Is Entrepreneurship for You?
An entrepreneur is someone who sees a business opportunity and acts on it. They bear most of the risks of starting a new business themselves. But they also enjoy most of the profits, glory, and rewards.
What Is Entrepreneurship About?
At its core, entrepreneurship is simply starting a business. Economists now view entrepreneurship as one of the key aspects of a thriving economy. In years past, economists have not considered entrepreneurship to be a central part of an economy. Instead, they believed that people would have perfect information to make rational choices in a free market. Therefore, they thought that risk-taking entrepreneurs were of limited importance to economic growth.
Later, economists realized that perfect information is not always available. They learned that people need to take risks to reap rewards in a free market. Economist Joseph Schumpeter was one of the first economic thinkers who believed that entrepreneurship was central to economic development.
In Schumpeter's view, economic growth requires ongoing disruptions to the status quo. He believed that these disruptions drive progress, which is necessary for an economy. Further, he believed that the source of these beneficial disruptions were entrepreneurs. By taking risks and entering into new industries, entrepreneurs drive progress. This can ultimately transform industries.
Is Entrepreneurship for You?: 10 Qualities of a Successful Entrepreneur
There is no way to eliminate all the risks that come with starting a small business. But you can improve your chances of success with good planning, preparation, and insight. Start by evaluating your strengths and weaknesses as a potential small business owner. If you have the right personality type and a tolerance for risk, starting a business could be exciting and fulfilling. But entrepreneurship is not for everyone.
It's a good idea to do a little self-evaluation before taking the leap into small business ownership. You don't have to go to business school to become an excellent business owner. But you should be motivated and prepared to do hard work. The personality traits listed below are key qualities that aspiring entrepreneurs should possess. These will help you weather the ups and downs that come with starting a business. As you go through these qualities, be honest and ask yourself if you have the desire and drive to start a business on your own.
When you are self-employed, it's entirely up to you to develop projects, organize your time, and follow through on details.
Running a business can wear you down emotionally. Some business owners burn out quickly from all of this responsibility. Strong motivation will help you to weather the slowdowns and periods of burnout.
2. Ability to Handle Different Personalities
Business owners need to develop working relationships with a variety of people. This includes customers, vendors, staff, bankers, and professionals such as lawyers, accountants, or consultants. Can you deal with a demanding client, an unreliable vendor, or a cranky receptionist if your business interests demand it?
Further, you may need to seek investments when you start your business. If an angel investor offers to invest in you, you will need to handle their demands and negotiate a deal with them.
3. Powers of Persuasion
As an entrepreneur, you will need to be comfortable selling your product or service. Selling involves persuasion and the ability to effectively explain your business.
Although you can advertise online and through social media, there's no replacement for a face-to-face business meeting. Many small business owners have to absorb multiple rejections before they are able to secure the sales and investments that they need. You will need to be able to learn from your rejections to improve your sales techniques and pitches.
As you start your business venture, you may need to seek outside investments to fund your startup business. This is another area where powers of persuasion will help you. If you are comfortable pitching your ideas to angel investors and venture capitalists, you stand a much better chance of securing investments.
4. Risk-Taking Capabilities
There is no way to eliminate all of the risks that come with small business ownership. Nobody is completely comfortable with taking chances with their money. However, entrepreneurs are usually risk-takers by nature. You should be able to tolerate some uncertainty to be a successful entrepreneur. With good organization and planning, you may be able to avoid some of your financial risks.
5. Organizational and Planning Abilities
Research indicates that poor planning is responsible for most business failures. Good organization -- of financials, inventory, schedules, and production -- can help you avoid many pitfalls. You should also honestly evaluate your business idea before you invest time and money into it.
Before you begin your startup business, it's a good idea to create a business plan. With a business plan, you can define your goals and purpose, lay out marketing strategies, and put other important issues into writing. If you are enthusiastic about creating detailed plans, this can help you to become a successful entrepreneur.
The flip side of organization and planning is adaptability. Even the best-laid plans can fall apart when unforeseen events happen. For this reason, entrepreneurs should be able to adapt to new situations and create backup plans. For instance, you may need to rethink your business model if a competitor poses a threat. Or you may need to come up with a new product or service when an existing market dries up.
It's impossible to predict every roadblock or hurdle that could pop up for your business. So, it will help if you are able to be flexible and creative with problem-solving.
7. Creativity and Imagination
Creativity and imagination are closely related to adaptability. As an entrepreneur, you will need to solve unexpected problems and create solutions when unforeseen issues arise.
Unforeseen hurdles can take the form of economic downturns, natural disasters, lawsuits, and more. If you can find imaginative ways to cope with these problems, it can make you a successful business owner.
Creativity will also help you when it comes to creating new products or services. With a little imagination, you will have the insight to see gaps in the market. If you can fill those gaps in a way nobody has before, you could have a profitable business on your hands.
One way that entrepreneurs use their imagination is to improve on existing products. Many of us see flaws in products that are already on the market. If you can create a product that does the job better than another product on the market, you might have a valuable idea on your hands.
8. Decision-Making Abilities
Small business owners have to make decisions constantly. They often must make judgment calls quickly, independently, and under pressure. If you have difficulty making important decisions, you may need a business partner or advisor. This can help you during the first few years of your new business.
However, if you have confidence in your decision-making abilities, this can make you an excellent leader.
9. Physical and Emotional Stamina
Business ownership can be exciting, but it's also a lot of work. To create a successful business enterprise, you may need to work more than standard business hours. Before you take the emotional and financial risks involved with a startup business, ask yourself if you are willing to work these long hours.
Even if you are comfortable working long hours and dedicating yourself to your business, you will still need support from your loved ones.
