck as the customer's expense.	1	2	3	4	5

D. Business Readiness Index

Circle the number on the scale of 1-5 to indicate your knowledge and/or readiness in the areas addressed where 1 = low knowledge and 5 = high knowledge.

	Low				High
1. How right are the times for starting your business? How would you rate the current economic climate?	1	2	3	4	5
2. How much do you know about the operations of the kind of business you want to start?	1	2	3	4	5
3. How well do you know your goals for the size and profitability of your business in years 1-5?	1	2	3	4	5
4. How sure are you that a market exists for your product or service?	1	2	3	4	5
5. How well do you know your competition and why customers will choose you over them?	1	2	3	4	5
6. How well can you identify your target market?	1	2	3	4	5
7. How knowledgeable are you about the buying habits of your customers?	1	2	3	4	5
8. How clear are you about the amount of money you will need to start and operate your business for the first year?	1	2	3	4	5
9. How clear are you about the amount of money you will need to make from the business to support your family?	1	2	3	4	5
10. How certain are you of the amount of estimated start-up capital you can raise from your savings and other assets?	1	2	3	4	5
11. How clear are your estimates for the amount of money you will need to run the business in years 2 and 3?	1	2	3	4	5
12. How sure are you that the business can give you an adequate return on your investment of time and money?	1	2	3	4	5
13. If you could make twice as much money working for someone else as running your own business, how certain are you that you would start the business?	1	2	3	4	5
14. How would you evaluate your credit rating and financial reputation in your community?	1	2	3	4	5

Scoring Key (Entrepreneur's Inventory)

A. Life Experience: Count the number of "true" answers you gave and find your score below.

Number of TRUE's	Score for Section A
13-17	5
10-12	4
7-9	3
4-6	2
0-3	1

B, C, & D: Personality, Motivation, and Readiness: Add the circled numbers in each section and calculate their average to determine your score for B, C, & D.

B. Personality: total score_______ ÷ 20 = ______ average score

C. Motivation: total score_______ ÷ 11 = ______ average score

D. Readiness: total score _______ ÷ 14 = ______ average score

Now use the diagram below to graph your Entrepreneurial Profile:

	A Experience	B Personality	C Motivation	D Readiness
5
4
3
2
1
0

How You Stack Up

Successful entrepreneurs come in all shapes and sizes. This inventory gives you an idea of how you stack up on the factors experts think are most important. Your profile is one indicator of your readiness to start a business, but it cannot predict success. In fact, no test can tell the whole story! Whether or not you have what it takes to make it in business for yourself is ultimately UP TO YOU!

(Used with permission from Rural Entrepreneurship through Action Learning Enterprises (REAL), 115 Market Street, Suite 320, Durham, NC 27701; 919.688.7325.)

Figure 6: Rate Your Entrepreneurial Potential

Nonstandardized Test (example 2)

A. Rate Your Personal Characteristics

Rate yourself using the following scale. Give this assessment to two other people who know you well and have them rate you using this scale. Compare your answers with theirs.

Not At All									Always
1	2	3	4	5	6	7	8	9	10

Item	Rating Scale 1 to 10
1. I am a leader.
2. I like to make my own decisions.
3. Others turn to me for help with making decision.
4. I enjoy competition.
5. I have will-power and self-discipline.
6. I plan ahead.
7. I like people.
8. I get along well with others.
9. I take responsibility.
10. I complete projects and tasks, once I start them.

B. Identify Your Physical, Emotional, and Financial Status

Answer the following questions. Give this to two other people who know you well and have them answer the questions about you as well. Compare your answers with theirs.

How many hours a day can you work? _____

Will you work on Sundays and holidays? _____

Use the following rating scale to answer the next set of questions.

Strongly Agree									Strongly Disagree
1	2	3	4	5	6	7	8	9	10

Item	Rating Scale 1 to 10
1. I have the physical stamina to work long hours.
2. I am prepared for the emotional strain of running my own business.
3. I am able to temporarily lower my standard of living if needed.
4. I am willing to borrow to fund my business.
5. I am prepared to invest my own money and capital in the business.

Use the following rating scale to answer the next set of questions.

No Support									A Great Deal of Support
1	2	3	4	5	6	7	8	9	10

Item	Rating Scale 1 to 10
1. My immediate family will provide emotional support.
2. My immediate family will participate in running the business (e.g., ordering, bookkeeping).
3. My immediate family will take on household duties if I am unable to do them because of the business.

Scoring Key (Rate Your Entrepreneurial Potential)

Add the scores for the "Characteristics" and the "Physical Emotional, and Financial Status" scales separately. There is no definitive way to score these scales - they are open to interpretation. Talk with the consumer about the answers and scores and how to realistically interpret them as they apply to the potential business. For example, you might say that a person who scores in the 90th percentile shows "very good" potential, and one scoring in the 80th percentile shows "good" potential. Scores below 80% of the total might indicate areas that need improvement before the individual pursues starting a business.

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