The term entrepreneur refers to individuals who prefer to make their professional careers running businesses themselves rather than getting employed at another company or organisation. They assume all the relevant risk factors and profit earning opportunities related to their business idea and the delivery and manufacture of their products and services.
Related: 7 characteristics of successful entrepreneurs
Entrepreneurs are decision makers
An entrepreneur is not only concerned with identifying and taking the initiative to avail a fruitful business opportunity and laying down the basis of a business machinery but in fact, entrepreneurs also act as decision-making bodies. Entrepreneurs need to be extremely judicious decision makers as the sole responsibility to make all the important decisions about the running and management of a business entity lies with them. They make important decisions concerned with the selection of products or services that they are to provide to the consumers, operational and manufacturing procedures and the feasibility of a business idea, product or a service in the marketplace.
Entrepreneurs are analysts and observant
However, what an entrepreneur really needs to be is highly insightful of consumers’ needs. A more abstract definition of entrepreneurs may relate to individuals who identify various needs and requirements of a consumer market that remain unfulfilled. Once identified, the entrepreneurs take the initiative to set up an enterprise with the rudimentary objective to deploy the business machinery towards the fulfilment of identified unfulfilled consumer needs to generate optimum profits for themselves.
Entrepreneurs are Innovators
Considering the aforementioned explanation of the role of an entrepreneur, an entrepreneur may also be termed as an innovator, who deals in the manufacture and delivery of novel ideas, products, services and procedures to meet an unfulfilled consumer demands.
As entrepreneurs are commonly considered as risk takers and leaders, an entrepreneur needs to have immense self-belief in his abilities and confidence in the feasibility of his business idea. Only then they will be able to optimally avail the most out of the opportunities presented to them and execute their business ideas and concepts.
History & evolution
Though the term ‘entrepreneur’ finds its root in the 18th-century literature, the concept of enterprising exists since the beginning of time. The birth of the concept of enterprising is usually attributed as a result of the realisation among humans, concerning the need to deliver services and goods to survive.
Richard Cantillon defines ‘entrepreneur’
The first proper and formal definition of entrepreneur was provided by Richard Cantillon in 1755. Cantillon describes an entrepreneur as an ‘adventurer’, who invests in the purchase of goods and materials with the incentive of selling these in the future. The inclusion of the term adventurer in the definition of entrepreneur by Richard Cantillon is the result of the uncertainty the surrounds the price at which an entrepreneur will resell the bought goods and materials. This unique feature also served as the distinctive factor between entrepreneurs and other businessmen.
This early definition of the term entrepreneur is indicative of their pro-active involvement in trade and travel while exercising their ability to take risks and identify and avail fruitful business opportunities.
Explanation of ‘entrepreneur’ by Francois Quesnay
Following the Cantillon’s definition of an entrepreneur, the next structured description of an entrepreneur may be found in the theories of Francois Quesnay, published in 1758. These theories brought forth the organisational and innovation related aspects of an entrepreneur’s ability.
Criticism by Adam Smith
However, it was much later in the year 1776, that entrepreneurs had to face the first documented criticism. In the ‘Inquiry into the Nature and Causes of the Wealth of Nations’, Adam Smith completely disregards the entrepreneurial aspect of human behaviour. He talked of its absence as a natural trait of human behaviour, giving precedence to industrious attitude.
Jean-Baptiste’s explanation
The damaged caused to the reputation of entrepreneurs by Adam Smith was rectified by Jean-Baptiste, who published his theory on entrepreneurs in 1803. This work included and elaborated on the famous phrase of “supply creates its own demand”, as Jean-Baptiste talked about the importance of entrepreneurs for the economy. He established the importance of entrepreneurs for the running and prospering of all industrial sectors, in relation to their organisational abilities, which they employ to meet consumer demands. Other factors that were highlighted in Jean-Baptiste’s definition of entrepreneurs included the qualities of farsightedness, risk taking abilities and analytical expertise.
John Stuart Mill published ‘Principles of Political Economy’
The last encouragement that entrepreneurs received was through John Stuart Mill’s‘Principles of Political Economy’, published in 1848, before the popularity of entrepreneurial personalities completely diminished by the end of 19th century.
