Entrepreneurship is the creation or extraction of value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values than simply economic ones.
More narrow definitions have described entrepreneurship as the process of designing, launching and running a new business, which is often similar to a small business, or as the “capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit.” The people who create these businesses are often referred to as entrepreneurs. While definitions of entrepreneurship typically focus on the launching and running of businesses, due to the high risks involved in launching a start-up, a significant proportion of start-up businesses have to close due to “lack of funding, bad business decisions, government policies, an economic crisis, lack of market demand, or a combination of all of these.”
In the field of economics, the term entrepreneur is used for an entity which has the ability to translate inventions or technologies into products and services. In this sense, entrepreneurship describes activities on the part of both established firms and new businesses.
Relationship between small business and entrepreneurship
The term “entrepreneur” is often conflated with the term “small business” or used interchangeably with this term. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner—or they have a small number of employees—and many of these small businesses offer an existing product, process or service and they do not aim at growth. In contrast, entrepreneurial ventures offer an innovative product, process or service and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales and so on, a process which is financed by venture capital and angel investments. In this way, the term “entrepreneur” may be more closely associated with the term “startup“. Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, to adapt to changing environments and understand their own strengths and weakness.
How Entrepreneurship Works
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:
1. Overcoming bureaucracy
2. Hiring talent
3. Obtaining financing
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 for 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.
How to Become an Entrepreneur
7 Steps to Becoming an Entrepreneur
Find the right business for you.
Entrepreneurship is a broad term, and you can be an entrepreneur in just about any area. However, you will have to pick a field to work in and business to start. Find a business that won’t only be successful, but is something that you are passionate about. Entrepreneurship is hard work, so you want to focus your attention on something you care about.
Determine if you should get an education
You don’t need to have any type of formal education to be an entrepreneur, but that doesn’t mean you should ignore education entirely. If you want to start a tech company, experience in business, computer programming and marketing could all be valuable. Also, some industries will likely require some type of education, such as your own accounting or law firm.
Plan Your Business
Before you begin your business, you need to have a business plan. A business plan lays out any objectives you have as well as your strategy for achieving those objectives. This plan is important for getting investors on board, as well as measuring how successful your business is.
Find your target group/audience
Not every business appeals to everyone. The age, gender, income, race and culture of your target group will play a large role in determining where you open up shop – or if you even need to have a physical address for business. Research which group fits your business model best, and then gear everything to attract that demographic.
While networking is important in all fields, it may be most important for entrepreneurs. Networking is how you meet other people that might have skills you can use in your business. You can also find potential investors through networking to help get your business model off the ground. Your network can also support your business once you open, helping send new customers your way.
Sell Your Idea
Consumers want products, but they don’t always know which product to pick. Your job as an entrepreneur is to convince people that whatever you’re selling is the best option available. You’ll have to find out what makes your product unique and then sell it based off the value it adds.
You should be focused on marketing before, during and after you start your business. You may have the best restaurant in the city, but nobody will visit if they don’t know it exists. Marketing is tricky, but if you should be able to focus your marketing efforts on your target audience. For example, millennials may be more likely to see an ad on social media than on a billboard downtown.
FAQ on Becoming a Entrepreneur
The main criteria is that it has to be something that adds value. If you don’t add value with your business, there’s no reason for anyone to pay attention to it.
Business licenses might be required for your field of work. Different states and counties have different requirements for licensure. Also, some industries will require other types of licenses as well. A restaurant may require a license for food handling and selling alcohol on top of the normal business license.
Yes, anyone can be an entrepreneur, but not everybody is going to have the same level of success. Entrepreneurship takes a lot of experience, determination and sometimes education. There are no prerequisites to becoming an entrepreneur, though, and there are successful entrepreneurs from every demographic.
No, but it certainly helps. If you’re opening a marketing agency, then you should have plenty of experience with marketing. Customers won’t want to spend their money if they don’t think you can provide a high quality product, and experience and a solid track record is a good way to prove you’re fit for the job.
There is no best way to become an entrepreneur. Every entrepreneur has a different experience, and even the best business ideas have the possibility of failing. However, you can mitigate your chances of failure. Education, experience and proper planning can all give your business a better chance of succeeding.
If you’ve followed your business plan and you’re seeing growth, then your business is doing well. Remember that many businesses take time to start making money.
Louis J. Erickson co-founded the company with me in 2000. We each own 50% of the company. I am the Chief Executive Officer and he is the Chief Operations Officer. Louis and I have been best friends for over 30 years. Our primary experience was building software while working for major defense contractors that provided software engineering services for the Department of Defense. We were not happy with the bureaucracy and inefficiencies in the department of defense.
We were both good at what we did. However, working in that environment with a bunch of B & C team players was frustrating. We would attend meetings just to discuss what we would do in the next meeting! We were both very creative and wanted to solve real world business problems and create innovative software solutions, but the bureaucracy and apathy in building software for the government was stifling. It was easy to soar like an eagle though, and we were both rock stars as employees, but we both wanted much more and I felt we could do it better.
We started talking about forming the company in 1998. We sketched out a business plan on a napkin at a Chucky Cheese during my niece’s birthday party, but we did not start the company until 2000. The catalyst for this was finding a good long term contract with a company in Austin, Texas. Louis was already in Austin, so I moved there and we formed a Texas Corporation.
Survive…just kidding, no seriously. We believed that we could create a services based company where software engineers could grow and flourish. We wanted to work with leading technology and build real-world enterprise software solutions. I have always been a leader and I am creative and take great satisfaction out of building things, both software and our company. I appreciate the opportunity to sink or swim based on my own effort and hard work.
Louis and I are Software Engineers who had to learn how to run a business and be business owners. We knew what we did not know and sought out and valued the people that could help us.
In 2000 we formed a Texas Corporation and applied for and IRS S-Corp Status. In 2001 we moved the company to Fort Walton Beach, Florida and on the advice of our attorney, we re-incorporated in the State of Florida, applied for an IRS S-Corp Status and dissolved the Texas based Corporation.
- 24 Employees
- 14 Software Engineers (Louis and I are counted in the Software Engineers)
- 4 Graphic Designers / Web Developers
- 1 Director of Marketing
- 1 Director of Sales
- 1 Director of Business Operations (HR, Finances)
- 1 Director of Morale (Admin, Employee Relations)
- Software Development (Application Development)
- Software Systems Integration
- Graphic Design (Web & Print Design & Development)
- IT Consulting
4. Web Site
5. Events & Seminars
6. Cold Calling
Absolutely! The key in running a business is knowing what you do not know and getting the right people to do it for you. You also have to value their services and be willing to pay for their expertise. We use O’Sullivan Creel as our CPA (Accounting Firm) and Pleat & Perry PA as our Attorney’s.