An entrepreneur is someone who develops an enterprise around an innovation. They manage the business and assume the risk for its success.
The definition of an entrepreneur isn't set in stone. To better understand what an entrepreneur is, learn more about the different types of entrepreneurs, what they do, and characteristics you're likely to recognize among them.
What Is an Entrepreneur?
An entrepreneur is defined by the personal risk they take on in pursuit of a new business, innovation, or some other form of enterprise. In exchange for taking on that risk, they often profit most significantly from their enterprise's success.
There is some debate over the exact definition of an entrepreneur. Some have a wide definition that includes anyone who works for themself. Others have a narrower viewpoint, suggesting that an entrepreneur doesn't just work independently for their own business, but their business must also involve innovation and leadership. Hence, there is a nuance practiced between a startup founded by an entrepreneur and a standard small business started by a small business owner.
The main difference between the two is innovation and scalability. A startup is founded on an innovative idea and can be scaled exponentially unlike a small business that is a copy-paste of what exists and will not grow to become a unicorn, to give a stretched analogy.
How Entrepreneurs Work
Entrepreneurs are an important aspect of the economy. They help spur growth by taking risks on innovative ideas. The odds of success may not be particularly promising, but if it succeeds, many entrepreneurial pursuits push industries forward dramatically.
Entrepreneurs have to overcome obstacles, including funding, employee, and organizational challenges as they pursue their goals.
Characteristics of a Successful Entrepreneur
Examining the commonly shared characteristics may help to explain the way entrepreneurs work. Whether a person is born into it or develops these traits along the way, there are similarities among those who have beensuccessful in their entrepreneurship.
Passion: Talk to successful entrepreneurs and you'll nearly always hear the word passion when they describe what they do. Following your passion is one of the best predictors of success.
Independent thinking: Entrepreneurs often think outside the box and aren't swayed by others who might question their ideas.
Optimism: It's difficult to succeed at anything if you don't believe in a good outcome. Entrepreneurs are dreamers and believe their ideas are possible, even when they seem unattainable.
Confidence: This is not to say entrepreneurs never have self-doubt, but they're able to overcome it, and believe they can achieve their goal.
Resourceful and problem-solvers: Lack of assets, knowledge, and resources are common, but entrepreneurs can get what they need or figure out how to use what they've got to reach their business goals. They never let problems and challenges get in the way, and instead, they find ways to achieve success despite hardships.
Tenacity and ability to overcome hardship: Entrepreneurs don't quit at the first, second, or even hundredth obstacle. For them, failure is not an option, so they continue to work toward success, even when things go wrong.
Vision: Some of the more stringent definitions of entrepreneurship include vision as a necessary element. It helps to know your end goal when you start. Further, vision is the fuel that propels you forward toward your goal.
Focus: It's easy to get distracted in this fast-paced world. Many start-ups get side-tracked by the "shiny object syndrome" (products and services that promise fast results), or they get bogged down in unimportant busywork. Successful entrepreneurs avoid these distractions and stay focused on what will bring results.
Action-oriented: Entrepreneurs don't expect something to come from nothing, and they don't wait for things to happen. They are doers. They overcome challenges and avoid procrastination.
Types of Entrepreneurs
One of the reasons there is disagreement over the definition of an entrepreneur is that it includes so many different types of self-employed businesses. Here are some common types of entrepreneurship.
Some entrepreneurial pursuits end up becoming massive businesses, but they all start out as a small business, and many stay that way. These include mom-and-pop shops and local business owners. Small businesses can include partnerships, sole proprietors, and LLCs. The exact definition of a small business in the U.S. depends on its industry, but it's determined by an employee headcount, a revenue cap, or both.
A bookstore with revenue under $30 million is considered a small business in the U.S.
A home-based business could fit under the category of small business, but the primary factor, in this case, is that it's run from home, as opposed to an office or other location. Just because a business is run from home doesn't mean it can't compete with larger businesses. Many large corporations start at home before moving into an office space.
Internet-based business can be small, home-based, or even large corporations. The key difference here is that the business is operated primarily online. This includes companies like Amazon or other e-commerce businesses, bloggers, eBay and Etsy owners, and any other business that does the majority of its business online.
For an inventor to be considered an entrepreneur, they need to go beyond the idea stage to build the product and get it to market. Good examples of inventors who transition to entrepreneurs are the contestants that appear on the TV show "Shark Tank."
Many entrepreneurs get the most joy out of starting and building a business, but not in its continued management. Those kinds of entrepreneurs start a business, then they sell it and pivot to launching a new idea. They are still considered entrepreneurs because they operate and assume risk in the business for the time they own it. Other times, serial entrepreneurs juggle several businesses at once, earning multiple streams of income.
Although the idea of a lifestyle entrepreneur isn't new, it's gained in popularity with the rise of technology like YouTube that gives everyone access to a global audience. A lifestyle entrepreneur is one who builds a business that incorporates their interests and passions and sustains their life goals. Many in this category are referred to as digital nomads because they have online businesses that allow them to travel. However, travel isn't a defining aspect of lifestyle entrepreneurs. The key factor in a lifestyle entrepreneur is that they've found a way to monetize their favorite hobbies, habits, and lifestyles.
How to Become an Entrepreneur
You don't have to be rich or famous to be a successful entrepreneur. There are countless examples of small-time, little-known entrepreneurs who had an idea and turned it into a thriving, profitable business. They are moms who invent a gadget or start a lifestyle blog, teenagers who star in their own YouTube shows, and retired folks who turn a lifetime of experience into coaching or consulting businesses.
Becoming an entrepreneur isn't hard, but it is work and requires many steps including:
- Focused development of entrepreneurial characteristics
- A great idea that people will pay money for
- A detailed plan for success
- Consistent execution and dedication to that plan
While it takes research, planning, and work, you can start a home business fairly quickly—perhaps even within a month.
- Entrepreneurs create a business around an innovation, and they assume personal risk in pursuit of those goals.
- The exact definition of an entrepreneur varies.
- The risks taken by entrepreneurs help spur economic growth and innovative progress.