Joseph Schumpeter highlights entrepreneurs’ importance
It was in 1930 that entrepreneurs’ popularity was restored when Joseph Schumpeter described entrepreneurs are innovative heroes. He described entrepreneurs as the elementary source of induction of innovation into business cycles, without which businesses may suffer from stagnancy and monotony. He explained the phenomenon of ‘creative destruction’ which was a consequence of entrepreneurial efforts that disturbed the economic and corporate equilibrium, eventually leading to the emergence of new industries and the redundancy of the older ones.
Modern definition of ‘entrepreneur’
Later, Frank Knight delved the concept that entailed the term entrepreneur and modified Cantillon’s definition, elaborating on the concepts of related risk and profit factors. Eventually, it was in 1970, that Nobel Laureate Theodore W. Schultz’s explanation of entrepreneurs gave a final shape to the definition of entrepreneur. He described entrepreneurs as all individuals who took an initiative, assuming all the related risks and profits and established a productive machinery to meet consumer demands.
What does an entrepreneur do?
Entrepreneurs generate economic activity
Today, entrepreneurs are recognised as the elementary participants of the market economy who keeps it running and contribute significantly towards its progress. They innovate and lay down the basis of business and industrial development, encouraging and propagating economic activity. Trends show that economies of various nations have flourished as a result of entrepreneurial initiatives.
Eventually, the participation of entrepreneurial innovations, initiatives and activities in the creation of new opportunities and economic growth and development leads to the overall betterment of the society. Conclusively, entrepreneurs not only play a role in determining the success level of an economy, but of the society as a whole.
A wide-scale study of global economy suggests that the most successful economies in the world today are those which involve increased level of entrepreneurial activities and where the legal and political structures provide sufficient support and motivation to entrepreneurs.
Entrepreneurs innovate
It is an entrepreneur who lays down the foundation for the implementation of a new idea or the production and delivery of a novel product or facility. Entrepreneurs endeavour to explore and exploit various business opportunities as profit earning incentives, while identifying and meeting unfulfilled consumer demands. Resultantly, they play a critical role in the initiation and sustenance of economic activity.
Entrepreneurs take initiative and manage
Entrepreneurs serve as the sole proprietors of business machinery who provide a platform for the integration of resources, labour forces, raw materials and manufacturing facilities, for the large scale creation and provision of a useful product or facility.
Enterprising in the modern age
Evolving economic trends and the advent of modern technology, which has considerably transformed marketing strategies and practices, have led to the modification of the definition and description of entrepreneurs and entrepreneurship, with respect to the needs and demands of the modern era.
Global acknowledgement
Entrepreneurial behaviour today enjoys widespread appreciation across the globe. Increasing number of individuals who are showing a profound interest in enterprising and independent operational and marketing activities has led to the global acknowledgement and growing implementation of entrepreneurial initiative. Recent surveys and studies suggest the growing inclination of young individuals towards entrepreneurial endeavours.
Modern age pressures
Those who are interested in enterprising today need to be passionate about their business ideas, for ensuring long-term success. Since competition in the marketplace is at an all-time high- and is expected to increase with time- entrepreneurs need to be highly motivated about their business ideas, so that they will be able to meet all the demands of strenuous hard work and long working hours, which entail their entrepreneurial success.
Digital and social media
Moreover, in the present times, entrepreneurs are showing increased dependency on digital and social media tools, especially those running and managing small and medium sized businesses. Today, social media is relied upon as a useful and efficient means for communicating, marketing, promotions, networking and various other business undertakings.
Challenges for entrepreneurs
Though social media has made it considerably easier for the interested individuals to enterprise, on the other hand, growing competition has added to the challenges that entrepreneurs face today.
Lack of talented hiring prospects
One of the biggest problems that entrepreneurs are faced with is the lack of talent to run their businesses. Since most of the talented individuals prefer to work for well-known, large organisations, talent seems to concentrate to a few specified corporations, while other businesses suffer from a lack of skilled employees.
Rising need for consistent innovation
Similarly, entrepreneurs also find it difficult to consistently innovate to keep their consumers engaged in the rapidly changing market trends. Every other day we are informed of a new development and discovery, and to cope up with the growing competition, it is extremely important for entrepreneurs to continue to introduce novel ideas and concepts to their consumers.
