Entrepreneur
Entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.
What Is an Entrepreneur?
An entrepreneur is an individual who creates a new business,
bearing most of the risks and enjoying most of the rewards. The entrepreneur is
commonly seen as an innovator, a source of new ideas, goods, services, and
business/or procedures.
Entrepreneurs play a key role in any economy, using the
skills and initiative necessary to anticipate needs and bring good new ideas to
market. Entrepreneurs who prove to be successful in taking on the risks of a
startup are rewarded with profits, fame, and continued growth opportunities.
Those who fail, suffer losses and become less prevalent in the markets.
- A person who undertakes the risk of starting a new business venture is called and entrepreneur
- An entrepreneur creates a firm, which aggregates capital and labor in order to produce goods or services for profit.
- Entrepreneurship is an important driver of economic growth and innovation.
- Entrepreneurship is high-risk, but also can be high-reward as it serves to generate economic wealth, growth, and innovation.
How Entrepreneurs Work
Entrepreneurship is one of the resources economists
categorize as integral to production, the other three being land/natural
resources, labor and capital. An entrepreneur combines the first three of these
to manufacture goods or provide services. They typically create a business
plan, hire labor, acquire resources and financing, and provide leadership and
management for the business.
Entrepreneurs commonly face many obstacles when building
their companies. The three that many of them cite as the most challenging are
as follows:
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Overcoming bureaucracy
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Hiring talent
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Obtaining financing
The Entrepreneur and Financing
Given the riskiness of a new venture, the acquisition of
capital funding is particularly challenging, and many entrepreneurs deal with
it via bootstrapping: financing a business using methods such as using their
own money, providing sweat equity to reduce labor costs, minimizing inventory,
and factoring receivables.
While some entrepreneurs are lone players struggling to get
small businesses off the ground on a shoestring, others take on partners armed
with greater access to capital and other resources. In these situations, new
firms may acquire financing from venture capitalists, angel investors, hedge
funds, crowdsourcing, or through more traditional sources such as bank loans.
Entrepreneurship Definitions
Economists have never had a consistent definition of
"entrepreneur" or "entrepreneurship" (the word
"entrepreneur" comes from the French verb entreprendre, meaning
"to undertake"). Though the concept of an entrepreneur existed and
was known for centuries, the classical and neoclassical economists left
entrepreneurs out of their formal models: They assumed that perfect information
would be known to fully rational actors, leaving no room for risk-taking or
discovery. It wasn't until the middle of the 20th century that economists
seriously attempted to incorporate entrepreneurship into their models.
Three thinkers were central to the inclusion of
entrepreneurs: Joseph Schumpeter, Frank Knight, and Israel Kirzner. Schumpeter
suggested that entrepreneurs—not just companies—were responsible for the
creation of new things in the search of profit. Knight focused on entrepreneurs
as the bearers of uncertainty and believed they were responsible for risk
premiums in financial markets. Kirzner thought of entrepreneurship as a process
that led to the discovery.
Entrepreneurs Impact the Economy
In economist-speak, an entrepreneur acts as a coordinating
agent in a capitalist economy. This coordination takes the form of resources
being diverted toward new potential profit opportunities. The entrepreneur
moves various resources, both tangible and intangible, promoting capital formation.
In a market full of uncertainty, it is the entrepreneur who
can actually help clear up uncertainty, as he makes judgments or assumes the
risk. To the extent that capitalism is a dynamic profit-and-loss system,
entrepreneurs drive efficient discovery and consistently reveal knowledge.
Established firms face increased competition and challenges from entrepreneurs,
which often spurs them toward research and development efforts as well. In
technical economic terms, the entrepreneur disrupts course toward steady-state
equilibrium.
Entrepreneurs Help Economies
Nurturing entrepreneurship can have a positive impact on an
economy and a society in several ways. For starters, entrepreneurs create new
business. They invent goods and services, resulting in employment, and often
create a ripple effect, resulting in more and more development. For example,
after a few information technology companies began in India in the 1990s,
businesses in associated industries, like call center operations and hardware
providers, began to develop too, offering support services and products.
Entrepreneurs add to the gross national income. Existing
businesses may remain confined to their markets and eventually hit an income
ceiling. But new products or technologies create new markets and new wealth.
And increased employment and higher earnings contribute to a nation’s tax base,
enabling greater government spending on public projects.
Entrepreneurs create social change. They break tradition
with unique inventions that reduce dependence on existing methods and systems,
sometimes rendering them obsolete. Smartphones and their apps, for example,
have revolutionized work and play across the globe.
Entrepreneurs invest in community projects and help
charities and other non-profit organizations, supporting causes beyond their
own. Bill Gates, for example, has used his considerable wealth for education
and public health initiatives.
