Course Material- All about An Entrepreneur

Who is an Entrepreneur?

Entrepreneurs play a vital role in the economic development of a country. Economic development of a country depends primarily on its entrepreneurs. An entrepreneur is often considered as a person who sets up his own business or industry. He has initiative, drive, skill and spirit of innovation who aims at high goals. The entrepreneur is the individual that identifies the opportunity, gathers the necessary resources and is ultimately responsible for the performance of the organization. Entrepreneurs are action oriented, highly motivated individuals who take risks to achieve goals.

Concept of Entrepreneur:

The story of defining entrepreneur and entrepreneurship will sound like the story of six blind men describing an. elephant. There is hardly any commonly agreed upon definition among economic pundits.

The word “entrepreneur” is derived from the French word entreprendre which means to initiate or undertake. In the early sixteenth century, the Frenchmen who organized and led military expeditions were referred to as “entrepreneurs”. The term entrepreneur was applied to business in the early eighteenth century by French Economist Richard Cantillon. According to him, the entrepreneur buys factor services at certain prices with a view to sell their products at uncertain prices in the future. Richard Cantillon conceived of an entrepreneur as a bearer of non-insurable risk.

Another Frenchman, J.B. Say, expanded Cantillon’s ideas and conceptualized the entrepreneur as an organizer of a business firm, central to its distributive and production functions. Beyond stressing the entrepreneur’s importance to the business, Say did little with his entrepreneurial analysis. According to J.B. Say, an entrepreneur is the economic agent who unties all means of production, the labour force of the one and the capital or land of the others and who finds in the value of the products his results from their employment, the reconstitution of the entire capital that he utilizes and the value of the wages, the interest and the rent which he pays as well as profit belonging to himself. He emphasized the functions of co-ordination, organization and supervision. Further, it can be said that the entrepreneur is an organizer and speculator of a business enterprise. The entrepreneur lifts economic resources out of an area of lower into an area of high productivity and greater yield.

The New Encyclopedia Britannica considers an entrepreneur as an individual who bears the risk of operating a business in the face of uncertainty about the future conditions. Leading economists of all schools, including Karl Marx have emphasized the contribution of the entrepreneurs to the development of economies, but Joseph A. Schumpeter who argues that the rate of growth in an economy depends to a great extent on the activities of entrepreneurs, has probably put greater emphasis on the entrepreneurial function than any other economist.

In the words of Joseph A. Schumpeter, “The entrepreneur in an advanced economy is an individual who introduces something new in the economy – a method of production not yet tested by experience in the branch of manufacture concerned, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like”. The function of an entrepreneur according to him is to “reform or revolutionize the pattern of production by exploiting an invention or more generally, an untried technological possibility for producing a new commodity”. According to Schumpeter, an entrepreneur is an innovator, who introduces something new in the economy. Innovation may be: (a) introduction of a. new product, (b) introduction of new methods of production, (c) developing new markets and finding fresh sources of raw materials, and (d) making changes in the organization and management.

Knight described entrepreneurs to be a specialized group or persons, who bear uncertainty; and uncertainty is defined as the risk which cannot be calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility which, by its very nature, cannot be insured or salaried. He also guarantees specified sums to others in return for assignments made to them.

Peter F. Drucker, in his book “Innovative Entrepreneurs” defines entrepreneurs as innovators. Entrepreneurs search for change and exploit opportunities. According to him “Innovation is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation”. He further said that an entrepreneur is one who always searches for changes, responds to it, and exploits it as an opportunity.

Cunningham and Lischerson in their recent work have described six possible schools of thought on entrepreneurs. The first school of thought i.e. ‘Great Person School’ says that an entrepreneur is born with an intuitive ability – a sixth sense and this sense helps him in start up stage. The second school of thought, i.e. ‘Psychological Characteristics School’ explains that entrepreneurs have unique values attitudes, and needs which drive them and help them especially in start-up stage. The third school, i.e. ‘Classical School of Thought’ says that central characteristic of entrepreneurial behavior is innovation. This characteristic helps the entrepreneur much in start-up and early growth. ‘Management School’ is the fourth school of thought and it says entrepreneurs are organizers of economic venture and they organize, own, manage and assume its risk. Such functional orientation helps them in early growth and maturity. The fifth school of thought is the ‘Leadership School’. According to this school, entrepreneurs are leaders of people and they have the ability to adopt their style to the needs of people. Such leadership personality suits them most during early growth and maturity situations. ‘Intrapreneurship School’ is the sixth school of thought. Intrapreneurship is the act of developing independent units, to create market and expand services within the organization. Intrapreneurship is needed by an entrepreneur during the situation of maturity and change.

