An Entrepreneurial Model
The Merriam Webster Dictionary defines an entrepreneur as “one who organizes, manages and assumes the risks of a business or enterprise.”
This definition seems to be simple and straightforward. However, the process of launching a new business or enterprise is quite involved. Additionally, the responsibilities of an entrepreneur are all encompassing and extensive. Entrepreneurs—especially when a company is in the start-up phase—tend to be responsible for developing the idea, conducting market research, selling the product or service, taking care of all billing and accounting needs, marketing the product or service, and managing other business activities. This may continue until the business has generated sufficient income to allow for the hiring of employees.
In this essay, we will explore what it means to be an entrepreneur and how to successfully work through the entrepreneurial process.
Are You an Entrepreneur?
The first step into entrepreneurship is to find out if being an entrepreneur is the right venture for you. The following list presents some of the questions you should consider.
- Are you comfortable taking risks?
- Are you independent enough to work on your own?
- Do you have the creativity to develop your own ideas?
- Do you have the financial resources to support a new venture?
- Do you have a high tolerance for stress?
- Are the people in your life supportive of your decision?
If you answered yes to most of these questions, then you should consider entrepreneurship as a viable path. However, if you answered no to most of these questions, perhaps this is not the right direction for you.
The next step in the entrepreneurial process is being able to recognize business opportunities. These opportunities exist all around us. The true entrepreneur is able to recognize these opportunities and begin to take action.
New ideas for successful businesses come from many places. Some ideas come from simply paying attention to the world around you. For example, while walking through a field, Swiss scientist Georges de Mestral noticed that burrs from the plant life were sticking to his clothing. He further noticed that the burrs had tiny hooks which helped them stay attached to the garments. He thought this would be a good way of attaching things to each other…and now we have Velcro!
Other ideas can come from gathering information about the world of business, trends, consumer behavior, and other external factors. You may generate new business ideas by learning about what is being produced, what shifts are occurring, and the ways in which consumers purchase and use products. Several companies and organizations have recognized shifts in demographics and parenting models and are developing solutions to meet the needs of men who are the primary care-givers for their children, for example, by marketing playgroups for stay-at-home dads.
An individual’s interests or hobbies might also help generate an idea for a business. Marcia Blackwell, the owner of Blackwell’s Organics—a company that produces organic gelato and sorbet—started out by making her own desserts as gifts for family and friends. When the recipients of the gelato and sorbet suggested that people would actually pay money for the delicious treats, Marcia Blackwell took this as a business opportunity.
After the formulation of a business idea, an entrepreneur must gather and analyze a great deal of information. Investigation into the marketplace and industry will provide information about the size of the market and potential growth of the industry. A competitive analysis is also essential to uncover other organizations in the marketplace and how consumers view these organizations and their products. This could potentially uncover areas of opportunity or improvement on another company’s products or services.
This phase should also include research about customers’ attitudes, preferences, and needs for your product category. This will help guide the entrepreneur in product development. For example, if research indicates that there is an increasing trend in do-it-yourself gardening, then new products can be developed for this consumer market. Or, the trend toward a more health-conscious life-style may point to the need for various products and services in this area.
To begin the research process, an entrepreneur may use secondary research sources, which contain information that is already published and readily available. Secondary research sources include business publications such as newspapers, magazines, trade journals, and industry papers. A wide range of online business databases are also available for research including Hoovers, LexisNexis, Plunkett, Mergent, and many others. Further, there are numerous government resources such as the SBA (Small Business Administration) and the US Census. The benefits of conducting secondary research include: the cost is low, data may be collected quickly, many sources are available, and information may provide new strategic directions. Disadvantages to using secondary research methods include: data may be outdated, information may not be complete, data may not be properly collected, and data may not be relevant to the entrepreneur’s specific needs. Secondary research sources can provide valuable information but should be carefully evaluated and assessed before being used in the decision-making process.
Once secondary research is obtained and evaluated, an entrepreneur may conduct primary research, which will require the individual to develop and implement his or her own research. This may include surveys, focus groups, experiments, observations, and other research methods. The benefit to the entrepreneur is that the research is conducted specifically for his or her needs, with results offering the most up-to-date and relevant information. Disadvantages include high cost, long time frame, inaccessibility to certain information, and a limited perspective based on unclear goals.
It is also important to understand the government rules, regulations, and laws relative to your product category. For instance, many industries, such as food service, pharmaceuticals, health care, require business owners to adhere to strict guidelines. Laws related to patents, trademarks, service marks, copyrights, and electronic rights should be explored thoroughly to ensure protection for your products, services, ideas, and designs.
The Business Plan
Would you take a long road trip without directions? Of course not. Directions will help you get from your starting point to your destination. A business plan will take you from the launch of the business to the goals you have set for your organization.
A business plan should include many of the areas already discussed in this essay such as market conditions, the competitive environment, a target analysis, your business goals, and financial sources. A business plan should also include your product’s features and benefits and any competitive advantages your product or service has over the competition. Additionally, a business plan will include the inherent risks associated with your business and the operational structure of the organization. The plan should include a description of the firm’s management team, as well as the legal form the organization will take, such as corporation, LLC, sole proprietorship, or partnership. A business plan should include a detailed marketing plan, focusing on how you will communicate your product’s features and benefits to the target market, plus a schedule of marketing activities. Finally, a business plan should include growth strategies for the organization. This is especially important if outside investor funding will be needed for the company’s launch. For example, when seeking funding from banks, investors, government agencies, and others, these sources will look to your business plan for details on what kind of funding you are requesting, how you will be using those funds, and how and when your stakeholders will see a return on their investments. You will learn more about creating a business plan in unit 3.
Before launching a business, the entrepreneur must determine the source of funding. An entrepreneur must decide whether the business will be self-funded or if it will require outside funds. Outside funds may include bank loans, government grants, angel investors, venture capitalists, or even monies from friends or relatives. These options will be discussed in more detail in unit 5.
The choice of how to fund a business is important, because the source of those funds may impact the ways in which the business is operated and which stakeholders may have a vested interest in the profits of the organization.
The entrepreneurial process requires a large investment of time, money, and energy in order to achieve the most successful outcome possible. By understanding your own skills, capabilities, and willingness to adopt risk, entrepreneurship can be rewarding and lucrative.
If you think you have what it takes to be an entrepreneur, go for it. Be sure to follow the important processes necessary to ensure that you give your business model all of the advantages possible to be successful.
- Determining if entrepreneurship is the right career move is the first step in the entrepreneurial process.
- Idea generation can come from both internal and external sources.
- An entrepreneur must obtain and analyze information about markets, target groups, competition, consumer needs, and government regulations before launching a new venture.
- A business plan is a vital document for guiding the new business, identifying the important factors for managing the business, and obtaining financing.
- The entrepreneurial process requires time, effort, and dedication, but with proper planning, it can be rewarding and lucrative.