The Essence of an Entrepreneur
Derived from the French verb entreprendre meaning “to undertake”, the word entrepreneur was once used in reference to Frenchmen who organised and led military expeditions. Today it refers to a person who organises, operates and assumes the risk for a business venture.
Entrepreneurs are an elusive group of people who inevitably generate interest and evoke strong reactions. Some who’ve made it big on sheer grit are admired while others who’ve allegedly made it with influence or luck are scorned. Either way they can rarely be ignored.
Whether out of mere curiosity or a genuine need to understand this enigmatic breed, everyone wants to know what it takes to be a successful entrepreneur, particularly if one is not born into a family that is already in business or one that is wealthy.
If we look at entrepreneurs around us we see that their backgrounds may be rich or poor, their education from a renowned institution or off the street, their age group young or old, their attitude humble or arrogant, their motivation the identification of a market gap or the pressure of circumstance, their style subdued or flamboyant.... So there is no stereotypical personality that we can just copy and be successful! How then can we go about capturing the essence of this mystery in brief?
Since the differentiating factor of an entrepreneur lies in his thoughts and actions, the answer lies in studying them and finding out if there is a pattern!
Over the years I have worked under several talented entrepreneurs and been fortunate to study their styles and methods at close quarters. I have also experienced the startup and failure of my own business. Reading numerous business case studies & biographies of great entrepreneurs have further assisted me in presenting some of the findings I’m about to share. At the end of this reading however, the conclusions will be your own.
While some entrepreneurs are born, there are many that are made – people who have either no business background or are incomplete entrepreneurs in some way but have taught themselves whatever it takes along the way. So entrepreneurship is something that can be learnt.
Entrepreneurship generally involves shifting economic resources from an area of lower yield to one of higher yield. This translates into the need for 2 abilities:
- A Resource Focused Ability that involves availing opportunities in the lower yield area. Resources refer to Money (including Machines and Materials, Men and Time. Let’s not get obsessive about the number of Ms).
- A Challenge-Seeking Ability that involves identifying opportunities in the higher yield area.
Based on this concept, the following grid attempts to capture the types of entrepreneurs that exist:
||Resource Focused Approach
|Challenge Seeking Approach
Grabs opportunities with little thought to the resource consequences of his actions. Seems to survive but eventually fails at the end of the startup period.
He displays a high degree of ability in both areas and balances risks, resources and rewards though a process of periodic review. He is a risk manager rather than a risk taker, in that he does his homework well and limits his financial exposure. For example he may relinquish even the best client contracts if they seem doubtful on the cash receivable front. This is the most successful type – one that we’d obviously like to study.
Low in both challenge-seeking as well as resource focus areas, they land up opting for “me too” businesses that inevitably fail.
Too resource focused to actualize business opportunities that come his way. Generally attributes failure to lack of resources. While his caution prevents failure it also doesn’t allow the business to grow. At best he manages to survive.
This grid has been derived from Rajan Chhibba’s “Starting a successful business”.
This model of classifying entrepreneurship on the basis of just two dimensions is rather simplistic, but does offer some sort of framework for understanding the concept.
Some ways entrepreneurs are known to Think
- Of all the factors that motivate entrepreneurs, personal satisfaction from success and not money is usually the chief one. Other factors may include: “doing things my way”, increase my income / independence, identifying a market gap, etc. Whatever the reason, entrepreneurs are inevitably driven to follow their dreams.
- Entrepreneurs recognise the difference between an idea and an opportunity. For instance a “health food concept” spoken about by many as relevant to today’s market is a wonderful idea. Still, no one has yet actualized it as an opportunity. Obviously there is far more to it than meets the eye.
- They are people with a vision who believe in “Create and Apply Thought!” This is not necessarily in reference to coming up with the idea to be implemented, whether it’s innovative or imitative is not as important as being able to see the path to get there. Also, entrepreneurs can see possibilities in situations where others can see none, and have the patience to work out a solution despite the variables out of their control.
- They ask themselves the right questions with regard to their reasons for being an entrepreneur, the niche they have in mind, the feasibility (financially, marketwise etc.), the realism of the pitfalls, the extent of adequacy of the research done, the implications on personal expenses and time (including family), the exit plan. Basically the what, why, when and how of starting.
- They consider their tolerance for risk versus their desire for reward. Rather than complain about the lack of something, they make up for it with an extra effort to overcome the odds. They believe that neither experience nor education can ensure success in business what matters is what you do with them.
- The overall approach is one of ownership that takes responsibility (rather than blaming other people or things) for failure, and is unafraid to think differently from the herd. They also have a curiosity that encourages gathering knowledge and skills to constantly modify their approach, perspective and even behaviour, leading to better performance. The entrepreneur’s success depends on the acceptance of the marketplace to the “change” that the entrepreneur is offering. So when someone else thrusts a change onto him or her, they embrace it and make it their friend. Thus flexibility is a great virtue. Good time-managers make great efforts to keep schedules at least to the extent they can control, as a delay in this is tantamount to a waste of resources. Thinking strategically rather than just tactically is critical. For example, build roadmaps rather than tools of execution, look at the big picture rather than just the day to day activities, do the right thing rather than do things right, etc.
