What defines an entrepreneur?
“A person who organises and manages a business undertaking, assuming the risk for the sake of profit.” Webster’s
“Someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced.
An entrepreneur supplies risk capital as a risk taker, and monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner, or the one who owns the majority of shares in an incorporated venture.
According to economist Joseph Alois Schumpeter (1883-1950), entrepreneurs are not necessarily motivated by profit but regard it as a standard for measuring achievement or success.” Business Dictionary
“A person who seizes an opportunity and masterminds a business undertaking to take advantage of it. S/he is the driving force in providing and/or attracting risk capital and in directing business activity towards a profitable outcome. Profit is as much a measure of success as an end in itself.” LWD
Using the physical Business Adept cards, I asked for insights into 5 key attributes for the role of entrepreneur. The following cards turned up. I’ve added my interpretation.
Structure 4 – Shortfall: managing resources to ensure that the right type, in the right quantity and quality are always available
Structure 7 – Quality Assurance: supplier management; attention to the quality of both component parts and the process by which they are used or assembled
Delivery 6 – Risk Analysis: in delivering a product or service, ensuring that ALL potential risks are understood and eliminated or contained effectively
Performance 2 – Performance Appraisal: have a comprehensive system for setting standards, monitoring, evaluating and improving all aspects of performance
Performance 4 – Targets: set targets that are challenging and achievable; make sure incentives reward behaviour that is good for the business as a whole
However, although these may be essential for the successful management of a business initiative, those people, who are generally recognised as successful entrepreneurs, while having the flare, charisma and dynamism to set the intention and direction, rarely apply themselves to such mundane matters. They motivate others to take on those tasks.
Small business start-ups
Whether proprietors of small business start-ups can be classed as entrepreneurs has been a matter of contention. Certainly they comply with the letter of the dictionary description, if not with the popular image.
In The E Myth revisited (2001), Michael E Gerber talks about the entrepreneurial myth - ie the beliefs that:
- a) most people who start small businesses are entrepreneurs, and
- b) someone who is skilled at the technical work of a business can successfully run a business doing that technical work.
My work in business process re-engineering has taught me that only 25-30% of the types of activity required to run a business are actually core to the business. The remainder include HR and finance, procurement and facilities management, IT and a whole host of activities needed to set up and maintain the capability to perform the core activity (which may be technical in nature).
In some ways it is lucky that many people who start small businesses do not appreciate this situation and naively take the plunge without fully understanding what they are taking on. They muddle their way through, somehow learn quickly enough how to tackle the challenges, and survive. Though many just can’t cope, we have to applaud those that do. However, it is likely that only a few will have the true entrepreneurial spirit which will take their businesses onto bigger things.