Entrepreneur: what it means to be one and how to start (2023)

What is an entrepreneur?

An entrepreneur is a person who starts a new business, taking the most risks and enjoying the most rewards. The process of starting a business is known asentrepreneurship. The entrepreneur is generally viewed as an innovator, the source of new ideas, goods, services and businesses/or processes.

Entrepreneurs play a key role in any economy, using the necessary skills and initiative to anticipate needs and bring good new ideas to market. Entrepreneurship that manages to take the risk, aBeginningYou will be rewarded with profit, fame and opportunities for further growth. The failure of ventures results in losses and reduced market prevalence for those involved.

How does the endeavor work?

Entrepreneurship is one of the resources that economists classify as an integral part of production, the other three being land/natural resources, labor and capital. An entrepreneur combines the first three to produce goods or provide services. They usually create oneBusiness plan, hire workers, obtain resources and finance, and provide leadership and management for the company.

Entrepreneurs often face many obstacles while building their business. The three that many of you cite as the biggest challenges are the following:

1. bypass bureaucracy
2. recruit talent
3. to obtain funding

Economists have never had a coherent definition of "entrepreneur" or "entrepreneurship" (the word "entrepreneur" comes from the French verbtake, meaning "to undertake"). Although the concept of the entrepreneur has existed and been known for centuries, the classic andneoclassical economistsIt took entrepreneurs out of their formal models: they assumed perfectly rational actors would have perfect information and left no room for risk-taking or discovery. It was not until the mid-20th century that economists made a serious attempt to include entrepreneurship in their models.

Three thinkers were fundamental to entrepreneurial inclusion: Joseph Schumpeter, Frank Knight, and Israel Kirzner.Schumpeter suggested that entrepreneurs, not just corporations, were responsible for creating new things in the pursuit of profit. Knight focused on entrepreneurs as carriers of uncertainty and believed that they were responsible for risk premiafinancial markets. Kirzner viewed entrepreneurship as a process that leads to discovery.

types of entrepreneurs

Not all entrepreneurs are the same and not all have the same goals. These are some types of entrepreneurs:

constructor

Builders want to build scalable businesses in a short amount of time. Builders typically spend $5 million in revenue in the first two to four years and continue to accumulate up to $100 million or more. These people want to build strong infrastructure by hiring the best talent and finding the best investors. They have high-spirited personalities suited to the rapid growth they desire, but can make personal and business relationships difficult.

opportunistic

Opportunistic entrepreneurs are optimistic people with the ability to spot financial opportunities, jump in when the time is right, stay on board during boom periods, and exit when business peaks.

This type of entrepreneur is interested in the profits and wealth they will generate, so they are drawn to ideas that will help them build or renew residual income. Seeking opportunistic opportunities, opportunistic entrepreneurs can be impulsive.

innovative

Innovators are the rare people who have a great idea or product that no one has thought of before. Think Thomas Edison, Steve Jobs and Mark Zuckerberg. These people worked on what they loved and found business opportunities through it.

Instead of focusing on money, innovators care more about the impact of their products and services on society. These people are not the best to run a business as they are idea generators; Therefore, they often leave day-to-day operations to those best suited in this regard.

specialist

These individuals are analytical and risk-averse. They have distinct skills in a particular area, acquired through education or training. A seasoned entrepreneur builds their business through networking and referrals, resulting in slower growth than a contractor.

4 types of entrepreneurship

Just as there are different types of entrepreneurs, there are also different types of businesses they start. Below are the main different types of entrepreneurship.

small business

small businessIt's the idea of ​​starting a business without making it a big conglomerate or opening many networks. A restaurant, grocery store, or retail store where you sell your artisan products would be examples of small business entrepreneurship.

These people usually invest their own money and are successful when their business generates a profit on which they live. They have no external investors and only accept loans if they help to continue the business.

scalable home

They are companies that start from a single idea; Think Silicon Valley. The hope is to innovate with a unique product or service and allow the company to continue to grow and continuously expand over time. This type of business often requires investors and large amounts of capital to expand your idea and reach multiple markets.

large companies

Large Business Entrepreneurship is a new business area created within an existing company. The existing company may be well positioned to diversify into other industries, or it may be well positioned to enter new technologies.

