Small Business Advice

What does it mean to be an entrepreneur?

What does it truly mean to be an entrepreneur? Our article examines this question and also goes over different types of entrepreneurs and the skills required.

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The U.S. is the most entrepreneurial country in the world1, ranking ahead of Germany, the U.K., Japan and other countries. It’s perhaps the reason why there are over 31 million entrepreneurs in America, making up 16% of the entire workforce2.

Part of the reason why the U.S. has many successful entrepreneurs is that it has policy initiatives that encourage entrepreneurship. These include favorable tax policies, less restrictive state and federal regulations, fairly low startup costs, and legal protection3.

That’s to say, if you have an entrepreneurial spirit, there’s no better place to be than in the U.S. But what does it mean to be an entrepreneur? How can you build a successful business in America or anywhere else for that matter? We cover everything you need to know about entrepreneurship and being your own boss.

Key takeaways

  • An entrepreneur is someone who starts a new business or creates a new product and assumes most of the risk while also enjoying the rewards that come with it.
  • There are four types of entrepreneurs, namely innovators, builders, opportunists and specialists.
  • Similarly, there are four types of entrepreneurships, namely small business, scalable, large company and social entrepreneurships.
  • Some of the skills required to start and run a successful venture include problem-solving, flexibility, financial, resilience and communication skills.

What is an entrepreneur?

The word ‘entrepreneur’ refers to a person who creates and operates a new business, taking on most of the risk and enjoying the rewards. This process of creating a startup is known as entrepreneurship. Economists usually categorize it as one of the four factors of production, along with capital, labor, and land (or natural resources).

An entrepreneur is essentially an individual who combines the other three factors of production to set up a new business or create a new product. This typically involves coming up with a business idea, creating a business plan, obtaining capital, hiring labor and providing leadership.

As risk-takers, entrepreneurs often face a myriad of challenges. The most common include hardship obtaining business financing, bureaucracy, and problems with accessing and hiring the necessary talent. Those who overcome these challenges are often rewarded with business growth and profits.

But the benefits of entrepreneurship go beyond personal gains. Being an entrepreneur means inventing a new product, service or way of doing things. Ultimately, it ends with creating a new business, which in turn leads to employment and a boost in the gross national income.

Take Steve Jobs, for example. A serial entrepreneur, he invented the Mac computer, iPad, iPod and iPhone through his company, Apple Inc. Today, Apple employs over 2 million Americans across all 50 states4. And with a market capitalization value of $2.72 trillion5, Apple is well over 10% of the U.S. GDP.

That said, entrepreneurs are not just people who build billion- or trillion-dollar companies. Some successful entrepreneurs simply create small businesses that bring new opportunities for societies around them. For example, a web design freelancer can create a website that tracks coronavirus cases within the state. Hospitals, medical facilities and even the public at large may refer to such a site for contact tracing, statistics etc.

That’s the other benefit of entrepreneurship – it leads to investment in communities. Successful entrepreneurs often invest in societal projects by helping other businesses, charities and non-profit organizations. A good example is Bill Gates who, through his foundation, has given over $50 billion5 to non-profit organizations that support good health and education.

So, what does it mean to be an entrepreneur? It means creating a startup through risk-taking. With innovation, patience and persistence, entrepreneurship may create a profitable business for the owner. This often translates to new business opportunities for others, whether as employees, business vendors or anything in-between.

That’s how entrepreneurs boost the economy. Beyond that, entrepreneurship also means supporting causes beyond your own. While being your own boss and determining your own destiny are big draws to entrepreneurship, at times satisfaction comes from helping others through charities and non-profits.

