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Business Entrepreneurship
Business Entrepreneurship
Business Entrepreneurship
1. Meaning
2. Types of Entrepreneurship
3. Characteristics
4. Importance
Concept of Entrepreneurship
Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most
prominent example of entrepreneurship is the starting of new businesses.
Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and desire to establish,
administer and succeed in a startup venture along with risk entitled to it, to make profits.
The best example of entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or innovators, and bring new
ideas in the market by replacing old with a new invention.
In a nutshell, anyone who has the will and determination to start a new company and
deals with all the risks that go with it can become an Entrepreneur.
These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter,
plumber, electrician, etc. These people run or own their own business and hire family
members or local employee. For them, the profit would be able to feed their family and
not making 100 million business or taking over an industry. They fund their business by
taking small business loans or loans from friends and family.
This start-up entrepreneur starts a business knowing that their vision can change the
world. They attract investors who think and encourage people who think out of the box.
The research focuses on a scalable business and experimental models, so, they hire
the best and the brightest employees. They require more venture capital to fuel and
back their project or business.
These huge companies have defined life-cycle. Most of these companies grow and
sustain by offering new and innovative products that revolve around their main products.
The change in technology, customer preferences, new competition, etc., build pressure
for large companies to create an innovative product and sell it to the new set of
customers in the new market. To cope with the rapid technological changes, the existing
organisations either buy innovation enterprises or attempt to construct the product
internally.
Social Entrepreneurship-
This type of entrepreneurship focuses on producing product and services that resolve
social needs and problems. Their only motto and goal is to work for society and not
make any profits.
Characteristics of Entrepreneurship:
Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:
Ability to take a risk- Starting any new venture involves a considerable amount of failure
risk. Therefore, an entrepreneur needs to be courageous and able to evaluate and take
risks, which is an essential part of being an entrepreneur.
Innovation- It should be highly innovative to generate new ideas, start a company and earn
profits out of it. Change can be the launching of a new product that is new to the market or a
process that does the same thing but in a more efficient and economical way.
Visionary and Leadership quality- To be successful, the entrepreneur should have a clear
vision of his new venture. However, to turn the idea into reality, a lot of resources and
employees are required. Here, leadership quality is paramount because leaders impart and
guide their employees towards the right path of success.
Open-Minded- In a business, every circumstance can be an opportunity and used for the
benefit of a company. For example, Paytm recognised the gravity of demonetization and
acknowledged the need for online transactions would be more, so it utilised the situation and
expanded massively during this time.
Flexible- An entrepreneur should be flexible and open to change according to the situation.
To be on the top, a businessperson should be equipped to embrace change in a product and
service, as and when needed.
Know your Product-A company owner should know the product offerings and also be
aware of the latest trend in the market. It is essential to know if the available product or
service meets the demands of the current market, or whether it is time to tweak it a little.
Being able to be accountable and then alter as needed is a vital part of entrepreneurship.
Related Topics: What is Marketing Mix?
Importance of Entrepreneurship:
Creation of Employment- Entrepreneurship generates employment. It provides an entry-
level job, required for gaining experience and training for unskilled workers.
Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.
Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and promotes
facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of
homeownership. Therefore, entrepreneurship assists the organisation towards a more stable
and high quality of community life.
Increase Standard of Living- Entrepreneurship helps to improve the standard of living of a
person by increasing the income. The standard of living means, increase in the consumption
of various goods and services by a household for a particular period.
Supports research and development- New products and services need to be researched
and tested before launching in the market. Therefore, an entrepreneur also dispenses
finance for research and development with research institutions and universities. This
promotes research, general construction, and development in the economy.
Importance of Entrepreneurship
Entrepreneurship drives the growth and diversification
of the economy and contributes to the creation of
wealth. Before we get into the specifics of the role of
entrepreneurship in economic development, let’s briefly
encapsulate its significance. Entrepreneurship’s
importance lies in the following:
4. Creation of Jobs
Entrepreneurship is a pivotal driver of job creation.