The CEOs of these companies envision a new market for the company or people within the company come up with ideas that lead to senior management starting the process.

social entrepreneurship

The goal ofsocial entrepreneurshipis to create benefit for society and humanity. They focus on helping communities or the environment through their products and services. They are not motivated by profit but by helping the world around them.

This is how you become an entrepreneur

After giving up her professional dancing shoes, Judi Sheppard Missett became a businesswoman, teaching dance to civilians to earn some extra money. But she soon found that the women who came to her were less interested in learning precise steps and more interested in losing weight and getting toned. Sheppard Missett then trained instructors to teach his routines to the crowds and Jazzercise was born. AFranchisefollowed the agreement. Today the company has more than 8,300 locations around the world.

After taking a correspondence course in ice cream making, two entrepreneurs, Jerry Greenfield and Ben Cohen, saved $8,000 on a $4,000 loan, rented a gas station in Burlington, Vermont, and purchased equipment to make uniquely flavored ice cream for the market .Today, Ben & Jerry's makes millions in revenue every year.

While the self-made person has always been a popular figure in American society, entrepreneurship has become quite romanticized in recent decades. In the 21st century, the example of internet companies like Alphabet, formerly Google (GUT),and target (META), formerly Facebook, which made its founders incredibly wealthy, got people excited about the idea of ​​becoming an entrepreneur.

Unlike traditional professions where there is often a set path, the path to entrepreneurship is confusing for most. What works for one entrepreneur may not work for another and vice versa. That being said, there are seven general steps that most if not all successful entrepreneurs have followed:

Ensure financial stability

This first step is not mandatory, but it is definitely recommended. While entrepreneurs have built successful businesses without being financially prosperous (think Facebook, now Meta, founder Mark Zuckerberg as a college student), starting a decent cash supply and securing ongoing funding can only help an aspiring entrepreneur grow his personal Grow and Give Advantage You'll have more time to work on building a successful business instead of worrying about making a quick buck.

Build a diverse skill set

Once a person has strong finances, it is important to develop diverse skills and apply them in the real world. The beauty of step two is that it can be done at the same time as step one.

Building a skill set can be achieved throughTo learnand try new tasks in real environments. For example, if an aspiring entrepreneur has a background in finance, they could take on a sales role in their existing company to learn the soft skills needed to succeed. Once a diverse range of skills is built, it provides the entrepreneur with a tool kit to rely on when confronted with inevitable difficult situations.

There has been much debate as to whether it is necessary to go to college to become a successful entrepreneur. Many famous entrepreneurs are famous college dropouts: Steve Jobs, Mark Zuckerberg, and Larry Ellison to name a few.

While a college degree isn't necessary to build a successful business, it can teach young people a lot about the world in many other ways. And these famous college dropouts are the exception rather than the rule. College may not be for everyone and the choice is personal, but it's something to think about, especially with the high price of a US college education.

It is not true that a specialization in entrepreneurship is necessary to start a business. People who have built successful businesses specialize in many different subjects, and as a result can open your eyes to a different mindset that can help you build your business.

Consume content across multiple channels

As important as it is to develop diverse skills, so is the need to consume a wide range of content. This content can be in the form of podcasts, books, articles or lectures. It is important that the content, regardless of the channel, is varied in the way it is addressed. An aspiring entrepreneur should always familiarize themselves with the world around them so they can see industries from a fresh perspective, giving them the opportunity to build a business around a specific causeSector.

Identify a problem to solve

By consuming content across multiple channels, an aspiring entrepreneur can identify multiple problems to solve. A business adage dictates that a company's product or service must address a specific pain point; either for another company or for a group of consumers. By identifying a problem, an aspiring entrepreneur can build a business to solve that problem.

It's important to combine steps three and four so that it's possible to identify a problem to solve by looking at different industries as an outsider. This often gives an aspiring entrepreneur the ability to see a problem that others cannot.

solve this problem

Successful startups solve a specific problem for other companies or the public. This is referred to as “add value to the problem”. Only by adding value to a specific problem or pain point can an entrepreneur be successful.

