TOPIC 1: Entrepreneurship: An Overview own money, providing sweat equity to reduce labor costs, minimizing

inventory, and factoring receivables

Fundamental Concepts Related to Entrepreneurship  While some entrepreneurs are lone players struggling to get small
1. What Is an Entrepreneur? businesses off the ground on a shoestring, others take on partners armed
2. How Entrepreneurs Work? with greater access to capital and other resources. In these situations,
3. The Entrepreneur and Financing new firms may acquire financing from venture capitalists, angel
4. Entrepreneurship Definitions investors, hedge funds, crowdsourcing, or through more traditional
5. Entrepreneurs Impact the Economy sources such as bank loans.
6. Entrepreneurs Help Economies 4. Entrepreneurship Definitions
7. Entrepreneurial Ecosystems
 Economists have never had a consistent definition of "entrepreneur" or
1. Who is an Entrepreneur? "entrepreneurship" (the word "entrepreneur" comes from the French
 An entrepreneur is an individual who creates a new business, bearing verb entreprendre, meaning "to undertake"). Though the concept of an
most of the risks and enjoying most of the rewards. The entrepreneur is entrepreneur existed and was known for centuries, the classical and
commonly seen as an innovator, a source of new ideas, goods, services, neoclassical economists left entrepreneurs out of their formal models.
and business/or procedures.  They assumed that perfect information would be known to fully rational
 Entrepreneurs play a key role in any economy, using the skills and actors, leaving no room for risk-taking or discovery. It wasn't until the
initiative necessary to anticipate needs and bring good new ideas to middle of the 20th century that economists seriously attempted to
market. Entrepreneurs who prove to be successful in taking on the risks incorporate entrepreneurship into their models.
of a startup are rewarded with profits, fame, and continued growth  Three thinkers were central to the inclusion of entrepreneurs: Joseph
opportunities. Those who fail, suffer losses and become less prevalent in Schumpeter, Frank Knight, and Israel Kirzner. Schumpeter suggested
the markets. that entrepreneurs not just companies were responsible for the creation
of new things in the search of profit.
2. How Entrepreneurs Work?  Knight focused on entrepreneurs as the bearers of uncertainty and
believed they were responsible for risk premiums in financial markets.
 Entrepreneurship is one of the resources economists categorize as
Kirzner thought of entrepreneurship as a process that lead to a
integral to production, the other three being land/natural resources, labor
discovery.
and capital. An entrepreneur combines the first three of these to
manufacture goods or provide services. They typically create a business 5. Entrepreneurs Impact the Economy
plan, hire labor, acquire resources and financing, and provide leadership
and management for the business.  In economist-speak, an entrepreneur acts as a coordinating agent in a
 Entrepreneurs commonly face many obstacles when building their capitalist economy. This coordination takes the form of resources being
companies. The three that many of them cite as the most challenging are diverted toward new potential profit opportunities. The entrepreneur
as follows: Overcoming bureaucracy, hiring talent and obtaining moves various resources, both tangible and intangible, promoting capital
financing formation.
 In a market full of uncertainty, it is the entrepreneur who can actually
3. The Entrepreneur and Financing help clear up uncertainty, as he makes judgments or assumes the risk.
To the extent that capitalism is a dynamic profit-and-loss system,
 Given the riskiness of a new venture, the acquisition of capital funding
entrepreneurs drive efficient discovery and consistently reveal
is particularly challenging, and many entrepreneurs deal with it via
knowledge.
bootstrapping: financing a business using methods such as using their
 Established firms face increased competition and challenges from
entrepreneurs, which often spurs them toward research and development
 efforts as well. In technical economic terms, the entrepreneur disrupts as entrepreneurs' associations, business incubators, and education
course toward steady-state equilibrium. programs
 For example, California's Silicon Valley is often cited as an example of
6. Entrepreneurs Help Economies
a wellfunctioning entrepreneurial ecosystem. The region has a well-
 Nurturing entrepreneurship can have a positive impact on an economy developed venture capital base, a large pool of well-educated talent,
and a society in several ways. For starters, entrepreneurs create new especially in technical fields, and a wide range of government and
business. They invent goods and services, resulting in employment, and nongovernment programs fostering new ventures and providing
often create a ripple effect, resulting in more and more development. information and support to entrepreneurs.
 For example, after a few information technology companies began in
Common Paths that Make Successful Entrepreneurs
India in the 1990s, businesses in associated industries, like call center
operations and hardware providers, began to develop too, offering 1. Ensure Financial Stability
support services and products. 2. Build a Diverse Skill Set
 Entrepreneurs add to the gross national income. Existing businesses may 3. Consume Content Across Multiple Channels
remain confined to their markets and eventually hit an income ceiling. 4. Identify a Problem to Solve
But new products or technologies create new markets and new wealth. 5. Solve That Problem
And increased employment and higher earnings contribute to a nation’s
tax base, enabling greater government spending on public projects.
1. Ensure Financial Stability
 Entrepreneurs create social change. They break tradition with unique
 This first step is not a strict requirement but is definitely
inventions that reduce dependence on existing methods and systems,
recommended. While entrepreneurs have built successful
sometimes rendering them obsolete. Smartphones and their apps, for
example, have revolutionized work and play across the globe. businesses while being less than financially flush, starting out with
 Entrepreneurs invest in community projects and help charities and other an adequate cash supply and ensuring ongoing funding can only
non-profit organizations, supporting causes beyond their own. Bill help an aspiring entrepreneur.
Gates, for example, has used his considerable wealth for education and  It increases his or her personal runway and give him more time to
public health initiatives. work on building a successful business, rather than worrying about
making quick money.