Entrepreneurial Ecosystems
There is research that shows high levels of self-employment
can stall economic development: Entrepreneurship, if not properly regulated,
can lead to unfair market practices and corruption, and too many entrepreneurs
can create income inequalities in society. Overall, though, entrepreneurship is
a critical driver of innovation and economic growth. Therefore, fostering
entrepreneurship is an important part of the economic growth strategies of many
local and national governments around the world.
To this end, governments commonly assist in the development
of entrepreneurial ecosystems, which may include entrepreneurs themselves,
government-sponsored assistance programs and venture capitalists. They may also
include non-government organizations, such as entrepreneurs' associations,
business incubators, and education programs.
For example, California's Silicon Valley is often cited as
an example of a well-functioning entrepreneurial ecosystem. The region has a
well-developed venture capital base, a large pool of well-educated talent,
especially in technical fields, and a wide range of government and
non-government programs fostering new ventures and providing information and
support to entrepreneurs.
Becoming an Entrepreneur
After retiring her professional dancing shoes, Judi Sheppard
Missett taught a dance class to civilians in order to earn some extra cash. But
she soon learned that women who came to her studio were less interested in
learning precise steps than they were in losing weight and toning up. Sheppard
Missett then trained instructors to teach her routines to the masses, and
Jazzercise was born. A franchise deal followed. Today, the company has more
than 8,900 locations worldwide.
Following an ice cream making correspondence course, Jerry
Greenfield and Ben Cohen paired $8,000 in savings with a $4,000 loan, leased a
Burlington, Vt., gas station and purchased equipment to create uniquely flavored
ice cream for the local market. Twenty years later, Ben & Jerry’s hauls in
millions in annual revenue.
Although the "self-made man" (or woman) has always
been a popular figure in American society, entrepreneurship has gotten greatly
romanticized in the last few decades. In the 21st century, the example of
Internet companies like Alphabet, fka Google (GOOG) and Facebook (FB)—both of
which have made their founders wildly wealthy—people are enamored with the idea
of becoming entrepreneurs.
Unlike traditional professions, where there is often a
defined path to follow, the road to entrepreneurship is mystifying to most.
What works for one entrepreneur might not work for the next and vice versa.
That said, there are five general steps that most, if not all, successful
entrepreneurs have followed:
1. Ensure Financial Stability
This first step is not a strict requirement but is
definitely recommended. While entrepreneurs have built successful businesses
while being less than financially flush (think of Facebook founder Mark
Zuckerberg as a college student), starting out with an adequate cash supply and
ensuring ongoing funding can only help an aspiring entrepreneur, increasing his
or her personal runway and give him more time to work on building a successful
business, rather than worrying about making quick money.
2. Build a Diverse Skill Set
Once a person has strong finances, it is important to build
a diverse set of skills and then apply those skills in the real world. The
beauty of step two is it can be done concurrently with step one.
Building a skill set can be achieved through learning and
trying new tasks in real-world settings. For example, if an aspiring
entrepreneur has a background in finance, he can move into a sales role at his
existing company to learn the soft skills necessary to be successful. Once a
diverse skill set is built, it gives an entrepreneur a toolkit that he can rely
on when he is faced with the inevitability of tough situations.
3. Consume Content Across Multiple
Channels
As important as building a diverse skill set is, the need to
consume a diverse array of content is equally so. This content can be in the
form of podcasts, books, articles or lectures. The important thing is that the
content, no matter the channel, should be varied in what it covers. An aspiring
entrepreneur should always familiarize himself with the world around him so he
can look at industries with a fresh perspective, giving him the ability to
build a business around a specific sector.
4. Identify a Problem to Solve
Through the consumption of content across multiple channels,
an aspiring entrepreneur is able to identify various problems to solve. One
business adage dictates that a company's product or service needs to solve a
specific pain point—either for another business or for a consumer group.
Through the identification of a problem, an aspiring entrepreneur is able to
build a business around solving that problem.
It is important to combine steps three and four so it is
possible to identify a problem to solve by looking at various industries as an
outsider. This often provides an aspiring entrepreneur with the ability to see
a problem others might not.
5. Solve That Problem
Successful startups solve a specific pain point for other
companies or for the public. This is known as "adding value within the
problem." Only through adding value to a specific problem or pain point
does an entrepreneur become successful.
Say, for example, you identify the process for making a
dentist appointment is complicated for patients, and dentists are losing customers
as a result. The value could be to build an online appointment system that
makes it easier to book appointments.
Passion to Action
What else do entrepreneurial success stories have in common?
They invariably involve industrious people diving into things they’re naturally
passionate about.