Types of entrepreneurs

While almost all entrepreneurs have the same end goal – to be successful in self-employment – they don’t all follow the same approach to achieving this end goal. Some will innovate while others will build. There are those who jump on opportunities and others who prefer more calculated risks. Because of these differences, there are four common types of entrepreneurs:

Innovator

An innovator is an individual who introduces a new product, idea or method and molds it into a new business. Innovators are rare and gifted individuals who come up with things that others haven’t thought about. Think of Alexander Graham Bell and the telephone, Thomas Edison and the light bulb, and more recently Bill Gates and Microsoft.

Oftentimes innovators care less about money and more about the impact of their product on societies. So, while they may use their products to build new businesses, many of them usually focus on the creative part and leave the day-to-day running of the business to others – usually a co-founder or business professional.

Builder

A builder is an entrepreneur who sets up a scalable business. The time it takes to build a business varies from person to person, but builders typically hit the $5 million mark in revenue within four years and proceed to scale the business to $100 million and beyond.

Builders often create strong infrastructures and use the best talent available to achieve their end goals. They are shrewd enough to find the necessary capital, whether from savings, angel investors, venture capitalists, or credit facilities. Some of the world’s biggest business builders include J.D. Rockefeller, Elon Musk, Jeff Bezos and Jack Ma.

Opportunist

An opportunist is a type of entrepreneur who is astute in judgment. This is an individual who can pick the right moment to invest in something, make a killing as it grows and exit when the business hits its peak.

Opportunistic entrepreneurs are profit-oriented. They focus on building wealth, thus they are attracted to opportunities that can create renewal or residual wealth. For this reason, many opportunistic entrepreneurs tend to be impulsive in their decision making.

Specialist

There’s always an aspect of risk-taking in all entrepreneurship. However, for specialists, the risk factor of starting a new business is always minimal. Under this business model, the entrepreneur relies on analytics, referrals and networking to build a business.

Many specialists possess skills and knowledge in specific areas – usually obtained through apprenticeship or education. Whatever the case, they often use their know-how to conquer their fields. Compared to builders, specialists prefer slow but steady growth.

Types of entrepreneurships

As you would expect, different types of entrepreneurs create different types of businesses. These businesses form the various types of entrepreneurships. Here’s a look at each type:

Small business entrepreneurship

Some entrepreneurs who start a small business usually have no intention of making it a large company. They prefer to keep it as a single-location business rather than a chain or conglomerate.

Small business owners typically use their own money to start the new business. While this type of entrepreneur may take up a co-founder or form a partnership, they very rarely go for outside capital from angel investors and venture capitalists. The furthest they may go in terms of getting external capital is applying for a small business loan.

Scalable entrepreneurship

Contrary to small business owners, entrepreneurs who create scalable businesses aim to grow their companies from small enterprises to large firms. They typically start off with a unique idea or product, create a buzz around it, get financing from investors and continuously scale the business.

Think of Canva – the way it started and continuously developed, up until recently when it got an additional $200 million6. Over time, scalable businesses usually venture into new markets – at times in foreign countries.

Large company entrepreneurship

This refers to when a large corporation starts a new business division. Even if the new business is independent in operations, it usually remains as a subsidiary of the larger company.

Companies often branch out when shareholders and CEOs find an opportunity in a different market. In such cases, subsidiaries get the financial backing they need from the large company until they can operate independently.

Social entrepreneurship

Social entrepreneurships focus on creating benefits to communities. These are businesses that provide goods or services that can help solve the problems of their immediate societies and beyond. They’re typically non-profit organizations, and are therefore not driven by financial gains.

A good example of social entrepreneurship is the Center for Women & Enterprise (CWE), which provides female entrepreneurs with microloans, technical assistance, training, education etc.

What skills are required to be an entrepreneur?

If you’re thinking of venturing into entrepreneurship, there are several sets of skills that you can develop to boost your chances of success. These include hard skills like financial management and soft skills like leadership.

One way of building a diverse skill set is through learning. Studying innovative and business-related courses may help you grasp entrepreneurial skills. But it’s not the only way. In fact, there’s a lot of debate about whether going to college is necessary for one to become a successful entrepreneur. Some of the most famous names in the field – including Steve Jobs, Bill Gates, Larry Ellison and Mark Zuckerberg – dropped out of college to become successful entrepreneurs.