Entrepreneurial Ecosystems
2. Build a Diverse Skill Set
 There is research that shows high levels of self-employment can stall
economic development: Entrepreneurship, if not properly regulated, can  Once a person has strong finances, it is important to build a
lead to unfair market practices and corruption, and too many diverse set of skills and then apply those skills in the real
entrepreneurs can create income inequalities in society. world. The beauty of step two is it can be done
 Overall, though, entrepreneurship is a critical driver of innovation and concurrently with step one.
economic growth. Therefore, fostering entrepreneurship is an important  Building a skill set can be achieved through learning and
part of the economic growth strategies of many local and national trying new tasks in real-world settings. For example, if an
governments around the world.
aspiring entrepreneur has a background in finance, he can
 To this end, governments commonly assist in the development of
move into a sales role at his existing company to learn the
entrepreneurial ecosystems, which may include entrepreneurs
soft skills necessary to be successful. Once a diverse skill
themselves, governmentsponsored assistance programs and venture
capitalists. They may also include non-government organizations, such set is built, it gives an entrepreneur a toolkit that he can
 rely on when he is faced with the inevitability of tough appointment is complicated for patients, and dentists are losing
situations. customers as a result. The value could be to build an online
appointment system that makes it easier to book appointments.

Traits of Successful Entrepreneurship

3. Consume Content Across Multiple Channels
1. Passion to Action
 As important as building a diverse skill set is, the need to consume 2. Getting Your Hands Dirty
a diverse array of content is equally so. This content can be in the 3. Knowing When to Change Course
form of podcasts, books, articles or lectures. The important thing is 4. Shrewd Money Management
that the content, no matter the channel, should be varied in what it
covers. 1. Passion to Action
 An aspiring entrepreneur should always familiarize himself with the
world around him so he can look at industries with a fresh  Giving credence to the adage, “find a way to get paid for the job
perspective, giving him the ability to build a business around a you’d do for free,” passion is arguably the most important
specific sector. component startup business owners must have, and every edge
helps. While the prospect of becoming your own boss and raking in
4. Identify a Problem to Solve a fortune is alluring to entrepreneurial dreamers, the possible
downside to hanging one’s own shingle is vast.
 Through the consumption of content across multiple channels, an  Income isn’t guaranteed, employersponsored benefits go by the
aspiring entrepreneur is able to identify various problems to solve. wayside, and when your business loses money, your personal
One business adage dictates that a company's product or service assets can take a hit—not just a corporation’s bottom line. But
needs to solve a specific pain point either for another business or adhering to a few tried and true principals can go a long way in
for a consumer group. diffusing risk.
 Through the identification of a problem, an aspiring entrepreneur is 2. Getting Your Hands Dirty
able to build a business around solving that problem. It is
important to combine steps three and four so it is possible to  When starting out, it’s essential to personally handle sales and
identify a problem to solve by looking at various industries as an other customer interactions whenever possible. Direct client
outsider. This often provides an aspiring entrepreneur with the contact is the clearest path to obtaining honest feedback about
ability to see a problem others might not. what the target market likes and what you could be doing better.
 If it’s not always practical to be the sole customer interface,
5. Solve That Problem entrepreneurs should train employees to invite customer
comments as a matter of course. Not only does this make
 Successful startups solve a specific pain point for other companies customers feel empowered, but happier clients are more likely to
or for the public. This is known as "adding value within the recommend businesses to others.
problem." Only through adding value to a specific problem or pain  Personally answering phones is one of the most significant
point does an entrepreneur become successful. …continuation  competitive edges homebased entrepreneurs hold over their larger
Say, for example, you identify the process for making a dentist competitors. In a time of high-tech backlash, where customers are
 frustrated with automated responses and touch-tone menus, investors are involved. Of course, such sacrifices can strain
hearing a human voice and is one surefire way to entice new relationships with loved ones who may need to adjust to lower
customers and make existing ones feel appreciated—an important standards of living and endure worry over risking family assets.
fact, given that some 80% of all business is generated from repeat  For this reason, entrepreneurs should communicate these issues
customers. well ahead of time, and make sure significant loved ones are
 Paradoxically, while customers value hightouch telephone access, spiritually on board.
they also expect a highly polished website. Even if your business
isn’t in a high-tech industry, entrepreneurs still must exploit
internet technology to get their message across. A startup garage-
based business can have a superior website than an established
$100 million company. Just make sure a live human being is on the
other end of the phone number listed.

3. Knowing When to Change Course

 Few successful businesses owners find perfect formulas straight

out of the gate. On the contrary: ideas must morph over time.
Whether tweaking product design or altering food items on a
menu, finding the perfect sweet spot takes trial and error.
 Former Starbucks Chairman and (Chief Executive Officer) CEO
Howard Schultz initially thought playing Italian opera music over
store speakers would accentuate the Italian coffeehouse
experience he was attempting to replicate. But customers saw
things differently. As a result, Schultz abandoned the opera and
introduced comfortable chairs instead.

4.Shrewd Money Management

 Through the heart of any successful new business, venture beats

the lifeblood of steady cash flow essential for purchasing inventory,
paying rent, maintaining equipment and promoting the business.
The key to staying in the black is rigorous bookkeeping of income
versus expenses.
 And since most new businesses don’t make a profit within the first
year, by setting money aside for this contingency, entrepreneurs
can help mitigate the risk of falling short of funds. Related to this,
it’s essential to keep personal and business costs separate, and
never dip into business funds to cover the costs of daily living.
 Of course, it’s important to pay yourself a realistic salary that
allows you to cover essentials, but not much more especially where