In today’s rapidly evolving world, entrepreneurship has become an attractive career path for many people. In fact, in the UK alone, over 750,000 new companies are incorporated each year. The allure of creating something from scratch, being your own boss, and potentially reaping substantial rewards is understandably compelling.
But how does someone embark on this journey and become an entrepreneur? In this blog, we’ll explore the fundamentals of becoming an entrepreneur, from understanding the different types of entrepreneurship to identifying the key characteristics that set successful entrepreneurs apart.
What are the four types of entrepreneurship?
Entrepreneurship is typically broken down into four different types. Each of these types have their own unique approach and objectives and will suit different people in different ways.
Small business entrepreneurship
Small business entrepreneurship is perhaps the most common form of entrepreneurship – the latest figures show there are 5.5m small and medium-sized businesses (SMEs) in the UK, making up 99.9% of the total private sector business population.
Small business owners tend to have a local or niche target market by focusing on providing goods and services that meet specific needs. Some examples of this include restaurants, boutique shops, and service providers like plumbers or accountants.
Scalable startup entrepreneurship
Scalable startup entrepreneurship is characterised by a strong emphasis on growth and scalability. These entrepreneurs aim to build businesses that have the potential to grow rapidly and capture a significant market share.
Startups often seek external funding and employ innovative technologies or business models. Tech giants like Facebook, Google and Airbnb are prime examples of scalable startups.
Large company entrepreneurship (intrapreneurship)
Large company entrepreneurship, or intrapreneurship, involves individuals within an existing organisation who take the initiative to develop new products, services or processes. These ‘intrapreneurs’ display the same qualities as traditional entrepreneurs, but operate within the framework of a larger company.
Intrapreneurship fosters innovation within a current workforce and enables existing organisations to stay competitive in a dynamic market.
Social entrepreneurship blends business principles with a social or environmental mission and is driven by a desire to create positive change in society by addressing issues such as poverty or environmental sustainability.
TOMS Shoes are a good example of social entrepreneurship as they donate a third of their profits to grassroots organisations which work to create an impact in mental health, access to opportunity, and ending gun violence in the US.
How do entrepreneurs make money?
One of the key motivators for becoming an entrepreneur is the potential for financial success, but the path to profitability can vary widely with the type of entrepreneurship you pursue and whether you need to seek external funding to get started.
Funding a startup
Starting a new business venture can have substantial upfront costs, particularly if it includes expenses like market research, product development, marketing strategies and office space.
To address these financial needs, entrepreneurs can explore the following:
- Bootstrapping: This involves using personal savings and reinvesting revenue generated by the business to fund growth. This approach allows entrepreneurs to maintain full control, but can limit the speed of business expansion.
- Angel investors: These are individuals who provide capital to startups in exchange for equity or ownership shares. They often bring valuable industry expertise and connections in addition to financial support.
- Venture capital: Venture capitalist firms invest in early-stage startups with high growth potential and typically receive equity in exchange for funding.
- Bank loans: Traditional business loans may be an option for entrepreneurs and are usually available as ‘secured’ (backed by collateral) or ‘unsecured’ (based on creditworthiness).
- Crowdfunding: Entrepreneurs can raise capital by presenting their business ideas to a wide audience who will receive incentives if they financially contribute.
Maintaining a profitable business
Cash flow is key to success in entrepreneurship, so it’s important that once a business gets off the ground it continues to make money. 90% of startups fail because they run out of cash, with this in mind, it’s important for a new entrepreneur to consider how much it will cost to be able to generate the product or service being offered to ensure the end price is more than cash spent.
The ways a company can make money will depend on its business model, but can include:
- Product sales: Businesses in retail and manufacturing will have revenue primarily coming from selling products. This method includes costs associated with product development, manufacturing, packaging and distribution, so entrepreneurs must have a competitive pricing strategy which will still generate a profit while taking these costs into account.
- Service fees: Service-based businesses generate income by providing specialised skills or expertise. When determining pricing structure and profit margins, costs to consider will include acquiring necessary equipment, setting up a workspace, and investing in professional development or certifications.
- Subscription models: Many modern startups, particularly in the tech sector, employ subscription-based models. This can require heavy investment in technology infrastructure, software development, and marketing to attract and retain potential customers.
- Advertising and sponsorships: Entrepreneurs who create content, whether through blogs, podcasts, or social media, can monetise their audience through advertising partnerships or sponsored content. This model will have lower startup costs compared to others, but may require a larger time investment to promote your platform to attract advertisers.
- Licensing and royalties: Some entrepreneurs generate income by licensing their intellectual property, such as patents, trademarks, or copyrighted content, to others in exchange for royalties. This won’t be applicable to all industries and can incur legal fees associated with securing and protecting intellectual property rights.
What are the characteristics of an entrepreneur?
To thrive in the world of entrepreneurship, it is vital to cultivate key traits that set successful entrepreneurs apart.
Some of these characteristics include:
- Visionary thinking: Entrepreneurs possess a clear vision of their goals and are forward-thinkers, always looking ahead.
- Resilience and perseverance: Setbacks are inevitable, but successful entrepreneurs view them as learning opportunities and press forward.
- Adaptability: The business landscape is ever-evolving. Being adaptable allows entrepreneurs to pivot when necessary and seize emerging opportunities.
- Effective communication: From in-person networking events to pitching to potential investors, communication skills are vital for building relationships and securing partnerships.
- Hard work and dedication: Starting a business demands unwavering commitment and a willingness to put in the hours.
- Customer-centric focus: Understanding and meeting the needs of your target audience is paramount. A successful business is one which provides value to its new and existing customers.
Learn how to thrive as an aspiring entrepreneur
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The flexible design of the programme is intended to enable you to fit study around existing commitments – whether that’s family, full-time work, or writing the business plan for your new venture. You will learn how to apply theories of strategic management in practice, effective operations management, and business finance. Take the next step in your career and apply today.