- The process of entrepreneurship constantly tests the human spirit, and dealing with the impossible becomes a daily affair. An unshakeable belief in oneself and ones ideas, supported by the ability to bounce back is absolutely necessary to overcome uncertainties. Perseverance is typically supported by hard work.
- Few entrepreneurs have succeeded in businesses in which they have no background knowledge. Those that do have in fact familiarized themselves with the business to an extent that they have equal if not greater knowledge than those from the industry.
- Management and Organisational skills such as those in finance, marketing, human resources or operations can certainly be hired, but there is no substitute for the entrepreneur having them to at least some degree in his own repertoire.
- A professional Manager as compared to an Entrepreneur generally expects compensation as opposed to rewards. He normally derives power through office as opposed to ownership, typically agrees with those in power as opposed to following a private vision, by and large seeks nurturing as opposed to self actualization, and characteristically works within defined duties and responsibilities as opposed to doing whatever it takes.
Some ways entrepreneurs are known to Act
- Loving what you do fuels an intense involvement with your work, that results in an almost unending flow of internal stamina and energy that is infectious. Constraints such as those of age or health then become irrelevant. Love the journey rather than the destination.
- They carry into action what they deliberately set out to do in terms of financial, social or other goals. The level of commitment required is considered by some to be equivalent to that of marriage.
- They are great relationship managers with everyone around them – from financiers to customers, and employees to vendors – cutting though the red tape and coping with bureaucracy. Even if an entrepreneur is not extroverted, a limited marketing budget for instance may force him to network in order to generate potential clients. Besides, when an entrepreneur makes a point, apart from presenting facts it is the sharing of his convictions that gives true meaning to the assembled data. This builds confidence in others with regards to his capabilities. When it comes to people, whether inside or outside your organisation, remember: “You are only as strong as your weakest link.”
- Risking loss of face, money and often health requires one to manage resources frugally while overcoming fear or at least containing it. Staying in ones comfort zone can be seductive. The propensity and the stomach for stepping out of it while taking a well considered risk is the hallmark of a victorious entrepreneur.
- Focus on goals keeping in mind deliverables with regards to timelines. The use of crosscheck mechanisms is also useful to keep track of your focus. For example, if food cost is a focus area, a mechanism like month-end F&B controls would be the right thing to concentrate on.
- While some believe that being crafty to an extent of even cheating people is necessary to be a successful businessman, the reality is that a business that desires to last long is built on its reputation, often synonymous with the values of its owner. Honouring ones word consistently is an example of expressing your belief system, thus developing your reputation.
- Frugality in expending resources is critical, particularly during the startup period of a new enterprise. If the concept is one of luxury that warrants a certain level of expenditure, then once the decision to spend is taken, so be it. What is important here is the overall need to be careful with money. Staying lean rather than splurging away capital on unnecessary social appearances or ego gratification that has little or nothing to do with the functional value of the business.
Whether or not all of the above thoughts and actions can be learnt or are even necessary for entrepreneurial success is debatable. The fact is that everyone has some or all of these qualities to a varying degree, and can actually practice and enhance them while creating their own successful style.
In a sense everyone is an entrepreneur. In an employer-employee relationship for instance you are in fact selling your time and expertise to a single client, i.e. your employer. One Harvard professor went so far as to say that based on this, pursuing entrepreneurship is actually safer, since you have multiple clients in a business as opposed to just one in a job.
How does one define success in a business? One thousand days is considered a good time frame to assess your business for success. Three criteria to evaluate this include:
- At least 40% of your client base is that of repeat customers.
- You have commenced using your cash surplus towards asset building, i.e. pumping funds back into the business via investments such as real estate, equipment, training, etc.
- You have commenced using your business cash surplus towards personal wealth generation using investment vehicles of your choice.
Before taking the plunge ask yourself if you have the following in terms of willingness and ability:
- To operate and make decisions while shouldering all responsibility for the business.
- To work hard and make the necessary sacrifices.
- Self-confidence and discipline to build the new business and persevere till you succeed.
Talking to successful entrepreneurs, getting some of them to play the role of a mentor (someone who can bring about favourable changes in your thinking and behaviour) and reading some biographies can also be inspiring.
If you are looking for immediate results, think about these words by Ray Kroc: “People are always amazed by the fact that I didn’t start McDonalds before I was 52 years old, and that I was an overnight success. But I was just like so many people in the entertainment business who practice their routine for years with hardly any notice, and then suddenly find themselves in the spotlight to stardom. I did achieve success from one day to the next, that’s true, but my 30 years of preparation were like a long, long night!”
If you’ve been reading this article merely out of general interest, I hope you found it informative. If however you are thinking of becoming an entrepreneur, you need to list out your targeted developmental areas and work on them. If you believe you have it all already, what are you waiting for? After all, footprints in the sand are not made by sitting down.