What is an Entrepreneurship & How to start a Startup Company?
"Entrepreneur" (/ˌɒ̃trəprəˈnɜːr, -ˈnjʊər/ (
listen), UK also /-prɛ-/) is a loanword from French. The word first appeared in the French dictionary entitled Dictionnaire Universel de Commerce compiled by Jacques des Bruslons and published in 1723.[29] Especially in Britain, the term "adventurer" was often used to denote the same meaning.[30] The study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Irish-French economist Richard Cantillon, which was foundational to classical economics. Cantillon defined the term first in his Essai sur la Nature du Commerce en Général, or Essay on the Nature of Trade in General, a book William Stanley Jevons considered the "cradle of political economy".[31][32] Cantillon defined the term as a person who pays a certain price for a product and resells it at an uncertain price, "making decisions about obtaining and using the resources while consequently admitting the risk of enterprise". Cantillon considered the entrepreneur to be a risk-taker who deliberately allocates resources to exploit opportunities to maximize the financial return.[33][34] Cantillon emphasized the willingness of the entrepreneur to assume the risk and to deal with uncertainty, thus he drew attention to the function of the entrepreneur and distinguished between the function of the entrepreneur and the owner who provided the money.[33][35]
Jean-Baptiste Say also identified entrepreneurs as a driver for economic development, emphasizing their role as one of the collecting factors of production allocating resources from less to fields that are more productive. Both Say and Cantillon belonged to the French school of thought and known as the physiocrats.[36]
Dating back to the time of the medieval guilds in Germany, a craftsperson required special permission to operate as an entrepreneur, the small proof of competence (Kleiner Befähigungsnachweis), which restricted training of apprentices to craftspeople who held a Meister certificate. This institution was introduced in 1908 after a period of so-called freedom of trade (Gewerbefreiheit, introduced in 1871) in the German Reich. However, proof of competence was not required to start a business. In 1935 and in 1953, greater proof of competence was reintroduced (Großer Befähigungsnachweis Kuhlenbeck), which required craftspeople to obtain a Meister apprentice-training certificate before being permitted to set up a new business.[37]
20th century[edit]
In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. While the loan from French of the word "entrepreneur" dates to 1850, the term "entrepreneurship" was coined around the 1920s. According to Schumpeter, an entrepreneur is willing and able to convert a new idea or invention into a successful innovation.[38] Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior offerings across markets and industries, simultaneously creating new products and new business models, thus creative destruction is largely responsible for long-term economic growth. The idea that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory[clarification needed] and as such continues to be debated in academic economics. An alternative description by Israel Kirzner suggests that the majority of innovations may be incremental improvements such as the replacement of paper with plastic in the construction of a drinking straw that require no special qualities.
For Schumpeter, entrepreneurship resulted in new industries and in new combinations of currently existing inputs. Schumpeter's initial example of this was the combination of a steam engine and then current wagon making technologies to produce the horseless carriage. In this case, the innovation (i.e. the car) was transformational but did not require the development of dramatic new technology. It did not immediately replace the horse-drawn carriage, but in time incremental improvements reduced the cost and improved the technology, leading to the modern auto industry. Despite Schumpeter's early 20th-century contributions, the traditional microeconomic theory did not formally consider the entrepreneur in its theoretical frameworks (instead of assuming that resources would find each other through a price system). In this treatment, the entrepreneur was an implied but unspecified actor, consistent with the concept of the entrepreneur being the agent of x-efficiency.
