This is “What Is an Entrepreneur?”, section 5.1 from the book An Introduction to Business (v. 1.0).
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In developing BTIO and Realityworks Inc., the Jurmains were doing what entrepreneurs do (and doing it very well). In fact, Mary was nominated three times for the Ernst & Young Entrepreneur of the Year Award and named 2001 Wisconsin Entrepreneurial Woman of the Year by the National Association of Women Business Owners. So what, exactly, is an entrepreneur? What does an entrepreneur do? According to one definition, an entrepreneur is an “individual who starts a new business,” and that’s true as far as it goes. Another definition identifies an entrepreneur as someone who uses “resources to implement innovative ideas for new, thoughtfully planned ventures”Canadian Foundation for Economic Education, “Glossary of Terms,” Mentors, Ventures & Plans (2008), http://www.mvp.cfee.org/en/glossary.html (accessed October 7, 2008). which is also true as far as it goes. But an important component of a satisfactory definition is still missing. To appreciate fully what it is, let’s go back to the story of the Jurmains, for whom entrepreneurship seems to have worked out quite well. We hasten to point out that, in 1993, the Jurmains were both unemployed—Rick had been laid off by General Dynamics Corp., and Mary by the San Diego Gas and Electric Company. While they were watching the show about teenagers and flour sacks, they were living off a loan from her father and the returns from a timely investment in coffee futures. Rick recalls that the idea for a method of creating BTIO came to him while “I was awake in bed, worrying about being unemployed.” He was struggling to find a way to feed his family. He had to make the first forty simulators himself, and at the end of the first summer, BTIO had received about four hundred orders—a promising start, perhaps, but, at $250 per baby (less expenses), not exactly a windfall. “We were always about one month away from bankruptcy,” recalls Mary.
At the same time, it’s not as if the Jurmains started up BTIO simply because they had no “conventional” options for improving their financial prospects. Rick, as we’ve seen, was an aerospace engineer, and his résumé includes work on space-shuttle missions at NASA. Mary, who has not only a head for business but also a degree in industrial engineering, has worked at the Johnson Space Center. Therefore, the idea of replacing a sack of flour with a computer-controlled simulator wasn’t necessarily rocket science for the couple. But taking advantage of that idea—choosing to start a new business and to commit themselves to running it—was a risk. Risk taking is the missing component that we’re looking for in a definition of entrepreneurship, and so we’ll define an entrepreneurIndividual who identifies a business opportunity and assumes the risk of creating and running a business to take advantage of it. as someone who identifies a business opportunity and assumes the risk of creating and running a business to take advantage of it.
If we look a little more closely at the definition of entrepreneurship, we can identify three characteristics of entrepreneurial activity:Adapted from Marc J. Dollinger, Entrepreneurship: Strategies and Resources, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2003), 5–7.
It isn’t hard to recognize all three of these characteristics in the entrepreneurial experience of the Jurmains. They certainly had an innovative idea. But was it a good business idea? In a practical sense, a “good” business idea has to become something more than just an idea. If, like the Jurmains, you’re interested in generating income from your idea, you’ll probably need to turn it into a product—something that you can market because it satisfies a need. If—again, like the Jurmains—you want to develop a product, you’ll need some kind of organization to coordinate the resources necessary to make it a reality (in other words, a business). Risk enters the equation when, like the Jurmains, you make the decision to start up a business and when you commit yourself to managing it.
Do you think Chris DeWolfe knew what a huge success MySpace would be when he and Tom Anderson started their Web site?
Source: http://commons.wikimedia.org/wiki/File:Chris_DeWolfe.jpg accessed Feb. 2, 2009.
