An entrepreneur is a person who starts and runs a business with limited resources and planning, and is responsible for all the risks and rewards of their business enterprise. The business idea generally encompasses a new product or service rather than an existing business model.
These enterprising companies aim for high returns with an equally high level of uncertainty. The entrepreneur is willing to risk his financial security and career, spending time and capital in an uncertain venture, organizing the necessary capital, raw materials, manufacturing locations and qualified employees. Marketing, sales and distribution are other important aspects that the entrepreneur controls.
Even if some of these functions are outsourced, the entrepreneur still takes the risk. This makes entrepreneurship different from inheriting and / or managing an existing business, working for a startup or entrepreneur for a salary, being a commissioned agent, or selling goods or services already available as a franchisee or concessionaire.
- Entrepreneurs are people who undertake the organization of a new business and the risks and rewards that come with it.
- Entrepreneurs tend to be classified as those who undertake high-risk, high-growth innovations, while small business owners oversee an established business with an established product and customer base.
- Successful entrepreneurs are considered a driving force in the modern economy.
Small companies versus entrepreneurial companies
There is a fine line between being a small business owner (SB) and being an entrepreneur (the roles actually have a lot in common), but there are clear differences that set them apart. Small businesses generally deal with well-known and established products and services, while entrepreneurial businesses focus on new and innovative offerings. Because of this, small business owners tend to deal with known risks and entrepreneurs face unknown risks.
Limited growth with continued profitability is what is expected in most small businesses, while entrepreneurial companies aim for rapid growth and high profitability. As a result, entrepreneurial ventures generally impact economies and communities significantly, resulting in a cascading effect on other sectors as well, such as job creation. Small businesses are more limited in this perspective and remain confined to their own domain and group.
Myths about entrepreneurs
- Entrepreneurs take unknown and uncalculated risks without any plans. This myth is partially true; Entrepreneurs take unknown and uncalculated risks, but conserve resources and plan as much as they can to deal with the unknown.
- Entrepreneurs start a business with a revolutionary invention. This is also partially true; not all business initiatives are true breakthroughs. Most are identifying and capitalizing on a mix-and-match approach. Google didn’t invent the Internet, McDonald’s didn’t invent the cheeseburger, Starbucks didn’t invent coffee. It is the identification and capitalization of the idea and the rapid rate of growth that makes the company entrepreneurial.
- Entrepreneurs venture only after gaining significant experience in the industry. Most entrepreneurs are young, inexperienced people who follow their passion.
- Entrepreneurs complete extensive research before taking the first step. Unless an existing company establishes a new line of business on a new concept, entrepreneurs start with little or no research. However, they have a good conscience about the potential of your offering, which gives them the confidence to take the risk.
- Entrepreneurs start with enough capital. Capital is the most important requirement of any business enterprise. Most entrepreneurs fail to raise sufficient capital from outside sources unless they have somehow proven themselves or have a marketable prototype. Therefore, most entrepreneurs start with insufficient capital with the goal of getting more along the way.
Examples of entrepreneurship
Trading products, such as buying entire batches of branded shampoo at wholesale prices and selling them at retail prices in your retail store or online, does not constitute entrepreneurship. However, making your own innovative herbal shampoo, obtaining a patent, and marketing it to companies using the same sales channels qualifies as entrepreneurship.
A great example is Africa-based KickStart International (not to be confused with Kickstarter), which designs and manufactures low-cost, low-effort, high-yield irrigation products to help African farmers and end poverty. Their flagship product is MoneyMaker Max, a “high-quality human-operated foot-operated irrigation pump” and they offer a low-cost, hip-operated version. Future product plans include a starter pump and submersible solar pumps.
Offering that extra space in your home for a monthly fee is simply a rental business. Building a service-based model around this idea is a fantastic business idea.
Airbnb implemented the mix-n-match business approach to build a network of all available rentals in a given area and make them available to tourists. Without owning a single property, its innovative business model offers a win-win situation for all parties. Landlords get short-term high-paying clients (tourists) rather than long-term low-paying tenants. Tourists benefit from relatively low costs and a safe, homey stay. Airbnb benefits from service charges for offering this buyer-seller market model, controlling the sales channel without owning a single property.
Nothing in this world is free. In the first example, the entrepreneur risks the time, effort, and financial investments required to manufacture the herbal shampoo, obtain the necessary licenses, and handle legal disputes arising from consumer complaints and contests. In the latter example, the entrepreneur is responsible for ensuring a trustworthy community of homeowners willing to offer adequate facilities, as well as the responsibility for handling conflicts that arise between various parties.
What does it take to be a successful entrepreneur?
There are several theories put forward by researchers from leading institutes on entrepreneurship. There is no single model for entrepreneurship. Generally speaking, entrepreneurship stems from passion or identifying suitable business opportunities.
A person who is passionate about developing electronic circuits can (accidentally) develop a great gadget. Such a person may not necessarily have the business sense, but they are driven by sheer passion. They don’t listen to anyone, they follow their instincts, and one day they develop a highly marketable product that offers extremely high returns. They fit into the first category of passionate entrepreneurs.
An entrepreneur with keen business acumen who sees a profit opportunity with a mix-and-match approach fits into the latter category.
Regardless of the category of origin, a business idea, if well nurtured and promoted correctly, can be transformed into a very profitable business venture.