Burton W. Folsom, Jr. distinguishes between what he calls a "political entrepreneur" who seeks profit for his business by using political influence to obtain favors and arrangements with government from a "market entrepreneur" who seeks to profit without utilizing political influence.  Entrepreneur is concerned more than simply “starting a business.”  The definition of entrepreneurship is a creation process through which entrepreneurs identify opportunities, allocate resources, and create value.  This creation of value is often through the identification of unmet needs or through the identification of opportunities for change. Entrepreneurs see “problems” as “opportunities,” then take action to identify the solutions to those problems and the customers who will pay to have those problems solved.

Whatever is the definition, across the world entrepreneurs have been considered instrumental in initiating and sustaining socio-economic development. There are evidences to believe that countries which have proportionately higher, percentage of entrepreneurs in their population have developed much faster as compared to countries which have lesser percentage of them in the society, discover new sources of supply of materials and markets and they establish new and more effective forms of organizations. Entrepreneurs perceive new opportunities and seize them with super normal will power and energy, essential to overcome the resistance that social environment offers. In sum, the concept of entrepreneurs is intimately associated with the three elements-risk bearing, organizing and innovating.

Features of an Entrepreneur

If we go through the business history of successful entrepreneurs in our country, we come across the names of Tata, Birla, Gulshan Kumar, Modi, Kirlosker, Dalmia and others who started their business with small size and made good fortunes. The scanning of their personal features shows that there are certain characteristics of entrepreneurs which are found usually prominent in them. Successful entrepreneurs are action-oriented, they have the ability to visualize the steps from idea to actualization. They are both thinkers and doers, planners and workers, get involved-they adopt a hands-on approach, can tolerate ambiguity-enterprise always consists of action in uncertainty, accept risk but understand and manage it; overcome rather than avoid mistakes – they don’t admit they are beaten, see themselves as responsible for their own destiny-they are dedicated, setting self-determined goals and believe in creating markets for their ideas, not just in responding to existing market demands.

An entrepreneur is a job-giver and not a job-seeker. This means that he is his own boss. The characteristics which make him his own boss are given below:

(a)        Strong achievement orientation.

(b)        Unwavering determination and commitment.

(c)        Self-reliance and independence.

(d)        Hunger for success.

(e)        Self-confidence and self-faith.

(f)         Sustained enthusiasm.

(g)        Single-mindedness.

(h)        Strong reality orientation.

(i)         Willingness to accept responsibility.

(j)         Courage.

(k)        Ability to survive defeat.

(l)         Become wealthy and stay humble.

An entrepreneur is a highly achievement oriented, enthusiastic and energetic individual.

Characteristic of successful entrepreneurs: Qualities of Successful Entrepreneurs are list below-

1. They dream big: - Successful entrepreneurs have the ability to envision a new reality and the will to bring it to fruition. They have crazy big dreams, even though to some these dreams may not be realistic or practical. But it is the big dreamers who really succeed. They are possibilities thinker who believe there are possibilities and are not limited by commonly held boundaries. They look beyond to ask the “what ifs” questions. They look for answers and solutions and aren’t daunted by challenges. In fact, they relish challenges.

2. They have a passion for positive change: - The entrepreneurs who make it big know that they have a unique contribution to make to society. They start a business, not just to change their own lives, but also to make a difference in the world and make it a better place. They want their products or services to succeed not only in terms of profits but to bring about positive change in the communities they live in by solving existing problems or filling existing gaps. They are motivated by their desire to improve circumstances at the broader level.

3. They have a clear vision of what they want to achieve: - Successful entrepreneurs have the vision for the future – what they want to achieve, what opportunities they need, and how they can accomplish it. Their vision gives them purpose and helps maintain their focus on what they want the business to achieve. It also helps them overcome the many humps and challenges they meet along the way.

4. They engage in calculated risk taking: - Contrary to common wisdom, entrepreneurs are not risk addicts. Instead, they take reasonable risks. While taking risks is part of the entrepreneurship process, those who succeed weigh the options, see what else is out there, and careful about the types of risks they are willing to take for themselves and those that might rely on them.

5. They are self-directed and self-motivated:- Entrepreneurs have a strong faith in their ideas, their capabilities and in themselves. After all, to succeed, they constantly need to ask themselves the hard questions and then come up with ways to answer them. They have “intestinal fortitude” or that “fire in the belly.” They love to be their own boss, carving their own paths along the way. .

6. They are results-driven: - Successful entrepreneurs are passionate about results. They want their actions to have a direct impact on results. They want the job done. They also have the ability to conceptualize the whole of a business; not just its individual parts, but how they relate to each other. They are individuals who always come up with new ideas.

