Richard Branson knows all too well about the challenges entrepreneurs face. He says one of the best things they can do to stay motivated and embrace challenges is to surround themselves with encouraging people who support their pursuits.

Now at the helm of the Virgin family of companies, Branson grew up in a nurturing environment. In his autobiography Losing My Virginity, he writes how his parents—Eve, a former flight attendant, and Ted, a lawyer—and his father's sister, Joyce, encouraged young Ricky to test his ideas and assert his independence.

Case in point: At age 4 or 5, Branson recounts his Aunt Joyce promising him 10 shillings if he could learn to swim during a two-week family trip. He flailed and failed to master swimming in the sea, but on the 12-hour drive home, he persuaded his father to stop the car and allow him one last try as they passed a river. He stripped to his underwear as he raced to the water. "I immediately felt myself sinking, my legs slicing uselessly through the water. The current pushed me around, tore at my underpants, and dragged me downstream. I couldn't breathe and I swallowed water...Then my foot found a stone and I pushed up hard." After breaking the surface, he relaxed and kicked slowly. "I could swim."

His Auntie Joyce pronounced the feat "well done" and presented a 10-shilling note. After that, Branson noticed his father was dripping wet. "He had lost his nerve and dived in after me. He gave me a massive hug. I cannot remember a moment in my life when I have not felt the love of my family."

The lively Branson clan also inspired his entrepreneurial spirit. To supplement the family income, Ted Branson's second job was to craft wooden tissue boxes and wastebaskets; Eve decorated and sold them. Her sister, Clare, bred Welsh mountain sheep to save them from extinction. Aunt Clare branched out, selling pottery decorated with black sheep and having village women knit shawls and sweaters from her black wool. Black Sheep became a brand that gave her decades of success.

Those early examples of entrepreneurship inspired young Richard. In his early teens, he and his lifelong friend Nik Powell grew Christmas trees, but unfortunately rabbits feasted on the tiny seedlings. Undeterred, Branson embarked on a venture raising budgerigars. Ted Branson reluctantly built a large aviary, and the birds reproduced in abundance. "Even after everyone in Shamley Green [his hometown] had bought at least two, we were still left with an aviary full of them." His mother, tired of cleaning the cage while her son attended boarding school, "accidentally" let them escape.

Branson's family continued to help him as he launched other endeavors. At 17, he published Student, a youth-focused magazine. Family pitched in: His mom gave him 100 pounds to help him pay the bills, and she, his dad and his sister, Lindi, hawked papers.

Meanwhile, Branson had another entrepreneurial notion. Everyone he knew listened to music, so he began selling discounted records by mail in 1970. In selecting a name, one girl on staff at Student suggested Virgin, "because we're complete virgins at business." Branson knew the name was a winner: eye-catching and with appeal that went beyond students.

In January 1971, Virgin faced doom because of a postal strike. Branson's friend Powell, brought in to manage money at Student and Virgin, determined they had to open a shop to sell records. Branson persuaded the owner of a vacant upstairs shop to let them use it free because it would attract clientele to his downstairs shoe store. Powell and Branson worked to make the shop welcoming, with free coffee and headphones for listening. Buoyed by a growing customer base, Branson had another brainstorm: a recording studio. He financed it with a gift from his parents, a bank note and a loan from Auntie Joyce.

Through his Virgin companies, Branson creates a supportive environment aimed at encouraging the best from entrepreneurs seeking to pitch their ideas. In his personal life, he and Joan, his wife of 20 years, have encouraged their children, Holly and Sam, to pursue their own passions and to dream big.

"All young people... need someone who can show them a future. They need to be able to work out what they can do with their lives, how they can enjoy their lives, how they can pay for it and how they can take responsibility for their actions," he writes in his book Business Stripped Bare. "I think it's a shame that we teach children everything about the world, but we don't teach them how to take part in the world, how to realize an idea, how to measure the consequences of their actions, how to take a knock, or how to share their success."

Read the cover story from the July 2009 issue of SUCCESS on the Virgin Entrepreneur.