Contents
What’s it: Enterprise is a business organization. It comes from Old French, which means “something done.” Those who start, operate, and run it are called entrepreneurs.
Specifically, an enterprise is a profit-oriented business or company. Some may strike a balance between profit, social and environmental, as social enterprises do.
Enterprise can refer to a small, unincorporated business such as a sole proprietorship. However, we often identify with large companies with many employees.
Then, we also use it to refer to state-owned enterprises, a company controlled and owned by the government.
Goals of an enterprise
Most enterprises’ primary goal is to generate profit. They achieve this by producing goods or providing services that meet the needs and wants of their target consumers, who can be individuals (households), other businesses, or even government organizations.
However, the pursuit of profit isn’t the sole motivator for all enterprises. A growing number of businesses are adopting a multi-faceted approach to their goals:
- Social enterprises: These businesses prioritize creating a positive social or environmental impact alongside generating profits. They may reinvest their earnings into social programs, sustainable practices, or community development initiatives.
- Balancing profit with purpose: Many for-profit businesses are recognizing the importance of social responsibility and environmental sustainability. They strive to find a balance between generating profits and creating a positive impact on the world around them. This can involve ethical sourcing practices, environmentally friendly production methods, or charitable contributions.
Who started the enterprise?
Individuals who do so are called entrepreneurs. They turn an idea into a business. They plan, start, and run businesses to make a profit. By commercializing their ideas, they can earn money and accumulate wealth. However, they also have to bear the associated risks.
To do it all, entrepreneurs pool resources: labor, capital, and raw materials. Then, they organize these resources to produce goods and services. Then, they also usually divide operations into functional areas such as marketing, production, human resources, and accounting and finance.
How entrepreneurs get ideas
Entrepreneurs love to use their imagination to seek out business opportunities. They like to try new things and often see problems from a different perspective. They see the problem as an opportunity that might be commercialized.
Entrepreneurs’ business ideas can appear in their daily lives, whether they interact with coworkers, with family, while using a product, or even by chance.
Entrepreneurs often challenge the status quo and see problems as opportunities to find solutions. For example, they ask, what are the solutions to make our lives easier? What can be improved from an existing product?
Take Facebook, for example. Mark Zuckerberg’s idea to found Facebook emerged from Harvard University’s “Face Book,” a student directory featuring photos and personal information. And it’s just a paper version. However, he saw that it had problems because it was difficult to collect student data considering many students. So, the question arises, “Why not build it online so everyone contributes by sending photos and personal information.”
Creative thinking is the key. This allows entrepreneurs to come up with new ideas or approaches. They can also adopt a business idea or concept from another country and adapt it to their own country.
Many people think creatively and come up with new ideas. However, not many can commercialize them into a new product. Entrepreneurs are one step ahead because they can do it. They made it happen by setting up a business.
New ideas are often easy to duplicate, especially when they have excellent growth potential. Therefore, entrepreneurs try to protect their business ideas legally. They patent their new invention, innovation, or process. When others copy it, they can claim compensation through patent, copyright, or trademark protection.
Back again to the subheading, where does the entrepreneur’s business idea come from? It can come from:
- Everyday coincidence
- Personal experience and others
- Hobby or skill
- Small budget research
- Reading or attending events
- Brainstorming
- Previous work experience
- Absorb ideas from others
- Watching the trend
Entrepreneur traits
Entrepreneurs make money by building businesses. However, they also know the consequences; money does not come without risk. Therefore, to earn money, they are also willing to take risks.
Even though they have researched the market carefully and found a business opportunity, the risk remains. For example, they may fail to raise sufficient capital to fund the business. In other cases, customers may not choose to buy their product because it is relatively expensive. Both cases can lead to failure and loss.
Some people like to take risks. Others weigh too much and calculate between risk and return without taking further action.
Entrepreneurs have a strong drive to realize the ideas and opportunities they find. In addition, they have the determination and energy to overcome obstacles in launching a new business.