For Schumpeter, the entrepreneur did not bear risk: the capitalist did. Schumpeter believed that the equilibrium was imperfect. Schumpeter (1934) demonstrated that the changing environment continuously provides new information about the optimum allocation of resources to enhance profitability. Some individuals acquire new information before others and recombine the resources to gain an entrepreneurial profit. Schumpeter was of the opinion that entrepreneurs shift the production possibility curve to a higher level using innovations.[39]
Initially, economists made the first attempt to study the entrepreneurship concept in depth.[40] Alfred Marshall viewed the entrepreneur as a multi-tasking capitalist and observed that in the equilibrium of a completely competitive market there was no spot for "entrepreneurs" as an economic activity creator.[41]
21st century[edit]
In the 2000s, entrepreneurship was extended from its origins in for-profit businesses to include social entrepreneurship, in which business goals are sought alongside social, environmental or humanitarian goals and even the concept of the political entrepreneur.[according to whom?] Entrepreneurship within an existing firm or large organization has been referred to as intrapreneurship and may include corporate ventures where large entities "spin-off" subsidiary organizations.[42]
Entrepreneurs are leaders willing to take risks and exercise initiative, taking advantage of market opportunities by planning, organizing, and deploying resources,[43] often by innovating to create new or improving existing products or services.[44] In the 2000s, the term "entrepreneurship" has been extended to include a specific mindset resulting in entrepreneurial initiatives, e.g. in the form of social entrepreneurship, political entrepreneurship, or knowledge entrepreneurship.
According to Paul Reynolds, founder of the Global Entrepreneurship Monitor, "by the time they reach their retirement years, half of all working men in the United States probably have a period of self-employment of one or more years; one in four may have engaged in self-employment for six or more years. Participating in new business creation is a common activity among U.S. workers over the course of their careers".[45] In recent years, entrepreneurship has been claimed as a major driver of economic growth in both the United States and Western Europe.
Entrepreneurial activities differ substantially depending on the type of organization and creativity involved. Entrepreneurship ranges in scale from solo, part-time projects to large-scale undertakings that involve a team and which may create many jobs. Many "high value" entrepreneurial ventures seek venture capital or angel funding (seed money) to raise capital for building and expanding the business.[46] Many organizations exist to support would-be entrepreneurs, including specialized government agencies, business incubators (which may be for-profit, non-profit, or operated by a college or university), science parks and non-governmental organizations, which include a range of organizations including not-for-profits, charities, foundations, and business advocacy groups (e.g. Chambers of commerce). Beginning in 2008, an annual "Global Entrepreneurship Week" event aimed at "exposing people to the benefits of entrepreneurship" and getting them to "participate in entrepreneurial-related activities" was launched.[who?]
Relationship between small business and entrepreneurship[edit]
The term "entrepreneur" is often conflated with the term "small business" or used interchangeably with this term. While most entrepreneurial ventures start out as a small business, not all small businesses are entrepreneurial in the strict sense of the term. Many small businesses are sole proprietor operations consisting solely of the owner—or they have a small number of employees—and many of these small businesses offer an existing product, process, or service and they do not aim at growth. In contrast, entrepreneurial ventures offer an innovative product, process, or service, and the entrepreneur typically aims to scale up the company by adding employees, seeking international sales, and so on, a process that is financed by venture capital and angel investments. In this way, the term "entrepreneur" may be more closely associated with the term "startup". Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, to adapt to changing environments, and understand their own strengths and weakness.[47]
Historians' ranking[edit]
A 2002 survey of 58 business history professors gave the top spots in American business history to Henry Ford, followed by Bill Gates; John D. Rockefeller; Andrew Carnegie, and Thomas Edison. They were followed by Sam Walton; J. P. Morgan; Alfred P. Sloan; Walt Disney; Ray Kroc; Thomas J. Watson; Alexander Graham Bell; Eli Whitney; James J. Hill; Jack Welch; Cyrus McCormick; David Packard; Bill Hewlett; Cornelius Vanderbilt; and George Westinghouse.[48] A 1977 survey of management scholars reported the top five pioneers in management ideas were: Frederick Winslow Taylor; Chester Barnard; Frank Bunker Gilbreth Sr.; Elton Mayo; and Lillian Moller Gilbreth.[49]
Definition of Entrepreneurship:-
An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures, and the process through which Entrepreneur works or deals is known as Entrepreneurship.
Entrepreneurship is the creation or extraction of value. With this definition, entrepreneurship is viewed as change, which may include other values than simply economic ones.
Entrepreneurs play a key role in any economy, using the skills and initiative necessary to anticipate needs and bring good new ideas to the market. An entrepreneur is successful in taking on the risks of a startup are rewarded with profits, fame, and continued growth opportunities. Those who fail, suffer losses become less prevalent in the markets.
