Who’s it: Entrepreneur refers to a person who takes a risk to set up a business. They combine the factors of production to produce goods and services.
Often, they invest their own savings and capital to try to commercialize business opportunities. Then, they take on managing the business and take the possible risk of failure.
If successful, the entrepreneur’s money will increase. However, some of them were not successful. They face business failure, and their money is burned. And business failures are more visible.
Reasons for entrepreneurs starting a business
There are many different reasons to start a business. Every entrepreneur has different motives. And in general, their motivation is divided into two:
- Financial goals
- Non-financial goals
Financial goals are related to money, such as making a profit and getting rich. Some entrepreneurs have also started businesses to take advantage of their idle money.
Non-financial goals are related to things other than money, such as personal satisfaction and independence. Becoming an entrepreneur offers more flexible work-life time, especially for commercializing their interests and skills. They also don’t have to carry out the orders of their superiors.
The difference between an intrapreneur and an entrepreneur
Individuals who come up with business ideas and dare to take risks to make them happen are entrepreneurs and intrapreneurs.
Both have similar characteristics. Both have ideas, invest energy and time to realize and accept responsibility for managing the new business.
But, the two also have differences. Entrepreneurs are independent. Business success and profits are for themselves.
Meanwhile, intrapreneurs work within companies or organizations. They help make the companies they work for more innovative and able to cope with change. Their success is not only for themselves (for example, promotion) but also for the company and shareholders.
Entrepreneurs stake their own capital. As a result, they bear all possible risks of failure.
Meanwhile, intrapreneurs are not risking their own capital. Instead, the consequences of their failure are borne by the companies they work for.
Characteristics of entrepreneurs
Successful entrepreneurs tend to have certain qualities and skills. They develop it through experience, training, and learning by doing. Here are the essential skills for success:
- Interpersonal relationships – to deal with stakeholders effectively.
- Leadership – to empower staff to achieve goals.
- Finance – to manage business finances to maximize profits.
- Communication – to clarify instructions, delegate, and coordinate various tasks and activities in the business.
- Management – to organize the team and resources needed.
- Motivation – to encourage staff to work hard to achieve goals.
- Problem-solving – to be able to find solutions to make the business successful.
Apart from the above skills, several personal qualities also influence the success of the entrepreneur. Unlike the above skills, the qualities below are inherent in the entrepreneur’s self and personality, which is difficult to imitate. They are:
- Self-confidence and the ability to inspire others
- Creative and innovative to generate business ideas or solve other people’s problems
- Risk-taker by being willing to face the uncertainty of future success
- Persuasiveness and the ability to get others to support his ideas
- Determination and commitment not to give up easily when faced with failure
Roles of entrepreneurs in the economy
Just to the point, I will detail the roles of entrepreneurs in the economy.
First, they satisfy people’s needs and wants. They seek opportunities and innovate to offer products. With these products, our lives will be more comfortable, easier, and more productive. Imagine what it would be like if Bill Gates didn’t develop personal computer software?
Second, they create jobs. To achieve their goals, they take risks to combine and manage various resources, including labor. By working, people get more money. The more new businesses there are, the more labor is used, and income is created.
Third, they spur economic growth by increasing the production of goods and services. They have also launched various products to meet our diverse needs daily.
Fourth, they promote prosperity and reduce poverty. People work to earn money, use it to make ends meet, get higher education, and get out of poverty.
Fifth, they pay taxes, which can be used for public investment and social spending. They pay taxes on the property they own and on the businesses they start.
Sixth, entrepreneurs contribute to foreign exchange. They sell products not only domestically but also abroad. By exporting products, they obtain foreign currency, which is the source of the economy’s foreign exchange reserves.
Seventh, they contribute to innovation and technological advancement. New businesses must be innovative to win the competition. Therefore, they develop new products and technologies to improve or replace existing ones.
Challenges faced by entrepreneurs
Being an entrepreneur is not as easy as turning your hand. They face various critical challenges, including:
- Finding a business idea
- Seeking capital
- Choosing business location
- Overcoming competition and external pressures
- Growing customer base
Entrepreneurs’ first job is to identify a business idea to commercialize. Not all business ideas are feasible. They must screen them and determine which ones to run.
Ideas can come from around them, from the problems faced by the people around them like their family, or the general public. They may also be able to find it overseas and apply it to the domestic economy.
After having a business idea, entrepreneurs must integrate the factors of production. For example, they have to find suppliers of raw materials, recruit workers and buy production equipment.
They must also determine a suitable business location. The need to minimize fixed costs is a factor in choosing a location. Another factor is the proximity to the source of raw materials and customers.
Then, entrepreneurs need a source of financing. Setting up a business is expensive. They need money to fund startup costs, such as buying machinery, property, advertising materials, or recruiting labor. They may rely on money from their pockets.
If that is not enough, entrepreneurs must seek external financing. It may be from their family, relatives, or friends. Or, it may be from sources such as bank loans, grants, bank overdrafts, and venture capital.
Once businesses are operational, they manage and must cope with competition and external environmental pressures to survive. Competition can arise from more established companies with more resources and more market knowledge.
External factors such as economic conditions, government regulations and policies, technology, and socio-culture, also could pose threats to the business. And at other times, they also present opportunities.
Lastly, the entrepreneur’s challenge is to build a customer base. It depends not only on their ability to attract new customers but also on the ability of competitors to grab customers. In other words, to build a customer base, they must be better than their competitors.