7. They have a strong desire to be independent:- Entrepreneurs love to be in charge and be their own boss. They want to be in control. They carve their own path, relying on their own talents, instincts and skills. They don’t take orders from anyone and do not need validation from superiors judging them whether they are worthy of a promotion or capable of handling more responsibilities. They move and make decisions on their own, without waiting for someone to push them. While being in charge can be daunting at times, the rewards of seeing the results of all the hard work are tremendous.

8. They know how to sell. Business is all about selling: - Whether selling their idea to an investor, negotiating with a bank for a loan, talking to a supplier, or directly selling to customer, entrepreneurs know how to sell. The business is bound to fail if the entrepreneur does not know how to sell. If they do not have sales skills, they are smart enough to partner with someone who excels at it.

9. They have a powerful drive to accumulate wealth: - Entrepreneurs appreciate what money could bring to their lives – and embrace it. They know that financial success can afford them with opportunity, freedom, and well-being. They view starting their own businesses as an opportunity to earn far more than they could ever from working for others. Win, lose or draw, entrepreneurs want to be master of their own financial destiny.

10. They embrace fear: - Successful entrepreneurs strongly believe in themselves. In fact, many of them are supremely confident individuals. However, their strong belief in themselves doesn’t necessarily mean that they don’t experience self-doubt. They do! They experience fear, but instead of running away from their fears, they embrace what they fear the most and just plod on.

11. They exhibit tolerance towards ambiguity: - Even though there is no assurance that a business will succeed, entrepreneurs are not daunted by this uncertainly and instead continue to pursue the idea of starting a business.

12. They see opportunities where others do not: - Those who succeed in business have finely honed business skills based on their environment, education, experience and innate intuitive abilities. What sets them apart is their inherent sense of what is “right” for a business. They have the ability to spot opportunities for growth, with loads of courage to pursue these opportunities. They love the challenge of pitting their resources and skills against the environment.

13. They are not afraid to make mistakes: - Successful entrepreneurs are not afraid of making mistakes because they see it as an opportunity to learn and improve. They don’t focus on blame and retribution, and instead work on finding solutions to rectify the mistake and prevent it from happening again.

14. They seek out help when needed: - Successful entrepreneurs realize that they don’t know everything. They will pull in resources and seek the advice of experts to help them achieve their goals. They know that they key to getting things done is to find the right people who can do the job. They understand their strengths and weaknesses – and find people who can complement them in areas that they need the most.

15. They have the willingness and capacity to persevere: - Entrepreneurs possess a high level of energy, sustainable over long hours to make the business successful. They welcome the responsibility that goes to owning a business. They are tenacious, always finding a way to display persistence or able to dig deep within oneself to find it. When things don’t go their way, they are able to handle thousands of rejections along the journey.

16. Good interpersonal skills: - They recognize that much of their success will depend on how well they deal with people. While success in entrepreneurship takes rugged individualism, it’s a “team sport” at its core.

17. Discipline: - Successful entrepreneurs possess huge doses of discipline. Discipline is important to stay focused on their objectives and vision. The process of building an idea into a business entails working on a lot of details — some of which the entrepreneur may not want to deal with — but it is discipline that makes the entrepreneur work on completing every task. As an entrepreneur, it is easy to go off strategy, including the allure of not working (for home-based entrepreneurs, that mean sleeping or watching TV instead of working), and discipline keeps them on the right track.

18. They keep their focus: - Successful entrepreneurs understand that focus is a key ingredient to the success of their business. They know the importance of identifying and concentrating on making the unique aspects of their business as superb as possible. They are clear on what their business stands for, and stick to it. They don’t have to grab all opportunities that come their way or try to do too much too quickly. They keep their eyes on the prize and spend their resources, time and energy in focusing on the attainment of their goals — running and developing a successful, profitable and viable business. Every day, their focus is how to further enhance their business.

19. They are flexible: - Successful entrepreneurs are always on their toes, ready to make the shift if needed. They know that as the business grow, the needs of their business changes and they will require help in developing and executing their vision. Their managerial skills become critical, and their understanding of the market and competition becomes crucial. They know that sleeping on the job is the worst mistake an entrepreneur can make, and they always strategize and prepare for change.

20. They love what they do: - Successful entrepreneurs are passionate with what they do. They love what they do, and their work feels more like fun, play and inspiration. They more they are having fun and loving what they do, financial rewards come easier. They are energized by the activities and challenges of their business. Even if they fail often, their passion keeps them going until they get it right.

Before committing yourself to the extraordinary investment of time, energy and money that starting a business requires, you need to engage in some personal soul-searching. You need to review your pluses and minuses, your strengths and weaknesses to determine if you are a suitable match for the challenge. Remember, the entrepreneur IS the business – its originator, its motivating force, and its energy. Without the needed ingredients, the business can fail as quickly as it started.