How Entrepreneurs Work
Entrepreneurship is one of the resources economists categorize as integral to production, the other three being land/natural resources, labor, and capital. An entrepreneur combines the first three of these to manufacture goods or provide services. They typically create a business plan, hire labor, acquire resources and financing, and provide leadership and management for the business.
Entrepreneurs commonly face many obstacles when building their companies. The three that many of them cite as the most challenging are as follows:
- Overcoming bureaucracy
- Hiring talent
- Obtaining financing
- Now, Let's grow our knowledge about How to start our own Startup but before we
- start this session, let's know "The 6 things that Young Entrepreneurs should know
- before starting up"
Know your market and your product
If you are truly passionate about an idea, the first step is to spend time on market research. Understand your target audience, their needs, challenges. Interact with potential customers to know more about how your idea can help solve a problem. Take the time to understand if your product will stand out in a crowded market. If there are too many competitors, find your niche. Work towards creating a product or solving a problem that’s unique.
Find a mentor
When you are starting out young, it’s easy to get carried away with your idea and lose focus from the larger picture. Find a mentor who can guide you with business strategies, crunch numbers, connect you to the right group of people and provide insights about the market. An experienced mentor can play a key role in the success of your business.
Network, network, network
Networking is a must if you want more people to know about your company or generate business leads. Identify networking events that are specific to your industry and make it a point to attend these events regularly. Participating in these events will help you build connections, identify new trends in your industry, help you hire the right talent, and build visibility for your business.
Transparency
Maintain transparency across all the stakeholders involved in the business especially customers. Don’t fool your customers just to satisfy sales. Be transparent about what your product is good for and what it is not good for. It’s not easy to maintain transparency across all aspects but once you start practicing it, positive results are bound to follow. Additionally, it also helps to build a great and age.
Perseverance
Perseverance is an important trait for an entrepreneur. Never give up on the idea that you are passionate about. When you start out young, you have the advantage of time. If Plan A does not work, be ready with a contingency plan. The concept of overnight success rarely works in business. There might be multiple rough moments in your entrepreneurial journey, dust it off, and keep working towards your goal.
Outreach and Marketing
While running the day to day operations, it’s easy to ignore the other aspects such as marketing and branding. A great idea is just an idea if no one knows about it. People are only familiar with a brand if they’re made familiar with it. Marketing is an important and essential tool for reaching out to the desired market. It’s important to effectively explain why people must buy your product or invest in your idea.
A startup or start-up is a company or project initiated by an entrepreneur to seek, effectively develop, and validate a scalable business model.
The 7 Main Steps You Need to Take to Get Your Startup Off the Ground
Make a business plan
Having an idea is one thing, but having a legitimate business plan is another story.
Of people who start companies with a completed business plan:
- 36% obtained a loan.
- 36% received investment capital.
- 64% grew their business.
Of the people without a business plan:
- 18% obtained a loan.
- 18% received investment capital.
- 43% grew their business.
We’ll discuss the financial aspects of launching your startup company shortly, but clearly, you need money to start and operate a new business.
A proper business plan gives you a significant advantage.
So how do you make a business plan?
In simple terms, a business plan is a written description of your company’s future.
You outline what you want to do and how you’re planning to do it.
Typically, these plans outline the first 3 to 5 years of your business strategy.
The business plan needs to be the first thing on your list because you’ll use it to help you with some of the remaining steps.
Secure appropriate funding
You’ll need adequate capital to get yourself off the ground.
There’s no magic number that applies to all businesses.
The startup costs will obviously vary from industry to industry, so your company may require more or less funding depending on the situation.
For a small, part-time startup with no equipment, employee salaries, or overhead to worry about, it may only cost you less than $10,000.
Other ventures may cost millions.
What’s the primary source of this funding?
Roughly 565,000 startup companies launch in the United States every month.
On average, these businesses raise $78,406.
Based on the graphic above, the vast majority of this money comes out of the entrepreneurs’ pockets.
The cost of doing business is much higher than people initially think.
Let’s circle back to our business plan for a minute.
All business plans contain a financial plan. This plan usually includes:
- Balance sheet
- Sales forecast
- Profit and loss statement
- Cash-flow statement
82% of businesses fail due to cash-flow problems.