Running the operations of new businesses and meeting
the requirements of customers results in new work
opportunities. Entrepreneurship also drives innovation
and competition that encourages other entrepreneurs
and investments, creating new jobs in a wide range of
industries, from manufacturing and construction to
service and technology sectors.
6. Elimination of Poverty
Entrepreneurship has the potential to lift people out of
poverty by generating employment and stimulating
economic activity. Entrepreneurship also contributes to
the development of local economies and helps improve
the overall standard of living.
7. Community Development
Entrepreneurship promotes economic growth, provides
access to goods and services, and improves the overall
standard of living. Many entrepreneurs also make a
positive impact on their communities and improve their
well-being by catering to underserved areas and
developing environment-friendly products. Their work
can help build stronger, more vibrant communities and
promote social and economic development.
By
ADAM HAYES
Reviewed by
AMY DRURY
Reviewed by Amy Drury
Full Bio
Amy is an ACA and the CEO and founder of OnPoint Learning, a financial
training company delivering training to financial professionals. She has nearly
two decades of experience in the financial industry and as a financial
instructor for industry professionals and individuals.
Learn about our Financial Review Board
Fact checked by
KATRINA MUNICHIELLO
Investopedia / Yurle Villegas
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 process of setting up a
business is known as entrepreneurship.
Entrepreneurs play a key role in any economy, using the skills and initiative
necessary to anticipate needs and bring new ideas to market.
Entrepreneurship that proves to be successful in taking on the risks of
creating a startup is rewarded with profits and growth opportunities.
KEY TAKEAWAYS
Entrepreneur
Builder
Builders seek to create scalable businesses within a short time frame.
Builders typically pass $5 million in revenue in the first two to four years and
continue to build up until $100 million or beyond. These individuals seek to
build out a strong infrastructure by hiring the best talent and seeking the best
investors. Sometimes, they have temperamental personalities that are suited
to the fast growth they desire but may make personal and business
relationships difficult.2
Opportunist
Opportunistic entrepreneurs are optimistic individuals with the ability to pick
out financial opportunities, get in at the right time, stay on board during the
time of growth, and exit when a business hits its peak.
These types of entrepreneurs are concerned with profits and the wealth they
will build, so they are attracted to ideas where they can create residual or
renewal income. Because they are looking to find well-timed opportunities,
opportunistic entrepreneurs can be impulsive.2
Innovator
Innovators are those rare individuals that come up with a great idea or
product that no one has thought of before. Think of Thomas Edison, Steve
Jobs, and Mark Zuckerberg. These individuals worked on what they loved
and found business opportunities through their vision and ideas.
Rather than focusing on money, innovators tend to care more about the
impact that their products and services have on society. These individuals are
not the best at running a business as they are idea-generating individuals, so
they often leave the day-to-day operations to those more capable in that
respect.2
Specialist
These individuals are analytical and risk-averse. They have a strong skill set
in a specific area obtained through education or apprenticeship. A specialist
entrepreneur will build out their business through networking and referrals,
sometimes resulting in slower growth than a builder entrepreneur.2
4 Types of Entrepreneurship
As there are different types of entrepreneurs, there are also different types of
businesses they create. Below are the main different types of
entrepreneurship.
Small-business
Small business entrepreneurship refers to opening a business without turning
it into a large conglomerate or opening many chains. A single-location
restaurant, one grocery shop, or a retail shop to sell goods or services would
all be examples of small business entrepreneurship.
These people usually invest their own money and succeed if their businesses
turn a profit, which serves as their income. Sometimes, they don't have
outside investors and will only take a loan if it helps continue the business.
Scalable startup
These are companies that start with a unique idea that can be built to a large
scale—think Silicon Valley. The hopes are to innovate with a unique product
or service and continue growing the company, continuously scaling up over
time. These types of companies often require investors and large amounts of
capital to grow their idea and expand into multiple markets.