For example, let's say you realize that booking a dentist appointment is cumbersome for patients and dentists are losing clients as a result. The value can be in creating an online scheduling system that makes scheduling easier.

network like crazy

Most entrepreneurs cannot do this alone. The business world is cruel and getting help will always help and reduce the time it takes to build a successful business. Networking is key for any new entrepreneur. Finding the right people to put you in touch with in your industry, e.g. Having the right vendors, funders, and even mentors can mean the difference between success and failure.

Attending conferences, emailing and calling people in the industry, talking to your cousin's friend's brother who is in a similar business will help you get out into the world and discover people to lead . Once you get your foot in the door with the right people, running a business becomes so much easier.

Lead by example

Every entrepreneur has to be a leader in his company. Merely fulfilling the daily requirements does not lead to thissuccess. A leader must work hard, motivate and inspire their employees to reach their best potential, which leads to the success of the company.

Check out some of the biggest and most successful companies; They all had great leaders. Apple and Steve Jobs, Bill Gates and Microsoft, Bob Iger and Disney, etc. Study these people and read their books to see how you can be a great leader and become the leader who inspires your people by example that you can give them follow.

corporate finance

Given the risk involved in starting a new business, raising equity is a particular challenge and many entrepreneurs deal with this by starting: funding a business using methods such as using their own money, providingsweat equityReduce labor costs by minimizing inventory and factoring accounts receivable.

While some entrepreneurs are single players struggling to build small businesses in ashoelacesOthers hire partners with better access to capital and other resources. In these situations, startups may receive funding from venture capitalists, angel investors, hedge funds, crowdfunding, or through more traditional sources such as bank loans.

Resources for Entrepreneurs

Various sources of funding are available for entrepreneurs starting their own business. Get a small business loan throughSmall business administration(SBA) can help entrepreneurs get their business up and running with affordable credit. The SBA helps connect businesses with credit providers.

When entrepreneurs are willing to give up some of their venture capital, they can find funding in the form of business angels and venture capitalists. These types of investors also offer advice, guidance, and connections that go beyond just capital.

cooperative fundingIt has also become a popular method for entrepreneurs to raise capital, particularly throughKickstarter. An entrepreneur creates a page for their product and a financial goal to achieve while promising specific rewards such as products or experiences to donors.

Startups for Entrepreneurs

Bootstrapping refers to building a business using only your savings as an entrepreneur and the initial sales you make with your business. This is a difficult process as all financial risk lies with the entrepreneur and there is little room for error. If the business fails, the entrepreneur can also lose all his life savings.

The benefit of bootstrapping is that an entrepreneur can run the business with their own vision and without outside interference or investors demanding quick profits. That being said, getting help from a third party can sometimes help a business instead of harming them. Many companies havesuccessful with boatsstrategy, but it is a difficult path.

Small Business x Entrepreneurship

A small business and entrepreneurship have a lot in common, but they are different. A small business is a business typically aone-man businessor a company that is not medium or large, operates locally and does not have access to a large amount of resources or capital.

Entrepreneurship is when a person who has an idea acts on that idea, usually to disrupt the current market with a new product or service. Entrepreneurship usually starts as a small business, but the long-term vision is much larger, looking for high profits and conquering the market with a new innovative idea.

How do entrepreneurs make money?

Entrepreneurs make money like any business: they strive to generate revenue that is greater than the costs. The goal is to increase sales and this can be achieved through marketing, word of mouth and networking. It is also important to keep costs down as this will lead to higher resultsprofit margins. This can be achieved through efficient operations and eventuallyeconomies of scale.

Taxes for Entrepreneurs

The taxes you have to pay as an entrepreneur depend on how you structure your business.

sole proprietorship:A company created in this way is an extension of the individual. Business income and expenses are reported on Appendix C of your personal income tax return and are taxed at your individual tax rate.

camaraderie:A partnership works like a sole proprietorship for tax purposes, with the difference that income and expenses are shared among the partners.

C-Corporation:A C corporation is a separate legal entity and has separate taxes that are filed with the IRS by the business owner. Business income is taxed at the corporation tax rate instead of the personal income tax rate.

Limited Liability Company (LLC) oder S-Corporation:Both of these options are taxed the same as a C corporation but generally at lower rates.

7 characteristics of entrepreneurs

What else do business success stories have in common? They invariably involve hardworking people immersed in things they are naturally passionate about.