You’ll use these financial statements to determine how much funding you need to raise in order to get started.
You may discover that the number is significantly higher than you originally anticipated.
For example, I’m sure you’ve heard someone say, “That would make a great app,” or “I should make an app for this.”
Do you know how much it costs to make a mobile application?
Even if you start a small app shop with only a few people, it’s likely going to cost you anywhere from $50,000 to $100,000.
And that’s just to make it.
It doesn’t include the cost of running it or customer acquisition costs.
The point I’m making is this – in order to secure the appropriate funding, you need to find out how much money you need to raise.
To find this number, you need to research and predict realistic financials in your business plan.
Let’s say you discover that your startup needs $100,000 to get off the ground.
What if you don’t have $100,000?
Don’t worry – your dream isn’t dead yet.
You’ve got some options, but you want to weigh them all cautiously to avoid paying massive interest rates.
22% of business loans go to small businesses. The vast majority of business loans are for large companies that are already established.
There’s a reason why this number is so low.
Banks are less likely to give large amounts of money to new companies with no income or assets to default on.
That’s why bank funding was second to last on the funding sources graphic that we referenced and discussed earlier.
So if you can’t get money from a bank, or if you can only find a bank that’s offering you an outrageous interest rate, what other options do you have?
Find investors.
Investors can be:
- Friends
- Family
- Angel investors
- Venture capitalists
Proceed carefully because you don’t want to start giving away significant equity in your company before you even get started.
The type of business you’re starting also influences the likelihood that angel investors and venture capitalists will be willing to give you funding.
Over half of venture capitalist money in the United States is invested in software and technology.
It may not be easy to find venture capitalists if you’re not in a certain area.
What do I mean by this?
f you find a potential investor, you need to know how to pitch your idea quickly and effectively.
You need to have your financial numbers memorized forwards and backward.
Refer to your business plan.
Make sure it’s presentable so you can give them a copy, but you also need to know how to successfully verbalize your startup strategy.
It’s imperative that your business plan has a proper executive summary.
Investors are busy and may not take the time to read through your entire plan if the executive summary doesn’t give them a reason to move forward.
Once you secure the appropriate funding, you can proceed to the next step of launching your startup company.
Surround yourself with the right people
You’re going to need some help while launching your startup company.
So where do you start?
Certain people often get overlooked when entrepreneurs are getting their business started.
Sure, you may realize that you’ll need some staff and a manager to help run your company. Is that it?
How many people do you need?
It depends on the industry.
Let’s take a look at an example from a study about the number of employees for startup companies in the technology industry.
Based on this information, the vast majority of startup companies are small teams.
These numbers would be significantly different if you were starting a business in the restaurant industry.
You would need servers, kitchen staff, bartenders, and managers.
Before you do anything, you need to register your business name.
Once your business gets registered, you’ll need to get a federal tax ID number, as well, from the IRS.
The IRS lets you submit your business information online to get your employer identification number (EIN).
You also need to consult with a:
- Lawyer
- Accountant
- Financial advisor
Unless you’re an expert in law, finances, and accounting, these three people can help save your business some money in the long run.
They can explain the legal requirements and tax obligations based on how you structure your business.
- Sole proprietorship
- Partnership
- Corporation
- Limited liability company
While your lawyer, accountant, and financial advisors are not necessarily employees on your payroll, they are still important people to surround yourself with.
Don’t forget about insurance.
Shop around and find an insurance agent who can get you plenty of coverage at an affordable rate.
Now you can start hiring people within your organization.
Find a location and build a website
Your startup company needs a physical address and a web address.
Whether it’s offices, retail space, or a manufacturing location, you need to buy or lease a property to operate your business.
As you can see from the graph, leasing property for your business is significantly more expensive than buying.
With that said, it may not be realistic for all entrepreneurs to tie up the majority of their capital in real estate.
You should strategize for this in your business plan.
Try to secure enough funding so that you can afford to buy a property.
It’s worth the investment and will save you money in the long run.
You also need to create a website.
Don’t wait until the day your business officially launches to get your website off the ground.
