Fundamentals of Entrepreneurship

Who Is An Entrepreneur?

An entrepreneur is an individual who creates and manages a business, willingly takes on the most risks and also reaps most of the rewards with profits and growth opportunities.

Entrepreneurs play a key role in any economy, being one of the top resources that economists categorise as integral to production together with land, labour and capital. Typically, they will combine all these three factors of production and make use of them to manufacture goods and services. 

For example, a person who wants to establish a fintech firm calls himself an entrepreneur as long as he is responsible for the business’s strategic directions including a complete business plan, hiring labour, acquiring resources and financing, providing leadership and management for the business. 

What Motivates An Individual to Become An Entrepreneur?

A 2019 study on entrepreneurship in Canada found that among many characteristics – independence, autonomy and flexibility motivated almost three-quarters of the respondents to become entrepreneurs. Followed by passion and fulfilment as being inspiring factors for over half of the surveyed entrepreneurs.

Distinguish Between a Small Business Owner and An Entrepreneur

While both entrepreneurs and small business owners fall in the category of a person who is in control of the operational and monetary aspects of a business, the differences between the two terms are based on the fact that business ownership does not entail the same level of risk entrepreneurs face. Other factors include motivation to launch a business, work style, personal financial goals and more.

That said,

• Entrepreneurs are inspired to change the world or revolutionize a particular industry. Business owners, however, are motivated first to make money.

• Entrepreneurship tends to launch ventures that involve more long-term risks and less short-term profitability. Whereas business owners want to see profit in the short term.

• Entrepreneurs can get access to a wider array of funding, usually through investors. Nevertheless, business owners may find it difficult to get investment and typically rely on banks for loans.

• Entrepreneurs aspire to expand the company scales and expect changes in their role while business owners largely retain the same function with day-to-day operations.

Source: Biztechday

Types of Entrepreneurship

Entrepreneurship can vary in form depending on the nature of the business, goals and risk appetite of the entrepreneur. Some of the main types of entrepreneurship include:

Small business

• The most common form of entrepreneurship.

• Individuals open businesses locally without any intention of becoming a chain or franchise.

• Only make money if they are successful in their venture.

• Examples – Grocery stores, freelance consulting and restaurant owners.

Scalable startup

• Entrepreneurs who start with an innovative business idea that can be built into a large scale over time.

• Often requires investors and substantial amounts of capital to support growth and expand into multiple markets.

• Examples – Tech startups like Uber, Grab and Airbnb.

Large company

• Established companies with newly created business divisions through innovation to sustain their competitive advantage.

• Example – Amazon started as an online bookstore, then expanded to e-commerce, cloud computing, AI and entertainment.

Social entrepreneurship

• Focus on helping solve social, environmental or community issues.

• Not driven by profits but rather by creating benefits for society and humankind.

• Example – Grameen Bank, Orange Sky.

Entrepreneurs and Risk

Data from the U.S. Small Business Administration showed that only two-thirds of businesses with employees survive at least 2 years and only half survive at least 5 years. The risks and obstacles faced by entrepreneurs are countless, they can range from macroeconomic issues such as:

• Losing business to similar service or product providers

• Constant changes in customer demands and preferences

• Business operations interruptions due to technology failure

to more personal reasons include:

• Leaving a full-time job and a steady paycheck

• Using personal savings without a guarantee of a return on investment

• Giving away time, energy, sleep and the ability to enjoy personal interests

However, without taking risks, there’s rarely a reward. Entrepreneurs must take some calculated risks to get a business off the ground. Taking risks creates both opportunity and progress. When entrepreneurs take certain risks that competitors are not willing to take, they can become leaders in their field.

Risks aren’t always negative. In contrast, they can be a good source of learning lessons for entrepreneurs to be more thoughtful when crafting future business strategies, encourage innovation and eventually lead to business growth.

Bottom Line

Entrepreneurship is a dynamic and multifaceted pursuit that involves much more than just starting a business. Whether through small businesses or large corporations, entrepreneurs are essential drivers of economic growth, societal change, and industry evolution. By understanding the various forms of entrepreneurship and the risks involved, aspiring entrepreneurs can better navigate their own journeys, balancing ambition with strategy and growth with sustainability.

References

Adam, H 2024, Entrepreneur: What It Means to Be One and How to Get Started, Investopedia, available at <Entrepreneur: What It Means to Be One and How to Get Started (investopedia.com)>.

BDC, n.d., What is an entrepreneur?, BDC, available at <https://www.bdc.ca/en/articles-tools/entrepreneurial-skills/be-effective-leader/what-is-an-entrepreneur>.

Bailey, M 2023, Entrepreneur vs. business owner: What’s the difference?, HubSpot, available at <https://blog.hubspot.com/sales/entrepreneur-vs-business-owner>.

Gene, M 2012, The difference between an entrepreneur and a small business owner, Forbes. available at <https://www.forbes.com/sites/quickerbettertech/2012/06/06/the-difference-between-an-entrepreneur-and-a-small-business-owner/>.

Hailey, M 2022, 4 types of entrepreneurship: Which one is right for you?, Center for Entrepreneurship, available at <https://cfe.umich.edu/4-types-of-entrepreneurship-which-one-is-right-for-you/>.

Teoh, L 2011, Difference Between an Entrepreneur and a Small Business Owner, BizTechDay , available <http://www.biztechday.com/difference-between-anentrepreneur-and-a-small-business-owner/>.

Wharton Online 2020, Is risk-taking behavior key to entrepreneurial spirit?, Wharton Online, available at <https://online.wharton.upenn.edu/blog/is-risk-taking-behavior-key-to-entrepreneurial-spirit/>.