10. Support System
The first few years of business start-up can be hard on family life. It's important for family members to know what to expect and for you to be able to trust that they will support you during this time. There may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a different standard of living or put family assets at risk in the short-term.
If your family members are fully on board with your new business venture, this will help. It will give you the support you need to get through those intense first few years of business ownership. To secure your family's support, you should be honest with them. You should be clear about the financial outlay and time commitment your entrepreneurial venture will involve.
Are There Different Types of Entrepreneurship?
The definition of entrepreneurship is the action of creating a new business on your own. Some people believe that there are various types of entrepreneurs too. They argue that entrepreneurs fall into different categories based on their behaviors and personality types.
A social entrepreneur is someone who wants to create social change in their community. Their main focus isn't just to gain profits, but to make a difference in the world around them. This might compel them to start a nonprofit or to engage in socially responsible investing.
Social entrepreneurs can be champions of a wide range of causes. This can include everything from eliminating hunger to creating environmentally sustainable products
Large Company Entrepreneurship
With large company entrepreneurship, an existing company expands into a new sector to offer a new or innovative product. This can help the company to stay on the cutting edge of their industry.
Upper management of these companies typically has to bring in outside talent or buy other companies to create entrepreneurial growth. If they are lucky, they might have entrepreneurial talent in their workforce.
Apple computers might come to mind when you think of large company entrepreneurship. Apple co-founder Steve Jobs guided his company to disrupt the technological industry with smartphones and other ground-breaking innovations. As with any entrepreneurial venture, there was significant risk associated with these projects.
Joe Abraham's Entrepreneur Types
Author Joe Abraham outlined four more types of entrepreneurs in his book, Entrepreneurial DNA. After studying many different entrepreneurs, Joe Abraham categorized these people according to their strengths and unique characteristics.
An innovator builds a business almost as a byproduct of their inventions, innovations, or discoveries. They are visionaries who do work that they love. This leads them to create businesses around those projects.
An example of an innovator entrepreneur is social media tycoon Mark Zuckerberg. Like Zuckerberg, many innovators create intellectual property that leaves a lasting imprint. However, this personality type can be reclusive and may prefer working alone.
If an innovator personality works at a large company, they could use their connections within the company to pitch a new product. This can drive the company to expand into a new product area using new technologies.
In some situations, a large company may offer to buy an innovator's invention or business. Deciding whether to accept a large company's offer will come down to your goals.
A specialist entrepreneur is typically an expert in their field. They tend to be interested in entrepreneurial ventures that are closely related to their expertise. Their specialty may be mentally demanding, and this is where most of their mental energy goes. As a result, they often do not succeed at selling and pitching their innovative ideas. Instead, they expand their business through loyalty and referrals.
Specialists often grow their businesses at a slower rate than some other entrepreneur types. If they can become more comfortable and skilled with selling, they may be able to grow at a faster pace.
A builder is a highly motivated person who thrives on creating a large business enterprise quickly. A builder's intense nature often enables them to grow a business into a multi-million-dollar enterprise within a short space of time. To build a large, scalable business on a short time frame, a builder will probably need large amounts of venture capital. To secure such investments, builders will need to practice their sales pitches and techniques.
Abraham argues that this personality type tends to be controlling. This can cause them trouble with their relationships and may cause high employee turnover. Builders would be wise to focus on relationships and team-building to improve employee morale.
As the name implies, opportunist entrepreneurs want to jump into business opportunities at the right time. They then sell when the business peaks. Opportunists have a keen eye for spotting new markets and new products that will yield enormous growth.
These types of entrepreneurs see themselves as successful if they are able to generate large amounts of residual and passive income. They want to see a steady cash flow even when they are not working. An opportunist's weakness is that they can be too impulsive. This can lead to some great business opportunities. But it can also lead to situations that are not well-considered or planned.
If one of the above types of entrepreneurs sounds like you, it's wise to play to the strengths that go along with that type while remaining aware of the downsides.
Why Small Businesses Fail
Starting a small business is always risky, and the chance of success is slim. According to the U.S. Small Business Administration, over 50% of small businesses fail in the first year. Further, 95% fail within the first five years.
These figures aren't meant to scare you, but to prepare you for the rocky path ahead. You will be better suited for the difficulty of starting a business if you are realistic about it from the start. Success can be yours if you are patient, willing to work hard, and take all the necessary steps.
In his book Small Business Management, Michael Ames gives the following eight reasons for small business failure. Numbers nine and ten are additional reasons that Gustav Berle added in The Do It Yourself Business Book:
- Lack of experience
- Insufficient capital (money)
- Poor Location
- Poor inventory management
- Over-investment in fixed assets (such as land, equipment, and machinery)
- Poor credit arrangements
- Personal use of business funds
- Unexpected growth
- Low sales
As you launch your business, it's wise to keep the above list in mind. Avoiding common pitfalls will help your business to thrive.
On the Upside
It's true that there are many good reasons not to start your own business, especially if you aren't able to commit an enormous portion of your time and energy. But for the right person, the advantages of business ownership far outweigh the risks:
- You will be your own boss
- Hard work and long hours directly benefit you, rather than increasing profits for someone else
- Earning and growth potential are far greater
- A new venture is as exciting as it is risky
- Running a business provides endless challenges and opportunities for learning
Before Getting Started: Talk To an Attorney
You will need to consider all of the challenges and potential pitfalls of entrepreneurship before taking the plunge. But the best way to become successful is to be prepared. There are many legal issues that come with starting a new business. This includes choosing the right legal structure, securing licenses, getting the appropriate insurance, and more.
A business and commercial law attorney can help you with these issues and any other legal questions you may have.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.