What is Entrepreneurship?
Introduction
I have, for some time now, been thinking about entrepreneurship, what it means and what it takes to be an entrepreneur.
In researching what it means and how you identify entrepreneurial ability it becomes apparent that authors who write on the subject approach it in one, or possibly two ways.
Firstly, as a technical, procedure-based exercise which focuses on how to write a business plan. To me that seemed insufficient, as all the entrepreneurs I have met don’t bother much with business plans. A new business simply changes too rapidly.
I am looking at a couple of books on my bookshelf as I write this, and they all have a step by step approach to writing a business plan as the core of their “How to Start Your Own Business”.
The intricacies of market research, where to site your business, the market segments you are aiming for, whether you are going to have a web site or not, sell services or products, calculating your start-up capital and so on might make for interesting reading, but little else. When you actually start your business what really matters is cash flow, and related to that but not superseding it, what level of sales you can expect.
Your sales projection is the most important number in your financial projections – the number on which all other numbers build. If you have started your own business you will know that the figures you put in your business plan are there to make the plan look nice and the figures add up. Until you actually start selling you have no idea what or how much you will sell; unless you have spent huge amounts of up-front money doing detailed research and lining up potential clients.
I don’t know any entrepreneurs who have been well-funded enough to do this either, especially in South Africa where Venture Capital is unavailable to Start-Ups.
Teaching would-be entrepreneurs how to write a business plan might assist them with their business planning, getting their heads around the complexities of what they are trying to do, making them more familiar with their market and product and for that reason if I am considering a new venture that will require a capital input I write up a business plan.
What it does not do, is tell you anything about the would-be entrepreneurs and whether they have what it takes to succeed.
The classic academic way of dealing with this, and the second approach I have identified, is to put people through a course on innovation. This is a laudable idea. I for example know that I am better at taking an existing concept and improving it than I am at coming up with something totally original and new. Does a course in innovation give me any idea whether I will succeed in business?
Well, if I look around me at all the businesses, large and small that exist in any particular area, the first thing that strikes me is how many of the same types of business there are, yet all of them are successful to a greater or lesser degree.
How many Google’s and Apple’s are there actually? Very, very few indeed. In fact Norm Brodsky, author of The Knack and columnist for Inc magazine, says that when he starts a new business (he has successfully started up a number of mid-sized businesses) he looks for – a brand new product in a brand new market? No; he looks for a big market with lots of players where he can identify a niche that will allow him to carve a place out for himself. His original thinking is restricted to the way he does business in his chosen niche.
Is innovation then, a critical component in successful entrepreneurship? It is important certainly, but it seems to me it is far more important to do what you do well, even if it is exactly the same as what the next person does.
I do not count myself an expert in entrepreneurship. I was forced by circumstances to start my own business and like the curate’s egg, have been successful in parts. Along the way I have however learnt a number of hard lessons and since TheNexus is aimed at capacitating people to generate their own income from training, I thought it might be useful to share my experiences with you. I welcome critical comment and debate around my comments, so please feel free to comment and also share your own experiences.
My question in terms of entrepreneurship is do you understand what entrepreneurship means to you? You need to define whether you want to be self-employed – put money in your account and pay your bills, or do you want to create opportunities for others to be employed? You cannot “force” this, and in my opinion the huge drive to entrepreneurship – employing others (by my definition), has been misunderstood and abused.
An interesting comment that. I suppose I would lean towards – not job creation for others neccesarily- but rather to the building of an asset. If I am a commission-based salesperson, I am effectively self-employed. I work hours that I determine, even though I report to a boss. I am in charge of my own income: the more I sell the more I make, and my loyalty is to my client base, not really to my employer, because the clients are mine, not my employer’s. When the rainy day comes however, I need a pension plan or something, because my job cannot continue to sustain me when I’m not there.
I would define Entrepreneurship in my mind therefore as the ability to create an asset that can sustain me even when I am no longer there doing it.
By that measure I could gamble on the stock markets from a beach in Mauritius; and as long as I create sufficient wealth to sustain myself even when I stop share trading, I will have achieved the same goal as the person who creates a thousand jobs in pursuit of his or her dream.
Of course its easier to do it with staff – you can appoint a manager, have enough other people to do the work and so on. For me the question is: do I want to build a lifestyle for myself, or an asset. Many people have lifestyles, but when things go wrong and they are unable to continue doing what they do, they lose the lifestyle.
In that they are no different from the hawker at the side of the road, they enjoy a higher income but their situation is just as precarious.
What you want to do is create an asset that continues to generate an income for you even if you are unable to be actively involved.