It’s never too early to start promoting your business.
If customers are searching online for a service in your industry, you want them to know that you exist, even if you’re not quite open for business yet.
You can even start generating some income through your website.
If it’s applicable, start taking some pre-orders and scheduling appointments.
For those of you who aren’t convinced of the pre-orders business model, take notes from Tesla.
Just make sure that your website is fast.
I can’t stress this point enough.
Today, your company can’t survive without an online presence.
If you’ve never launched a website before, you can follow my guide to building your first website.
It may sound like a tough task, but it’s really not that difficult.
Once your website is up and running, you need to expand your digital presence.
Utilize social media platforms like:
- Snapchat
Your prospective customers are using these platforms, so you need to be on them, as well.
Become a marketing expert
If you’re not a marketing expert, you need to become one.
You might have the best product or service in the world, but if nobody knows about it, then your startup can’t succeed.
Learn how to use digital marketing techniques like:
- Content marketing
- Affiliate marketing
- Email marketing
- Search engine optimization (SEO)
- Social media marketing (SMM)
- Search engine marketing (SEM)
- Pay-per-click advertising (PPC)
If you’re starting a small business in a local community, you can take advantage of some older and conventional methods such as:
- Print advertising
- Radio advertisements
- Television
- Billboards
While these methods can be productive, outbound marketing efforts are not as effective as they used to be.
If you’re stuck in an old-school mindset and can’t adapt to the new trends from the marketing world, you’ll struggle to get your startup off the ground.
For those of you who aren’t efficient marketers, there is no shame in hiring a marketing director or even a marketing team, depending on the size of your company.
Your marketing efforts will be one of the most important, if not the most important, components of launching your startup business.
Allocate a marketing budget.
Determine how you’re going to distribute this money across different channels.
Have a plan and try to maximize your return on investment for each campaign.
The graph displays where companies are having the highest and lowest ROI based on their marketing costs.
Take these numbers into consideration before you spend your entire budget on something like banner ads.
The bottom line is this: Marketing needs to be a top priority for your startup company.
Build a customer base
If you’re following this plan in order, the good news is that you’re already on the right track to building a customer base.
Starting a website, growing your digital presence, and becoming an effective marketer are all steps in the right direction.
But now it’s time to put these efforts to the test.
Open your doors (or website) for business.
Getting a customer to make a purchase is the first step.
But this isn’t nearly enough.
You need to keep your customers coming back.
This statement holds true for physical store locations as well as e-commerce businesses.
So what’s the key to getting repeat customers?
It’s no secret.
- Customer service
- Customer service
- Customer service
The customer needs to be your main priority. They are the lifelines of your business, and they need to be treated accordingly.
Once you establish a steady customer base, you can use it to your advantage.
You’ll get more money from your existing customers than from new ones.
How do you sell more products or services to your current customers?
It’s a more effective method than cross-selling.
Less than 0.5% of customers respond to cross-selling.
Over 4% of your customers will buy an upsell.
These strategies both double back to having effective marketing campaigns.
Overall, establishing, building, and maintaining a customer base will help you get your startup company off the ground.
Prepare for anything
Expect the unexpected.
Launching your startup company won’t be easy, and you need to plan for some hurdles along the way.
Don’t let these speed bumps become roadblocks.
You can’t get discouraged when something goes wrong.
Preserve and push through it.
The difficulties that you’ll face while launching your startup company will help prepare you for the tough road ahead.
Even after your business is up and running, it won’t necessarily be smooth sailing for the entire lifecycle of your company.
You will face peaks and valleys while your company operates.
Mistakes and setbacks happen.
Some of these things will be out of your control, like a natural disaster or a crisis with the nation’s economy.
Employees will come and go.
You’ll face tough decisions and crossroads.
Sometimes, you’ll even make the wrong decision.
That’s OK.
Part of being an entrepreneur is learning from your mistakes.
It’s important to recognize when you’ve done something wrong, move forward, and try your best to make sure it doesn’t happen again.
Pay your bills.
Pay your taxes.
Operate within the confines of the law.
As long as you’re doing these things, you’ll be able to fight through any obstacle your startup company faces in the future.
Conclusion
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