Unless you’ve been living under a rock for the past 50 years, you have probably heard of the following people: Bill Gates, Emily Weiss, Reshma Saujani, and Arianna Huffington.
What do all of these people have in common: they all hold the title of entrepreneur.
What’s interesting about the people listed above is that they all work in different industries: news, technology, cosmetics, and more. All of these different types of businesses, and their founders all hold the same title. So, what is an entrepreneur?
A lot of businesspeople consider themselves to be entrepreneurs when they really aren’t, and true entrepreneurs might not even know that they fit the description. To avoid any further confusion, let’s go ahead and define what an entrepreneur is.
What is an entrepreneur?
An entrepreneur is someone who organizes, manages, and assumes the risks of starting a business or enterprise. Entrepreneurship is the act of being an entrepreneur through innovation in the hope of making a profit.
Only people that have a deep enough understanding of an industry and the economy to create worthwhile opportunities can be successful entrepreneurs. Entrepreneurs play a big part in the health of the economy and the various markets within it.
They combine their knowledge of the economy and a particular industry with new technologies and innovations to introduce an entirely new product or service. Their end goal is not only to see a profit but also to help the economy thrive.
Entrepreneurs need to be masters at analyzing the risk of a certain business venture and can benefit from simulating investment scenarios with financial risk management software.
Even though successful entrepreneurs are in tune with the economy, that doesn’t mean they always introduce something worthwhile. There are some entrepreneurs that see success from the risk of starting a business, but there are also plenty that fail.
There are plenty of reasons why new businesses don’t make it, and the most common ones for entrepreneurs are lack of funding, bad decision-making, economic crisis, and lack of demand. Not to mention that a business can suffer from all of the above.
From that, you can tell that attempting to become a successful and self-made entrepreneur is not for the faint of heart. It is a high-risk high-reward situation.
The basics of entrepreneurship
Since an entrepreneur is someone that designs a new business, entrepreneurship is the act of launching, establishing, and running it.
There are four categories of resources that economists see as crucial to production: natural resources, labor, capital, and, you guessed it, entrepreneurship. What makes entrepreneurs unique is that they use the other three resources to start a business. To become an entrepreneur, four things need to happen:
|1. There is an opportunity to combine resources, labor, and capital to make a profit
|2. The person that recognizes that opportunity is able to understand that there is an opportunity and access those things
|3. That person takes on a financial risk
|4. The person is able to bring people and resources together into a business
And, of course, that entrepreneur must follow the typical steps of starting a business to launch that game-changing product or service eventually.
Types of entrepreneurship
There are four main types of entrepreneurship. These are not the only types but the most common ones observed.
Small business entrepreneurship
Small business entrepreneurship is the act of starting and running a small business. Small business entrepreneurs are individuals who are willing to invest hard-earned money into their ideas, ventures, companies, or projects. These individuals take calculated risks in the hopes of growth and success.
EXAMPLE: A freelance graphic designer or personal trainer may choose to create their own small business to advertise their services.
Scalable startup entrepreneurship
Scalable startup entrepreneurship refers to the ability to scale, adapt or market a product or service to many people at once through the use of technology. In some cases, scalable startups are built around a product that can be sold repeatedly, with new clients purchasing the product as needed. This is often the case for software or technology companies that require some level of customer interaction to succeed.
EXAMPLE: Amazon began as a place to purchase books and is now a large market with nearly every type of product available. They continue to scale as they create brick-and-mortar stores.
Large company entrepreneurship
Large company entrepreneurs are people who have an entrepreneurial spirit, but already work within established large companies. Large company entrepreneurs often use their connections at their company to gain access to resources required for starting a new business or acquiring an existing one.
EXAMPLE: Google is one of the largest companies that keep that entrepreneurial spirit by constantly collecting feedback and adjusting their product and services accordingly.
Social entrepreneurship is the pursuit of social and environmental impact alongside personal financial gain. Entrepreneurial values are at the heart of social entrepreneurship, and entrepreneurs use business strategies to solve social problems. Social entrepreneurship offers individuals the opportunity to apply their business skills without sacrificing their personal values and sense of community.
EXAMPLE: While Ben & Jerry's sells delicious ice cream, they have also made it clear that social change is a huge mission of theirs. To this day, the company consistently donates to foundations supporting LGBTQ+ rights, environmental issues, and other deserving charities.