Qualities of an entrepreneur
Individual qualities distinguish successful entrepreneurs from ordinary people. It includes the following entrepreneur characters:
- Creative problem-solvers: Entrepreneurs see problems as opportunities. They constantly look for ways to improve existing products and services or identify unmet market needs. This creative thinking allows them to develop innovative solutions and disrupt the status quo.
- Confident and self-assured: Entrepreneurship is a journey filled with challenges and setbacks. Successful entrepreneurs possess unwavering confidence in their abilities and the vision for their business. They back themselves and their ideas, even in the face of doubt.
- Relentless drive and motivation: Building a successful business requires dedication and perseverance. Entrepreneurs are fueled by a strong internal drive and a burning desire to achieve their goals. They are self-motivated and possess the unwavering spirit needed to overcome obstacles and push through challenges.
- Disciplined and focused: Great ideas alone aren’t enough. Successful entrepreneurs translate their vision into a concrete plan and execute it with discipline. They are laser-focused on achieving their goals and hold themselves accountable for their actions.
- Calculated risk-takers: Entrepreneurship is inherently risky. However, successful entrepreneurs understand how to manage risk. They carefully assess potential rewards and weigh them against potential downsides before taking calculated risks.
- Open to feedback and learning: The most successful entrepreneurs are lifelong learners. They are open to new ideas and feedback from others. They actively seek out diverse perspectives and use this knowledge to refine their strategies and improve their businesses.
- Tenacious and resilient: The road to entrepreneurial success is rarely smooth. Setbacks and failures are inevitable. However, successful entrepreneurs possess remarkable resilience. They learn from their mistakes, pick themselves up after setbacks, and keep pushing forward with unwavering persistence.
- Goal-oriented and visionary: Successful entrepreneurs are driven by a clear vision for the future. They have a well-defined roadmap for their business and are adept at setting achievable goals that keep them moving forward toward their ultimate vision.
Types of enterprises by size
The size of an enterprise can significantly impact its structure, operations, and target market. Here’s a breakdown of the most common enterprise size classifications based on the number of employees:
Micro enterprises (less than 10 employees): These tiny businesses are often startups or family-run operations. They typically have a limited product or service offering and operate locally.
Due to their small size, micro-enterprises can be nimble and adaptable, but they may also face challenges in terms of securing funding and resources.
Small enterprises (10-49 employees): Small businesses are the backbone of many economies. They offer a wider range of products and services compared to micro-enterprises and may have a regional or national customer base.
Small businesses can be more specialized than micro-enterprises but may still require owner involvement in most aspects of the business.
Medium enterprises (50-249 employees): Medium-sized businesses have a more established presence in the market. They often have departmental structures with dedicated teams for marketing, production, and human resources. They may operate across multiple locations and have a national or even international reach.
Compared to smaller businesses, medium enterprises can leverage economies of scale to negotiate better deals with suppliers and potentially invest in more sophisticated technology and marketing strategies.
Large enterprises (more than 250 employees): Large enterprises, also known as corporations, are the giants of the business world. They have complex organizational structures, with multiple departments and layers of management.
Large enterprises often operate internationally and have a significant brand presence. Their size allows them to invest heavily in research and development, marketing campaigns, and global expansion. However, due to their complex structures, large enterprises can also be less adaptable to change.
It’s important to note that these size classifications can vary depending on the industry and the specific country or organization defining them. However, this breakdown provides a general framework for understanding the different scales of enterprises.
Types of enterprises by legal status
The legal structure of an enterprise defines how it’s formed, operated, and taxed. Here’s a breakdown of the two main categories of enterprises based on their legal status:
Incorporated businesses
Incorporated businesses are separate legal entities from their owners. This means the business itself is liable for its debts and obligations, offering a layer of protection to the owners’ personal assets. Here are some common types of incorporated businesses:
Private Limited Company (Ltd. or LLC): This is a popular choice for small and medium-sized businesses. Ownership is divided into shares held by shareholders.