True to the adage, "Find a way to get paid for work you'd do for free," passion is arguably the most important ingredient new business owners should have, and all the perks help with that.

While the prospect of becoming your own boss and making a fortune is attractive to entrepreneurial dreamers, the potential downside of hanging your own mosaic is huge. Income is not guaranteed, employer-sponsored benefits are overlooked, and if your business loses money, your personal wealth may suffer; not just the financial results of a company. But adhering to a few tried and true principles can go a long way towards spreading risk. Below are somefeaturesnecessary to be a successful entrepreneur.

1. Versatile

In the beginning, it's important to handle sales and other customer interactions in person whenever possible. Direct customer contact is the easiest way to get honest feedback on what your target market likes and what you could do better. If it's not always practical to be the only interface to the customer, employers should train their employees to accept customer feedback as second nature. This not only makes customers feel empowered, but more satisfied customers are also more likely to recommend companies to others.

Personal answering is one of the most significant competitive advantages work-from-home entrepreneurs have over their larger competitors. In an era of high-tech backlash, when customers are frustrated by autoresponders and sound menus, hearing a human voice is a surefire way to attract new customers and make existing customers feel valued; an important fact since around 80% of all business is generated by regular customers.

Paradoxically, while customers expect a high-end dial-up, they also expect a sophisticated website. Even if your business isn't in a high-tech industry, entrepreneurs still need to use internet technology to get their message across. A garage startup may have a bigger website than an established $100 million company. Just make sure there's a live human on the other end of the phone number listed.

2. flexible

Few successful entrepreneurs find perfect formulas from the start. On the contrary: ideas have to change over time. Whether it's tweaking product design or changing items on a menu to find the perfect sweet spot, trial and error is required.

Former Starbucks chairman and CEO Howard Schultz initially thought that playing Italian opera music through the store's speakers would punctuate the Italian cafe experience he was trying to reproduce. But customers saw things differently and didn't seem to like arias with espresso. As a result, Schultz abandoned opera and introduced comfortable chairs.

3. Smart money

At the heart of any successful new business, a business is the lifeblood of a steady cash flow, which is essential to purchasing inventory, paying rent, maintaining equipment and promoting the business. The key to staying in the black is rigorous accounting of income and expenses. And since most new businesses don't turn a profit in their first year, entrepreneurs can help mitigate the risk of running out of funds by setting money aside for that emergency. In this context, it is important to separate personal and business expenses and never use business funds to cover the expenses of daily living.

Of course, it's important that you pay yourself a realistic salary that will cover the basic necessities, but not much more; especially when investors are involved. Of course, such sacrifices can strain relationships with loved ones, who may have to adjust to lower living standards and worry about risking family fortunes. Because of this, business owners need to communicate these issues early and make sure their significant ones are mentally on board.

4. Persistent

Running your own business is extremely difficult, especially when you start from scratch. It takes a lot of time, dedication and failure. A successful entrepreneur must show resilience to any difficulties along the way. Whenever you face failure or rejection, you need to keep going.

Starting your business is a learning process, and every learning process comes with a learning curve that can be frustrating, especially when money is involved. It is important to never give up in difficult times if you want to be successful.

5. Focused

Like resilience, a successful entrepreneur must stay focused and overcome the noise and doubt that comes with running a business. Getting distracted, not believing 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 stay on course to see it through.

6. Smart business

Knowing how to manage money and understanding financial statements is essential for anyone running their own business. It is important to know your income and expenses and how to increase or decrease them. Making sure you don't spend money can help keep the business alive.

Executing a solid business strategy, knowing your target market, your competitors, and your strengths and weaknesses will enable you to navigate the difficult landscape of running your business.

7. Communicator

Successful communication is important in almost every area of ​​life, regardless of what you do. It is also of paramount importance in running a business. From communicating your ideas and strategies to potential investors, to relaying your business plan to your employees, to negotiating contracts with vendors, successful communication is required.

Entrepreneurship in Business

In the language of economists, an entrepreneur acts as a coordinating agent in acapitalist economy. This coordination takes the form of redirecting resources to new potential profit opportunities. the entrepreneurit movesdiverse, tangible and intangible resources, promoting capital formation.

In a market full of uncertainty, it is the entrepreneur who can really help to clarify the uncertainty by making judgments or taking risks. Because capitalism is a dynamic system of gain and loss, entrepreneurs drive efficient discovery and consistently reveal knowledge.