5 traits of an entrepreneur
Anyone can attempt to be a successful entrepreneur, but that doesn’t mean that everyone has what it takes to pull it off. There are five key traits that every entrepreneur must have to make it in today’s economy.
Entrepreneurs cannot be successful without in-depth knowledge of the industry they wish to start a business in, usually gained the hard way: experience. More often than not, entrepreneurs have left the security of their jobs to struggling to make it. What keeps them going, you ask? Passion.
Entrepreneurs must be passionate about their business idea. If they aren’t, they can’t expect investors, employees, or customers to be. Getting a business off the ground is a lot of work, and most of the time, entrepreneurs are working long hard hours without much payoff. At the end of the day, their passion is what pushes them to success.
If I were to guess, I would say there has never been an entrepreneur immune to failure. And there probably never will be.
Every business idea is prone to fail in one way or another, and every entrepreneur knows that failure is not an option. To be successful in their field, entrepreneurs must be resilient. They are going to get a lot of pushback and run into a lot of obstacles. It’s simply a part of the job.
Aspiring entrepreneurs can’t expect to succeed if their business plan is nearly identical to other businesses in the market. They need to apply creative, out-of-the-box thinking to not only bring something new and innovative to the market but also to find ways to improve collaboration, production, and communication in the workplace.
The flip side of creativity is practicality. An idea without a potential customer is a failure waiting to happen. That’s why even the most creative minds need to approach their new ventures with a business mindset.
Entrepreneurs need to not only have access to the resources to start a business, but they also need to have the strategic mind to make their business model come alive. A true entrepreneur will strategically recognize opportunities, identify challenges, ask questions, find creative solutions, and overall, be a forward thinker.
Entrepreneurs need to think big picture. If they focused too heavily on the day-to-day, where they will constantly have to leap over hurdles, solve problems and accept certain defeats, they would never succeed. This not only includes keeping their eye on the prize but also understanding where the industry is going, potential challenges for their business, and overall long-term goals and initiatives.
The relationship between entrepreneurs and capitalism
Entrepreneurs feed capitalist economies. When every industry is controlled by private companies looking to make a profit, a small number of people hold a majority of the money in the economy. The people with that money are the ones that fund entrepreneurs who will further contribute to capitalism, creating an endless cycle of investing money and seeing a return.
Enter entrepreneurial capitalism. Entrepreneurial capitalism is the private capital that is invested in private startups in the hopes of generating profit.
New innovations, and businesses, as a result of them, are constantly being introduced by entrepreneurs, increasing competition, uncertainty, and profit opportunities in almost every industry. Basically, for every entrepreneur that successfully enters a market, more gas is thrown on the capitalism fire.
The best way to get started with your own entrepreneurship journey is to learn from the success of others. Check out some of the most famous entrepreneurs in history.
- Walt Disney started by drawing doodles on a farm. After finding a passion for cartooning, Disney opened his own animation studio. Disney's name has become an empire with movies, television shows, music, theme parks, and more.
- After becoming an orphan at age 12, Coco Chanel taught herself how to sew. While working as a seamstress, she became passionate about clothing and fashion. Today, her empire continues to thrive, with her namesake brand tied to fashion stores, perfumes, jewelry, and handbags.
- After becoming a famous basketball player, Michael Jordan decided to try his hand at entrepreneurship. Jordan partnered with a shoe company, Nike, to create a brand of shoes that was fit for an MVP. The Air Jordans continue to be a sought-after shoe for athletes of all ages and other fans alike.
- Co-founder of Cloudflare, Michelle Zatlyn, started with the mission of creating a tool to help with email spam. Cloudflare has now grown into an extremely popular service that protects users and websites from various forms of virtual attacks. Zatlyn still sits as the Chief Operating Officer.
- Bill Gates, aka one of the richest men in the world, is an entrepreneur who led the revolution of personal computers. Gates's love of computer programming at a young age brought him to create Microsoft, the largest computer company in the world.
Work that entrepreneurial spirit
A lot of people think they have what it takes to be an entrepreneur: the idea of the century and the know-how to make it succeed. Most people would find themselves mistaken, especially after that five-year mark.
However, that fairy tale happy ending (from a business standpoint) is not unattainable. If you have extensive knowledge of the economy and a product or service consumers won’t be able to resist, you might have what it takes.
Looking to prepare for the potential monetary needs of your new company? Learn more about small business financial planning.
This article was originally published in 2019. It has been updated with new information and examples.