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What is an entrepreneur?
What is an entrepreneur and how do you become one? In this simple guide we’ll look at the characteristics and types of entrepreneurship and what’s involved in creating a new business.
What is an entrepreneur?
What is entrepreneurship?
What does an entrepreneur do?
Why are entrepreneurs important?
What are the different types of entrepreneurs?
Characteristics of an entrepreneur
What makes a successful entrepreneur?
How to become an entrepreneur
Pros and cons of being an entrepreneur
The pros of being an entrepreneur
The cons of being an entrepreneur
Finance for entrepreneurs
Questions to ask an entrepreneur
What is an entrepreneur?
An entrepreneur is someone who sees a business opportunity and takes action to realise their vision. They are typically innovative problem solvers and are not afraid to take risks to start new ventures and create wealth.
While there are no strict rules around the qualities of an entrepreneur, they are usually associated with developing new products or innovations.
Examples of successful entrepreneurs include Steve Jobs, Arianna Huffington, Oprah Winfrey and Richard Branson. However, there are many different types of entrepreneurs, and becoming a household name is not always the goal! There are millions of entrepreneurs in the UK alone, playing a vital role in society and business.
What is entrepreneurship?
Entrepreneurship is the process of identifying new business opportunities and putting them into action through the development of new products and services. It typically requires creating a business structure, hiring staff, and implementing innovative business strategies.Entrepreneurial skills and approaches can include:
- Developing an innovative product
- Enhancing, refining, or transforming an existing product
- Finding a new audience for an existing product
- Creating a new business model
What does an entrepreneur do?
Entrepreneurs are known for breaking the mould and trying new things, so there is no set way to be an entrepreneur. For some people, an entrepreneur is any person who works for themselves or starts their own businesses.
For others, the role of an entrepreneur is to have an innovative idea or vision or demonstrate significant leadership in their industry.
In general, if you take on most of the risks and rewards of your business or venture, you are an entrepreneur.
Being an entrepreneur is not just about the type of business you run or how you distribute profits; it’s about having a mindset of independence, innovation and leadership and having a willingness to take risks to generate profit or benefit society.
Why are entrepreneurs important?
Entrepreneurs play a very important role in any economy. They help bring consumers new and improved products and services and are a key source of economic growth and innovation.
They help stimulate competition by disrupting existing business models and can find solutions that other companies overlook.
By taking on risks and persevering against the odds, entrepreneurs help create value, boost growth, and move society forwards. By creating new businesses, they help create new jobs and increase tax revenue, which funds vital public services.
The new products they develop can also have a profound impact on society. For example, the development of the smartphone transformed the way we communicate and access media in both work and in our daily lives.
Entrepreneurs are especially attuned to evolving customer needs and market trends, which helps contribute to the dynamism of the economy. For example, the creation of app-driven taxi services led to similar developments in all kinds of spheres of economic activity – from food ordering to the development of the gig economy.
Economists consider entrepreneurs to be one of the four essential components in any economy. Economic activity requires the following resources:
- Land (both physical land and the resources it contains)
- Labour (the physical and mental ability of workers)
- Capital (money, machines and other equipment used in production)
- Entrepreneurship (businesspeople who take risks and seek opportunities)
What are the different types of entrepreneur?
Small business entrepreneur
Someone who starts and runs their own business. This could be a small shop or café, or a service provider like an electrician or designer.
Large business entrepreneur
These are owners of existing companies who seek to expand the reach of their businesses to create new markets and grow audience share.
Scalable startup entrepreneur
These entrepreneurs start off small but seek to expand their operations into large scale enterprises.
Social entrepreneur
Some entrepreneurs use their business talents to make a positive impact on society. They have less of a focus on making profits, and any surplus revenue is typically reinvested into the enterprise.
Characteristics of an entrepreneur
We've established 'what is an entrepreneur' and the different types, but what about the characteristics? There is no singular style or entrepreneur personality, but there are several traits that enable entrepreneurs to start and develop their business.
- Dedication – you can pursue a project to completion and be able to take some calculated risks in the process.
- Being a communicator – you are willing to network and create connections, whether that’s essential contacts in your sector, with mentors, or like-minded peers.
- Collaborative – you enjoy working with others to build or develop new projects and bring your dream into reality.
- Curiosity – you enjoy learning, asking questions, and developing new skills.
What makes a successful entrepreneur?
Successful entrepreneurs need a bold or innovative vision, as well as the ability to share their passion with others. They also need to have a willingness to take risks and learn positive lessons from past failures.