So what about you? Do you ever wonder what it would be like to start your own business? Maybe you want to try your hand at entrepreneurship. You could be the next Tom Anderson or Chris DeWolfe, founders of MySpace. Or the next David Marcks, a golf course manager who came up with the idea of Geese Police—training dogs to chase geese from golf courses, corporate parks, and municipal playgrounds.Isabel M. Isidro, “Geese Police: A Real-Life Home Business Success Story,” PowerHomeBiz.com (2008), http://www.powerhomebiz.com/OnlineSuccess/geesepolice.htm (accessed October 8, 2008). Or even the next Pierre Omidyar, the French-born software developer who built an online venue for person-to-person auctions, known as eBay.See American Academy of Achievement, “Pierre Omidyar,” Academy of Achievement (November 9, 2005), http://www.achievement.org/autodoc/page/omi0bio-1 (accessed October 8, 2008). You might even turn into a “serial entrepreneur,” like Dan Bricklin, whose résumé so far includes four software companies: Software Arts (founded to market his own invention, an electronic spreadsheet calculator), Software Garden (software for monitoring Web servers), Slate Corp. (software for pen computers), and Trellix Corp. (software for building and hosting Web sites).Dan Bricklin, Dan Bricklin’s Web site, http://www.bricklin.com (accessed October 8, 2008); Dan Bricklin, “Natural-Born Entrepreneur—Lessons of a Serial Entrepreneur,” Working Knowledge (October 22, 2001), http://hbswk.hbs.edu/archive/2569.html (accessed October 8, 2008).
For the sake of argument, let’s say that you would like to know a little more about going into business for yourself—in which case, you’ll want some answers to questions like the following:
In this chapter, we’ll provide some answers to questions like these.
Let’s say that you are interested in the idea of going into business for yourself. Not everyone, of course, has a desire to take the risks and put in the work involved in starting up a business. What sort of characteristics distinguishes those who do from those who don’t want to start a business? Or, more to the point, why do some people actually follow through on the desire to start up their own businesses? According to the Small Business Administration (SBA)Government agency that helps prospective owners set up small businesses, obtain financing, and manage ongoing operations., a government agency that provides assistance to small businesses, the most common reasons for starting a business are the following:U.S. Small Business Administration, “First Steps: How to Start a Small Business,” http://www.sba.gov/starting/indexsteps.html (accessed April 21, 2006).
The SBA points out, though, that these are likely to be advantages only “for the right person.” And how do you know if you’re one of the “right people”? The SBA suggests that you assess your strengths and weaknesses by asking yourself a few relevant questions:U.S. Small Business Administration, “Is Entrepreneurship for You?” http://www.sba.gov/smallbusinessplanner/plan/getready/SERV_SBPLANNER_ISENTFORU.html (accessed October 26, 2008).
Later in this chapter, we’ll take up the question of why businesses fail, but since we’re still talking about the pros and cons of starting a business in the first place, we should consider one more issue: in addition to the number of businesses that start and then fail, a huge number of business ideas never even make it to the grand opening. One business analyst cites four reservations (or fears) that prevent people from starting businesses:Shari Waters, “Top Four Reasons People Don’t Start a Business,” About.com, http://retail.about.com/od/startingaretailbusiness/tp/overcome_fears.htm (accessed October 8, 2008).
If you’re still interested in going into business for yourself, feel free to regard these potential drawbacks as mere obstacles to be overcome by a combination of planning and creative thinking.
These bakers are not entrepreneurs. They run their small bakery for the sole purpose of providing an income for themselves and their families (a salary-substitute firm) or to earn a living while pursuing their hobby of baking (a lifestyle firm).
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Though most entrepreneurial ventures begin as small businesses, not all small business owners are entrepreneurs. Generally speaking, we can divide small businesses into three types:Adapted from Bruce R. Barringer and R. Duane Ireland, Entrepreneurship: Successfully Launching New Ventures, 2nd ed. (Upper Saddle River, NJ: Pearson Education, 2008), 16.
There are three characteristics of entrepreneurial activity:
According to the SBA, a government agency that provides assistance to small businesses, there are five advantages to starting a business—“for the right person”:
To determine whether you’re one of the “right people” to exploit the advantages of starting your own business, the SBA suggests that you assess your strengths and weaknesses by asking yourself the following questions:
Though most entrepreneurial ventures begin as small businesses, not all small business owners are entrepreneurs. Generally speaking, we can divide small businesses into three types:
Do you have what it takes to be an entrepreneur? To find out, start by reviewing the following list of characteristics commonly attributed to entrepreneurs:
We’ll also add that entrepreneurs usually start small. They begin with limited resources and build their businesses through personal effort. At the end of the day, their success depends on their ability to manage and grow the organization that they created to implement their vision.
Now use the following three-point scale to indicate the extent to which each of these attributes characterizes you:
Based on your responses, do you think that you have the attributes of an entrepreneur? Do you think you could be a successful entrepreneur? Why, or why not?