If you’ve been thinking about starting your own business lately, you’re not alone. Americans began launching ventures in record numbers during the COVID-19 pandemic, with an above-trend pace continuing through 2023.
Unfortunately, many of these enterprises won’t last long: 30% of new businesses fail within two years, and half don’t last past five, according to the Small Business Administration. While some of these unlucky founders will pursue new ventures, others will try to rejoin the traditional labor force.
You can’t blame them. People often see “going back to work” as a safety net for risk-taking entrepreneurs. As professors of management who study entrepreneurship, we wanted to see if this was true.
So we surveyed more than 700 hiring professionals to determine whether founders really can get new jobs that easily, as well as seven former entrepreneurs who made the transition back into the workforce.
We found that former business owners were less likely to get interviews compared with applicants with only traditional experience. This was true regardless of whether they had sold or closed their businesses.
Why do employers hesitate to take a chance on former business owners?
It starts at the earliest stages, with the recruiters who screen people to be considered for interviews. We found that recruiters worried that entrepreneurs would jump ship to start their own companies. This is a problem for employers since hiring is a long, expensive process that can take a long time to pay off.
One recruiter told us, “I am looking for candidates that will be long-term employees, as we invest quite a bit into each hire. When I interview people, it is generally a red flag if they say they want to start their own business or already have a business on the side.”
A related fear: a worker who leaves to start a new venture might be tempted to poach talent, clients and tactics from their old employer.
Recruiters were also concerned that spending time as your own boss can make it difficult to adapt to a lower place on the organizational hierarchy.
They also raised issues of job fit, questioning whether ex-entrepreneurs’ knowledge and abilities would translate to traditional work. In addition, for entrepreneurs who have worked alone, it can be difficult for recruiters to know how well they’ll perform with others.
Our research also offers insights that organizations can use to improve their applicant pool – and that enterprising job seekers can use to boost their odds.
Our study found that former entrepreneurs face less bias when they apply to roles that seem entrepreneurish. So, for example, they’re more likely to land interviews when applying for positions with autonomy.
For their part, ex-entrepreneur job applicants would be wise to highlight in-demand aspects of their work history. Former entrepreneurs should emphasize their many valuable characteristics – such as being passionate and creative – that contribute to innovation.
The lack of a traditional employment history may create obstacles for entrepreneurs trying to rejoin the workforce. Recruiters who overlook their value risk missing out on strong candidates.
Jacob A. Waddingham is an assistant professor of management at Texas State University. Miles Zachery is an associate professor of management and entrepreneurship at Auburn University. Distributed by The Associated Press.