Here are some valuable entrepreneurial skills for all business owners:
- Creative problem solving
- Adaptability
- Communication
- Leadership
- People management
- Self-motivation
How to become an entrepreneur
There are many ways to become an entrepreneur. For example, you could register as self-employed, create a partnership or limited liability company, or even set up a cooperative or social enterprise.
To become an entrepreneur, it can also be useful to have gained experience in the industry you want to enter. This can be done by working with an existing business or getting experience as a freelancer.
Some people become entrepreneurs by turning an existing hobby or pastime into a profitable business model.
Once you have decided you want to become an entrepreneur, you should do your market research to identify the sector you want to enter and identify any gaps in the market.
You can do this through customer research and by speaking to owners in similar industries, or by drawing on your own experiences.
Next, you will need to write a business plan you can use to attract funding and inspire people to join your team. Your business plan should establish the story that makes your idea compelling and outline how you intend to make your business viable.
You will then need to explore different business funding options, or use your own funds to get your proposal off the ground. Other considerations include assembling a team, approaching suppliers and other contractors, and setting up the legal and accounting structures you need to achieve your aims.
You will also need to create a strategy for marketing and distributing your goods or services.
Pros and cons of being an entrepreneur
There are many benefits to being an entrepreneur including being your own boss and gaining financial freedom. However, there can also be disadvantages like being responsible for any setbacks and having to take on many different roles in your own organisation.
Let’s take a closer look at the pros and cons of being an entrepreneur.
The pros of being an entrepreneur
1. Financial freedom:
Because starting a new business has its challenges, you also get to enjoy the financial rewards that being an entrepreneur can bring.You get to choose what business structure you have, how much salary you will receive, and how you will share your profits.
2. Creative satisfaction:
Being an entrepreneur can be extremely creatively rewarding. Not only do you get to do what you love, you get to benefit from the creative and professional sense of satisfaction that comes from bringing new ideas to market and making an impact in your industry.3. Industry leadership:
One of the major pros of being an entrepreneur is the level of influence you can have in your organisation and in your wider industry. Entrepreneurs are often looked to as ‘thought leaders’ and sources of knowledge, wisdom, and insight.The cons of being an entrepreneur
1. Financial risk:
A key characteristic of entrepreneurship is taking risks. But this can result in financial losses or the emotional impact if your dream idea doesn’t take off.There are many things entrepreneurs can do to minimise personal risks, but the prospect of losing money is one of the cons of being an entrepreneur. However, many businesses fail to turn a profit in the first year and then become profitable in later years.
2. Long hours:
Although you can set your own hours, you will be personally invested in your idea taking off. Entrepreneurs often play many roles, from product design to management, accounting and even marketing.3. Instability:
Being an entrepreneur means you can’t rely on the steady income that comes from having a traditional salaried job or working for a well-established organisation. You may be relying on chasing clients and service providers for invoices or securing ongoing rounds of funding. A key skill will be writing a business invoice and issuing it promptly.Finance for entrepreneurs
There are many ways entrepreneurs can raise funding for their ventures. Some tap into their personal savings, and others reach out to their friends, family, and connections.
Others approach angel investors willing to take a chance on new ideas and invest in startups. Venture capital is another common source of finance for entrepreneurs.
There are also government incentives to support entrepreneurs in the UK such as the Seed Enterprise Investment Scheme (SEIS), which helps startups raise money by offering tax relief to investors.
Business Disposal Asset Relief (formerly called Entrepreneurs’ relief) reduces capital gains tax when you sell all or part of your business.
Banks also provide an important source of finance for entrepreneurs as well as other support such as business bank accounts, advice, and loans.
If you operate a small enterprise, our Small Business Banking Account may be the right option for you. Sole traders and single director shareholder businesses can benefit from the award-winning HSBC Kinetic Current Account. You can apply for an account in minutes in the app and enjoy services such as a monthly breakdown of your cashflow and categorised spending. We also offer a Business Banking Account for already-established small and medium enterprises and suitable for all legal entities. Eligibility criteria and fees may apply.
Questions to ask an entrepreneur
One of the best ways to find out how to become an entrepreneur is to speak to other business owners in the industry you want to enter.
Here are some questions to ask entrepreneurs:
- How did you decide on your business model?
- What are the most import things to get right early on?
- What were your biggest challenges?
- If you had to start over, what would you do differently?
- How do you stay motivated?
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Disclaimer
This article is intended as general information only and does not constitute advice in any way. For any specific questions, you may wish to consult a qualified accountant.