Established companies face increasing competition and challenges from entrepreneurs, which often also drives them to undertake research and development efforts. From a technical and economic point of view, the businessman makes it difficult for himselfstationary equilibrium.

How entrepreneurship helps the economy

The promotion of entrepreneurship can apositive impact on the economyand a society in many ways. First of all, entrepreneurs create new businesses. They invent goods and services, resulting in jobs, and often create a domino effect that leads to more and more development. For example, after some IT companies were established in India in the 1990s, companies in related sectors also started to develop, such as call center operations and hardware vendors offering support products and services.

Add Entrepreneurgross national income. Existing companies may remain confined to their markets and eventually reach a sales ceiling. But new products or technologies create new markets and new prosperity. And more jobs and higher incomes add to a nation's tax base and allow for more government spending on public projects.

Entrepreneurs create social change. They break with tradition with unique inventions that reduce reliance on existing methods and systems, sometimes rendering them obsolete. Smartphones and their applications, for example, have revolutionized work and leisure around the world.

Entrepreneurs invest in community projects and help charities and other not-for-profit organizations by supporting causes outside of their own.Bill GatesFor example, he used his considerable wealth for educational and health initiatives.

Entrepreneurial Ecosystems

Research shows that high levels of self-employment can stunt 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. In general, however, entrepreneurship is a fundamental driver of innovation and economic growth. Therefore, promoting entrepreneurship is an important part of the economic growth strategies of many local and national governments around the world.

To this end, governments often support the development of entrepreneurial ecosystems, which may include entrepreneurs themselves, government-sponsored aid programs, and venture capitalists. They may also include non-governmental organizations such as business associations, business incubators and educational programs.

for example californiaSilicon Valleyit is often cited as an example of a well-functioning business ecosystem. The region has a well-developed venture capital base, a large pool of qualified talent, particularly in technical fields, and a wide range of governmental and non-governmental programs that encourage new businesses and provide information and support for entrepreneurs.

Questions for Entrepreneurs

The entry into the entrepreneurial career of “being your own boss” is exciting. But make sure to do your homework on yourself and your situation alongside all your research.

Some questions to ask yourself:

• Do I have the personality, temperament and mindset to face the world on my own terms?
• Do I have the environment and resources to devote all my time to my business?
• Do I have an exit plan with a clearly defined timeline in case my business collapses?
• Do I have a concrete plan for the next “x” months or will I face challenges along the way due to family, financial or other commitments? Do I have a mitigation plan for these challenges?
• Do I have the network to seek help and advice when needed?
• Have I found and built bridges to experienced mentors to learn from their experiences?
• Have I prepared a full draft risk assessment, including dependencies on external factors?
• Have I realistically assessed the potential of my offer and how does it fit into the existing market?
• If my offering is designed to replace an existing product on the market, how will my competitors react?
• Does it make sense to get a patent to protect my offer? can i wait that long
• Have I identified my target customer base for the initial phase? Do I have scalability plans for larger markets?
• Have I identified the sales and distribution channels?

Questions dealing with external factors:

• Does my business comply with local laws and regulations? If it is not feasible locally, can and should I move to another region?
• How long does it take to get the necessary licenses or permits from the relevant authorities? Can I survive that long?
• Do I have a plan to obtain the necessary resources and qualified personnel and have I considered the costs involved?
• What are the tentative deadlines to launch the first prototype or have the services live?
• Who are my main customers?
• What are the sources of funding I may need to address to get this big? Is my company good enough to convince potential stakeholders?
• What technical infrastructure do I need?
• Once the business is formed, will I have enough money to raise funds and take it to the next level? Will other big companies copy my model and shut down my operations?

Conclusion

An entrepreneur is a person who takes an idea or product and creates a business, a process known as entrepreneurship. Starting a business takes a lot of work and dedication that not everyone is prepared for. Entrepreneurs are highly motivated risk-takers who have a vision and sacrifice a lot to get it.

Entrepreneurs enter the market because they love what they do, because they believe their product will have a positive impact, and because they hope to benefit from their efforts. The steps entrepreneurs take feed the economy; They create companies that employ people and make products and services that consumers buy.