Shareholders have limited liability, meaning they are only liable for their investment in the company, not the company’s debts. Profits are distributed to shareholders as dividends. Private limited companies are not required to disclose their financial statements publicly.
Public Limited Company (PLC): Public limited companies, also known as publicly traded companies, are larger and more complex than private limited companies. Their shares are traded on stock exchanges, allowing anyone to invest in the company.
Publicly traded companies are subject to stricter regulations and must publicly disclose their financial statements. This transparency can be appealing to investors but also requires a higher level of compliance.
Unincorporated businesses
Unincorporated businesses are not separate legal entities from their owners. The owners have unlimited liability, meaning their personal assets can be used to satisfy the business’ debts if necessary. Here are some common types of unincorporated businesses:
Sole proprietorship: This is the simplest form of business ownership, with a single individual owning and operating the business.
The owner has complete control over the business and receives all profits. However, the owner also bears all risks and is unlimitedly liable for the business’s debts.
Partnership: A partnership is formed by two or more people who agree to co-own and operate a business. Partners share profits and losses according to the partnership agreement.
Each partner has unlimited liability for the business’s debts. Partnerships can be advantageous for combining resources and expertise, but they can also be complex to manage due to potential disagreements between partners.
Choosing the right legal structure for your enterprise depends on several factors, including size, ownership goals, liability concerns, and access to capital. It’s advisable to consult with a lawyer or accountant to determine the most suitable structure for your specific business needs.
Types of enterprises by legal structure
The types of enterprises depend on what variables we use. It will usually also vary between countries or institutions. Say, we use the business size to differentiate them, specifically the number of employees. The OECD divides them into four:
- Micro: less than 10 employees
- Small: 10-49 employees
- Medium: 50-249 employees
- Large: more than 250 employees
Next, we might distinguish between them based on their legal status: incorporated and unincorporated businesses.
Alternatively, we distinguish them based on their legal structure within a particular jurisdiction. It can be:
- Sole proprietorship
- Partnership
- Private limited company
- Public limited company
Sole proprietorship
A sole proprietorship refers to a business structure owned and operated by an individual. It does not result in a separate entity. So, the assets and liabilities of the business are entirely in your hands as the owner.
You are fully responsible for the operation and success of the business and have unlimited liability for any business risks. Therefore, you may have to sell personal assets to pay off company debt.
But if your business is successful, the profit is entirely yours. You do not have to share it with others as in a partnership or only get a portion (dividends) as in a limited company.
Partnership
The ownership of the business is under two or more parties (partners). They work together to form and run a business. Each partner contributes differently depending on the agreement.
Unlike sole proprietorships, partnerships allow for the pooling of greater resources and capabilities. Each partner can bring certain resources, including capital and expertise, to lead the business to success.
In addition, business risk is also spread among partners. Likewise, profits must also be shared between them, the proportion depending on the partnership deed.
Private limited company
A private limited company implies a separate business organization from its owners (shareholders). Unlike sole proprietorships and partnerships, it is an incorporated business.
The owner assumes limited liability and is not personally liable for the financial and legal obligations of the business. So, when businesses have difficulty paying debts, they don’t have to pay them off using their personal money. And if the company closes, the owner only loses some of the money they invested in it.
The owner does not operate the business directly. Instead, they appoint a board of directors to run the business, expecting the directors to act in their best interests.
Then, the owner is entitled to the company’s profits, but maybe not entirely. For example, companies may only distribute a certain percentage of profits as dividends to them. And, sometimes, companies don’t pay dividends at all, usually because they need an increase in internal capital.
Public limited company
A public limited company has similar characteristics to a private limited company. The difference between the two lies only in whether the company’s shares are available to the public for trading or not.
Public limited companies list their shares on the stock exchange, so people can trade them. In contrast, private limited companies do not.
Then, shareholders in a public limited company have the potential to receive dividends and capital gains. When the company’s stock price rises, they can sell their shares and realize a profit.
Next, public limited companies are usually more transparent because they are bound by regulations. For example, they must regularly publish their financial statements.
