Accepting the challenge of starting and running a business. On the one extreme, an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme, anyone who wants to work for himself or herself is considered an entrepreneur.
While many people use the terms entrepreneurship and small business interchangeably, there are significant differences. Entrepreneurial ventures differ from small businesses in the following ways:
1. Amount of Wealth Creation. Rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars in profit.
2. Speed of Wealth Creation. While a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid. For example, this may occur within five years.
3. Risk. The risk of an entrepreneurial venture must be high. Otherwise, with the incentive of sure profits, many people would pursue the idea of entrepreneurship, making business ventures impossibly competitive.
4. Innovation. Entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. Innovation may be in new products, new production methods, new markets, and new forms of organizations.
From this list, you can quickly gather that entrepreneurship is not always small and small business is not always entrepreneurial. While most businesses start small, it is the intent to stay small that separates them from entrepreneurship.
There are many triggers to why people become entrepreneurial and some reasons many include the decision to leave corporate life (by choice or after downsizing), a sudden inheritance that allows them to try something different, a change in health that forces a career path adjustment, a change in family responsibility that sparks a search to increase income, or even disliking a supervisor so much that being self-employed is an attractive option. Other reasons why people are willing to take the challenge of starting a business are described in more detail below:
– New Idea, Process, or Product.
– Family Pattern
As you review the following important entrepreneurial attributes, you may ask yourself if you have them.
– Highly Energetic.
– Tolerant of Uncertainty.
– Able to Learn Quickly.
While courage is not considered a skill, it is nevertheless an important element of an entrepreneur. Courage is required to challenge the status quo, to see an opportunity, and then most importantly, to try to do something about it. Entrepreneurs are doers. They do not just think and talk about an idea, they act on it! Also be aware that even if you posses many (or even all) of these attributes, there is no guarantee that you will be successful with every endeavour.
Keep in mind, however, that not all ideas are opportunities. If your idea does not meet anyone else’s needs, the business will not succeed. You may have a business idea that is a good opportunity if:
– It fills customers’ needs;
– You have the skills and resources to start a business;
– You can sell the product or service at a price customers are willing and able to pay-and still make a profit;
– You can get your product or service to customers before your window of opportunity closes or before competitors with similar solutions beat you to the marketplace; and
– You can keep the business going.
SMEs (small and medium-sized enterprises)
Refers to all businesses with fewer than 500 employees.
Studies have shown a variety of reasons for the emergence of female entrepreneurs:
– Financial Need.
– Lack of Promotion Opportunities.
– Women Returning to the Workforce.
– Family and Personal Responsibility.
– Public Awareness of Women in Business.
– Part-Time Occupations.
– Higher Rate of Success for Women.
A group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product. A team may be better than an individual entrepreneur because team members can combine creative skills with production and marketing skills right from the start. Having a team also can ensure more co-operation and coordination among functions.
A small business defined as having one to four employees.
Small-business owners with fewer than five employees who are willing to accept the risk of starting and managing the type of business that remains small, lets them do the work they want to do, and offers them a balanced lifestyle.
In addition to helping business owners balance work and family, other reasons for the growth of home-based businesses include the following:
– Computer Technology.
– Corporate Downsizing.
– Change in Social Attitudes.
Working at home has its challenges, of course. In setting up a home-based business, you could expect the following major challenges:
– Getting New Customers.
– Managing Time.
– Keeping Work and Family Tasks Separate.
– Abiding by City Ordinances.
– Managing Risks.
An online marketing strategy in which a business rewards individuals or other businesses (affiliates) for each visitor or customer the affiliate sends to its website.
Creative people who work as entrepreneurs within corporations. The idea is to use a company’s existing resources-human, financial, and physical-to launch new products and generate new profits.
Centres that provide space, services, advice, and support to assist new and growing businesses to become established and successful. The business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. The other goals of incubation programs are creating jobs, retaining businesses in a community, building or accelerating growth in a local industry, and diversifying local economies.
Must meet the following minimum criteria; it must have at least one paid employee, it must have annual sales revenue of $30,000, and it must be incorporated and have filed a federal corporate income tax return at least once in the previous three years.
A business that is independently owned and operated, is not dominant in its field, and meets certain standards of size in terms of employees or annual revenues.
There are several ways to get into your first business venture. They are:
1. Learn from others.
2. Get some experience.
3. Buy an existing business
4. Buy a franchise.
5. Inherit / take over a family business.
To help you succeed as a business owner, in the following sections we explore the five functions of business in a small-business setting, which are as follows:
1. Planning your business
2. Financing your business (finance)
3. Knowing your customers (marketing)
4. Managing your employees (human resources)
5. Keeping records (accounting)
Although all of the functions are important in both the start-up and management phases of the business, the first two functions-planning and financing-are the primary concerns when you start your business. The remaining functions are the heart of your operations once the business is underway. One of the major causes of small-business failure is poor management. Keep in mind, though, that the term poor management covers a number of faults. It could mean poor planning, record keeping, inventory control, promotion, or employee relations. Most likely it includes poor capitalization.
A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s). A business plan forces potential owners of small businesses to be quite specific about the goods or services they intend to offer. They must analyze the competition, calculate how much money they need to start, and cover other details of operation. A business plan is also mandatory for talking with bankers or other investors. Put another way, a business plan is a tool that is used to transition the entrepreneur from having an idea to actually developing a strategic and operational framework for the business. All require a comprehensive business plan. The time and effort you invest before starting a business will pay off many times over. The big payoff is survival.
Private individuals who invest their own money in potentially hot new companies before they go public.
Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.
Raising funds through the collection of small contributions from the general public (known as the crowd) using the Internet and social media.
People with unsatisfied wants and needs who have both the resources and the willingness to buy.
Small businesses have several advantages over large businesses in international trade, which include the following:
– Overseas buyers enjoy dealing with individuals rather than with large corporate bureaucracies;
– Small companies can usually begin shipping much faster;
– Small companies can support a wide variety of suppliers; and
– Small companies can give customers more personal service and more undivided attention, because each overseas account is a major source of business to them.
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