Managing cash flow
Another challenge that might hinder the progress of budding entrepreneurs is concerned with the mismanagement of cash flow. They need to employ workable and feasible strategies to ensure consistent cash flow, to survive and progress amid the growing competition.
Financing
First and foremost it’s financing. How you finance your business is key to its success. Money is the be all and end all to any successful business, and it’s not always easy to build cash, encourage investment and keep the money flowing.
So as a starting-out entrepreneur, how do you stump up the cash? You should start out by researching into the best business loans on the market. But before you go feet-first into the nearest bank for your business, you should make sure you have a well-thought-out business plan to present your case. Your plan should include:
- What your business will do
- The products and services it will provide
- How customers will obtain your services
- Product pricing information
- Long-term and short-term objectives
When writing your plan your business plan, you should be clear, honest and realistic.
Decision making
In terms of stress, this could be the biggest challenge for an entrepreneur. As the head of the business, every decision you make is pivotal. No matter how big or small, decision fatigue can affect entrepreneurs, especially in the early stages. So establish the most important questions that need to be answered and prioritise those, and try not to deliberate too much over the minutia.
Marketing
Ok, so you know the basics of social media marketing, but that will only get you so far. Having a great business idea won’t guarantee its success. You’ll have to invest in long-term marketing for it to be a hit. Know your customers and tailor a marketing plan to directly engage your target market. As Bill Gates once said, ‘Content is King’, and he wasn’t wrong. Investing in a strategic content marketing company could be a great direction for your business to take.
Finding a merchant service
If your business relies on the efficiency of quick and easy payments by customers, establishing a good merchant service provider is key. This isn’t as easy as it sounds to sort. For example, if you’re a young entrepreneur or this is your first business venture, how can you convince a merchant provider that you aren’t high-risk? Well, you’ll be pleased to know that there are several steps that you can take to help to get approved for a merchant business account:
- Ensure you have good credit rating
- Be transparent about your business, past finances and your previous merchant accounts
- If possible, you should be willing to pay higher fees to accommodate your low credit rating or lack of successful business evidence
- Shop around. This is the most beneficial and cost-free action you can take.
Securing a commercial mortgage
Renting your business property is perfectly normal if you haven’t the cash for a commercial loan. However, it won’t save you money in the long-run. Owning your business property has many benefits:
- It brings stability
- You mortgage repayments will be lower than your rental payment
- Interest payments on commercial property is tax deductible
- Control and flexibility over property alterations
- An increase in value will increase your business capital.
And that’s not everything. In fact, when money is tight, a commercial mortgage can offer significant cash flow. It gives you great flexibility, allowing you to release equity from an existing building and pump it back into your business. Knowing the best commercial mortgage rates on the market can be vital to gaining as much capital as possible to support your business.
Legalities
If you want to trade legally and stress-free, you should know the ins and outs of trading laws. When incorporating your business how do you want to structure it? Sole proprietorship? Partnership? Corporation? LLC? Knowing your options is vital to starting out on the right foot. It’s worth booking some time with a solicitor for legal advice if you’re unsure.
Next comes the licenses and permits to your type of business. For example, you will need to establish whether you’re permitted to trade in certain areas. A simple call to your local council should clear up that query.
Falling under the legality umbrella comes patents and trademarks. If your business is particularly unique, you should really think about patenting your idea to prevent a copycat company selling in your product at a cheaper price. Protecting your business is a must, and should be dealt with from the outset.
The unknown
Entrepreneurs can be rational, logical thinkers. This can be especially hard when dealing with the unknown. If you have a successful business or a great idea for a start-up, chances are, there’ll be some other bright-spark with the very same idea. Dealing with this unpredicted competition can be tough. To overcome this you’ll have to think outside the box and have an edge over your competitor. Investigate that competition, know your customers, step up your marketing, target new markets and don’t forget to look to the future.
As you can see, being an entrepreneur isn’t for the faint-hearted. You have to be thick-skinned, constantly on the ball and prepared to take the rough with the smooth. But as an entrepreneur, you’ll know that challenges are there to be beaten, and nothing can match that rewarding feeling of success.
Related: What is entrepreneurship?