Large-company
Large company entrepreneurship is a new business division created within an
existing company. The existing company may be well placed to branch out
into other sectors or it may be positioned well to become involved in new
technology.
CEOs of these companies either foresee a new market for the company or
individuals within the company generate ideas that they bring to senior
management to start the process and development.
Social entrepreneurship
The goal of social entrepreneurship is to create a benefit to society and
humankind. This form of business focuses on helping communities or the
environment through their products and services. They are not driven by
profits but rather by helping the world around them.
In the 21st century, the example of Internet giants like Alphabet, the parent
company to Google (GOOG), and Meta (META; formerly Facebook), both of
which have made their founders wildly wealthy, have been clear examples of
the lasting impact of entrepreneurs on society.
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
seven general steps that many successful entrepreneurs have followed:
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, they can move into a sales role at their 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 they can rely on when
they are faced with the inevitability of tough situations.
Say, for example, you identify that the process for making a dental
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.
Lead by example
Every entrepreneur needs to be a leader within their company. Simply doing
the day-to-day requirements will not lead to success. A leader needs to work
hard, motivate, and inspire their employees to reach their best potential,
which will lead to the success of the company.
Look at some of the greatest and most successful companies; all of them
have had great leaders. Apple and Steve Jobs, Bill Gates and Microsoft, Bob
Iger and Disney, are just a few examples. Study these people and read their
books to see how to be a great leader and become the leader that your
employees can follow by the example you set.
Entrepreneurship 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.
7 Characteristics of Entrepreneurs
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 attribute entrepreneurs 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 out
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; it's not a corporation’s bottom line. But
adhering to a few tried and true principles can go a long way in diffusing risk.
The following are a few characteristics required to be a successful
entrepreneur.
1. Versatility
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.
2. Flexibility
Few successful business 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 Chair 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.
3. Money savviness
At the heart of any successful new business, is steady cash flow, which is
essential for purchasing inventory, paying rent, maintaining equipment, and
promoting the business. The key to staying in the black is rigorous, regular
cash flow management. 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 on
board.
4. Resiliency
Running your own business is extremely difficult, especially getting one
started from scratch. It requires a lot of time, dedication, and often failure. A
successful entrepreneur must show resilience to all the difficulties on the road
ahead. Whenever they meet with failure or rejection they must keep pushing
forward.
Starting your business is a learning process and any learning process comes
with a learning curve, which can be frustrating, especially when money is on
the line. It's important never to give up through the difficult times if you want
to succeed.
5. Focus
Similar to resilience, a successful entrepreneur must stay focused and
eliminate the noise and doubts that come with running a business. Becoming
sidetracked, not believing in your instincts and ideas, and losing sight of the
end goal is a recipe for failure. A successful entrepreneur must always
remember why they started the business and remain on course to see it
through.
6. Business smarts
Knowing how to manage money and understanding financial statements are
critical for anyone running their own business. Knowing your revenues, your
costs, and how to increase or decrease them, respectively, is important.
Making sure you don't burn through cash will allow you to keep the business
alive.
Implementing a sound business strategy, knowing your target market, your
competitors, and your strengths and weaknesses will allow you to maneuver
the difficult landscape of running your business.
7. Communication skills
Successful communication is important in almost every facet of life,
regardless of what you do. It is also of the utmost importance in running a
business. From conveying your ideas and strategies to potential investors to
sharing your business plan with your employees and negotiating contracts
with suppliers—all require successful communication.
Entrepreneurship in Economics
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 2022, there were 33.2 million small businesses in the United States.9
How entrepreneurship helps economies
Nurturing entrepreneurship can have a positive impact on an economy and
society in several ways. For starters, entrepreneurs create new businesses.
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 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
Research shows that 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.
Entrepreneurs enter the market because they love what they do, believe their
product will have a positive impact, and hope to make profits from their
efforts. The steps entrepreneurs take fuel the economy; they create
businesses that employ people and make products and services that
consumers buy today.
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