Giving credence to the adage, “find a way to get paid for
the job you’d do for free,” passion is arguably the most important component
startup business owners must have, and every edge helps. While the prospect of
becoming your own boss and raking in a fortune is alluring to entrepreneurial
dreamers, the possible downside to hanging one’s own shingle is vast. Income
isn’t guaranteed, employer-sponsored benefits go by the wayside, and when your
business loses money, your personal assets can take a hit—not just a
corporation’s bottom line. But adhering to a few tried and true principals can
go a long way in diffusing risk.
Getting Your Hands Dirty
When starting out, it’s essential to personally handle sales
and other customer interactions whenever possible. Direct client contact is the
clearest path to obtaining honest feedback about what the target market likes
and what you could be doing better. If it’s not always practical to be the sole
customer interface, entrepreneurs should train employees to invite customer
comments as a matter of course. Not only does this make customers feel
empowered, but happier clients are more likely to recommend businesses to
others.
Personally answering phones is one of the most significant
competitive edges home-based entrepreneurs hold over their larger competitors.
In a time of high-tech backlash, where customers are frustrated with automated
responses and touch-tone menus, hearing a human voice and is one surefire way
to entice new customers and make existing ones feel appreciated—an important
fact, given that some 80% of all business is generated from repeat customers.
Paradoxically, while customers value high-touch telephone
access, they also expect a highly polished website. Even if your business isn’t
in a high-tech industry, entrepreneurs still must exploit internet technology
to get their message across. A startup garage-based business can have a
superior website than an established $100 million company. Just make sure a live
human being is on the other end of the phone number listed.
Knowing When to Change Course
Few successful businesses owners find perfect formulas
straight out of the gate. On the contrary: ideas must morph over time. Whether
tweaking product design or altering food items on a menu, finding the perfect
sweet spot takes trial and error.
Former Starbucks Chairman and CEO Howard Schultz initially
thought playing Italian opera music over store speakers would accentuate the
Italian coffeehouse experience he was attempting to replicate. But customers
saw things differently and didn’t seem to like arias with their espressos. As a
result, Schultz jettisoned the opera and introduced comfortable chairs instead.
Shrewd Money Management
Through the heart of any successful new business, venture
beats the lifeblood of steady cash flow—essential for purchasing inventory,
paying rent, maintaining equipment and promoting the business. The key to
staying in the black is rigorous bookkeeping of income versus expenses. And
since most new businesses don’t make a profit within the first year, by setting
money aside for this contingency, entrepreneurs can help mitigate the risk of
falling short of funds. Related to this, it’s essential to keep personal and
business costs separate, and never dip into business funds to cover the costs
of daily living.
Of course, it’s important to pay yourself a realistic salary
that allows you to cover essentials, but not much more—especially where
investors are involved. Of course, such sacrifices can strain relationships
with loved ones who may need to adjust to lower standards of living and endure
worry over risking family assets. For this reason, entrepreneurs should
communicate these issues well ahead of time, and make sure significant loved
ones are spiritually on board.
Questions for Entrepreneurs
Embarking on the entrepreneurial career path to “being your
own boss” is exciting. But along with all your research, make sure to do your
homework about yourself and your situation.
A Few Questions to Ask Yourself:
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Do I have the personality, temperament, and
mindset of taking on the world on my own terms?
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Do I have the required ambiance and resources to
devote all my time to my venture?
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Do I have an exit plan ready with a clearly
defined timeline in case my venture does not work?
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Do I have a concrete plan for next "x"
number of months or will I face challenges midway due to family, financial or
other commitments? Do I have a mitigation plan for those challenges?
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Do I have the required network to seek help and
advice as needed?
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Have I identified and built bridges with
experienced mentors to learn from their expertise?
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Have I prepared the rough draft of a complete
risk assessment, including dependencies on external factors?
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Have I realistically assessed the potential of
my offering and how it will figure in the existing market?
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If my offering is going to replace an existing
product in the market, how will my competitors react?
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To keep my offering secure, will it make sense
to get a patent? Do I have the capacity to wait that long?
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Have I identified my target customer base for
the initial phase? Do I have scalability plans ready for larger markets?
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Have I identified sales and distribution
channels?
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Questions That Delve into External Factors:
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Does my entrepreneurial venture meet local
regulations and laws? If not feasible locally, can I and should I relocate to
another region?
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How long does it take to get the necessary
license or permissions from concerned authorities? Can I survive that long?
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Do I have a plan about getting the necessary
resources and skilled employees, and have I made cost considerations for the
same?
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What are the tentative timelines for bringing
the first prototype to market or for services to be operational?
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Who are my primary customers?
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Who are the funding sources I may need to
approach to make this big? Is my venture good enough to convince potential
stakeholders?
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What technical infrastructure do I need?
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Once the business is established, will I have
sufficient funds to get resources and take it to the next level? Will other big
firms copy my model and kill my operation?
#Enterprenure@educatequick.com
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