Entrepreneurship is the process of starting new businesses, generally in response to opportunities. For instance, Fred Carl, founder of the Viking Range Corporation, saw an opportunity to create an appliance that combined the best features of commercial and residential ranges.
Many people think that entrepreneurial ventures and small businesses are the same, but they’re not. Entrepreneurs create entrepreneurial ventures—organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals. On the other hand, a small business is an independent business having fewer than 500 employees that doesn’t necessarily engage in any new or innovative practices and that has relatively little impact on its industry. A small business isn’t necessarily entrepreneurial because it’s small. To be entrepreneurial means that the business is innovative and seeking out new opportunities. Even though entrepreneurial ventures may start small, they pursue growth. Some new small firms may grow, but many remain small businesses, by choice or by default.
Who’s Starting Entrepreneurial Ventures?
“Call them accidental entrepreneurs, unintended entrepreneurs, or forced entrepreneurs.” As the unemployment rate hovers around double digits, many corporate “refugees” are becoming entrepreneurs. These individuals are looking to entrepreneurship, not because they sense some great opportunity, but because there are no jobs. The Index of Entrepreneurial Activity by the Kauffman Foundation showed the rate at which new businesses formed in 2010 remained high, representing the “highest level of entrepreneurship over the past decade and a half.” The report found that “the patterns provided some early evidence that ‘necessity’ entrepreneurship is increasing and ‘opportunity’ entrepreneurship is decreasing.” But “accidental or by design,” entrepreneurship is on the rise again.
As many entrepreneurs (successful and not-so-successful) would attest, being an entrepreneur isn’t easy. According to the Small Business Administration, only two-thirds of new businesses survive at least two years. The survival rate falls to 44 percent at four years, and to 31 percent at seven. But the interesting thing is that entrepreneurial venture survival rates are about the same in economic expansions and recessions.
What Do Entrepreneurs Do?
Describing what entrepreneurs do isn’t an easy or simple task! No two entrepreneurs’ work activities are exactly alike. In a general sense, entrepreneurs create something new, something different. They search for change, respond to it, and exploit it.
Initially, an entrepreneur is engaged in assessing the potential for the entrepreneurial venture and then dealing with start-up issues. In exploring the entrepreneurial context, entrepreneurs gather information, identify potential opportunities, and pinpoint possible competitive advantage(s). Then, armed with this information, an entrepreneur researches the venture’s feasibility—uncovering business ideas, looking at competitors, and exploring financing options.
After looking at the potential of the proposed venture and assessing the likelihood of pursuing it successfully, an entrepreneur proceeds to plan the venture. This process includes such activities as developing a viable organizational mission, exploring organizational culture issues, and creating a well-thought-out business plan. Once these planning issues have been resolved, the entrepreneur must look at organizing the venture, which involves choosing a legal form of business organization, addressing other legal issues such as patent or copyright searches, and coming up with an appropriate organizational design for structuring how work is going to be done.
Only after these start-up activities have been completed is the entrepreneur ready to actually launch the venture. A launch involves setting goals and strategies, and establishing the technology-operations methods, marketing plans, information systems, financial accounting systems, and cash flow management systems.
Once the entrepreneurial venture is up and running, the entrepreneur’s attention switches to managing it. What’s involved with actually managing the entrepreneurial venture? An important activity is managing the various processes that are part of every business: making decisions, establishing action plans, analyzing external and internal environments, measuring and evaluating performance, and making needed changes. Also, the entrepreneur must perform activities associated with managing people including selecting and hiring, appraising and training, motivating, managing conflict, delegating tasks, and being an effective leader. Finally, the entrepreneur must manage the venture’s growth including such activities as developing and designing growth strategies, dealing with crises, exploring various avenues for financing growth, placing a value on the venture, and perhaps even eventually exiting the venture. Visit LSBF, one of the best online learning platforms, to learn more about entrepreneurship.
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