That, however, is not a cause-and-effect scenario. You don’t have to drop out of school to be a successful entrepreneur. If anything, some regular and short-courses can help you understand a few aspects of entrepreneurship. For example, studying business management may help you with the day-to-day running of your company.

Similarly, you don’t have to take a course to be a great entrepreneur. A good number of entrepreneurial success stories are built around passion. If you’re naturally passionate about something, you may find a way to constantly learn more about it and build the necessary skill set to make it a successful business.

Below are the top five skills that are typically associated with successful entrepreneurs:

  • Problem-solving skills

Many successful business owners have the ability to identify a problem and come up with a solution for it. Knowing specific pain points that societies and/or other companies are facing helps you identify market gaps. By filling those gaps, you’ll be adding value within the problem.

  • Flexibility

There’s no single formula for becoming a successful entrepreneur. What works for one person may not necessarily work for the other. Thus, you have to learn and adapt as you go. This is why entrepreneurship requires a lot of flexibility. For example, you may need to tweak the design of a new product every new and then so that it meets the morphing expectations of your target audience.

At times flexibility is required, not in product design, but in how you manage your business. When starting out, you may find that you have to do it all by yourself – from handling sales to picking calls and everything else. But as the business grows, you (and it) may need to be flexible enough to accommodate other people (employees) and departments.

  • Basic finance skills

Being money savvy – especially when it comes to budgeting and analyzing financial statements – can help you build a successful business. Budgeting skills are at the core of every financial aspect of any business, from purchasing inventory to managing expenses and even handling profits. That’s why budgeting can make or break a business.

Similarly, the ability to analyze financial statements will help you understand the overall health of your company. By accurately examining your cash flow statement, income statement and balance sheet, you can know the strong and weak points of your business. That information will help you maximize on your strengths and minimize weaknesses to ultimately maximize income.

  • Resilience

Starting and running your own business is a learning process. There are always difficult moments to endure – from fatigue to cash flow problems and everything in-between. But perhaps the biggest thing to keep in mind is that oftentimes failure is a part of the process.

To be a successful business owner, you have to recover from the failure (and other challenges), re-strategize and go again. Staying focused on your end goal may keep you grounded. Therefore, don’t forget why you started the business in the first place. It may just be what you need to ward off any feelings of doubt and hopelessness.

  • Communication

Good communication is necessary and important in every aspect of life, more so in business. You need to clearly communicate your business ideas to your team, customers and even lenders. People will offer immense support if they can buy into your ideas.

Besides, many lenders usually ask for documentation like business plans before offering financial assistance. Entrepreneurs with good communication skills may find it easy to communicate their vision and strategies through such documents and ultimately access the funding they need.

Another benefit of proper communication is that it may help with networking. Seemingly simple acts of talking to people and reaching out to other organizations can help you meet the right contacts. That’s how you build a network of customers, financiers, suppliers, mentors and other parties that can play a big role in the success of your business. Remember, oftentimes entrepreneurs can’t do it alone – that’s why many of them have co-founders. Bill Gates had Paul Allen, Steve Jobs had Steve Wozniak & Ronald Wayne, while Mark Zuckerberg had Eduardo Saverin, Dustin Moskovitz & Chris Hughes.

Final thoughts

While the idea of being your own boss and shaping your own destiny is flattering, it’s not an entirely rosy path. Entrepreneurship comes with challenges, the main ones being lack of capital, poor management and marketing issues7. However, with the necessary skill set, you can overcome these challenges and build a successful company.

Some of the skills required to run a successful business venture include problem-solving, flexibility, financial, resilience and communication skills. Unlike natural talents, these skills can be learned and perfected over time. Therefore, it may help to practice them as you build your path to a hustle of your choice.

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