What is an entrepreneur?
An entrepreneur creates a business and takes on the majority of the risk when beginning a new business. But conversely, an entrepreneur is also the person who enjoys most of the reward if their business is a success.
The process of setting up a new business is known as entrepreneurship. The business entrepreneur is commonly seen as an innovator, as they are a source of new goods, ideas, services, and business and procedures.
Entrepreneurs play a crucial role in all economies, as they use the skills and initiative necessary to anticipate needs and bringing good new needed ideas to the market. Entrepreneurship that proves to be successful takes on the risks of creating a startup and can be rewarded with profits and continued growth.
How do entrepreneurs typically get started?
It’s important to examine what kind of people make the best entrepreneurs. It’s true that there is no one particular prototype when it comes to determining who can be a successful entrepreneur.
However, realizing that anyone can be an entrepreneur is only the first step, the next step is figuring out how to do it.
There are traits that many successful entrepreneurs share. Some include:
A person with openness to new experiences
An innovative mind
An extroverted personality
Finding a niche
Often the most challenging parts of starting a new business is coming up with a good idea.
It’s best to find something you already enjoy doing that you have developed some sort of skill in and spend some time thinking about what you can offer. If your passion is knitting shoes for cats, good for you! However, this might not be a lucrative business.
The trick to finding a good business niche is to combine something you like to do with something you’re good at while making sure it’s something that other people need or want.
Talk through an idea with family and friends. Beta test it by interviewing a select group of people that would fall into your target market. Ask them what they think of the idea and what they would pay for it? What can they suggest would be something you can offer others in the truest entrepreneurial sense? This is a great way to collect data and add it to your idea inventory.
Do you need additional qualifications?
Once you’ve brainstormed some viable ideas determine if you need additional education or qualifications. Make sure you understand what you expect to sell your services or goods in the regulatory sense.
Look for a mentor; if you know someone who has done something similar and accomplished success, reach out and ask how they did it. A good mentor can inspire, motivate, connect and guide new business owners. Mentors can also help new entrepreneurs avoid a lot of unnecessary mistakes.
As you research your business idea, it’s essential to determine how much financing will be required to get the business off the ground. According to a recent study, over 94% of new businesses fail during the first year of operation chiefly because of a lack of funding. Money is the essential component of any business. Fuel is what drives the long, painstaking yet exciting journey from the idea to revenue-generating business. At almost every stage of the business, entrepreneurs should be asking – How do I finance my startup?
Here are some options for financing your startup:
Bootstrapping your business
Self-funding is also known as bootstrapping and is an effective way of startup financing, particularly when you are just starting your business. You can invest from your savings or make requests for funding to family and friends to contribute. The added advantage is that in most situations, family and friends are flexible with the interest rate.
Crowdfunding is a new way of funding a startup. Basically, crowdfunding is like taking a loan, contribution, or investment from more than one person simultaneously. Crowdfunding platforms require an entrepreneur to put up a detailed description of the business online. The business owner will mention the goals of his company, plans, how much funding is needed, and for what reasons, and then buyers can give money if they like the concept. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Some of the most popular crowdfunding platforms include Kickstarter, RocketHub, DreamFunded, Onevest, and GoFundMe.
Venture capitals are professionally managed funds that invest in companies with huge potential. VCs usually invest in a business against equity and exit when there is an IPO or an acquisition. VCs offer expertise, mentorship and evaluates the company from the sustainability and scalability point of view.
Angel investors work with surplus cash and an interest in investing in upcoming startups. They can work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital. Angel investors have helped to start up many prominent companies, including Google, Alibaba, and Yahoo. Angel investors generally invest in the company’s early stages of growth, with investors expecting a up to 30% equity. Angel investors prefer to take more risks in investment for higher returns.
Business Incubators & Accelerators:
Incubator and Accelerator programs are a great funding option. Incubators are in almost every major city, and every year these programs assist hundreds of startup businesses. Incubators are like a parent to a child; they nurture the business providing training and networking to a business. Accelerators are more or less the same thing, an incubator nurtures a business to walk, while accelerator helps a business to take a giant leap.
Banks commonly provide two kinds of financing for businesses. One financing option is a working capital loan, and another is funding. A working capital loan is a loan that is required to run a complete cycle of revenue-generating operations, with the limit decided by hypothecating stocks and debtors. Bank funding involves the usual process of sharing the business plan and the valuation details and the project report, based on which the loan is sanctioned.
Marketing a product
Remember always that if you own a business, you’re in sales. Entrepreneurs like to think of themselves as inventors and managers, but the reality is the only way to get a business off the ground is to sell the vision, sell the product, and sell top performers on the idea of joining your team.
An excellent way to become a profitable salesperson is to boil down your sales message to eight words. Once you understand why your customers buy from you, create an elevator pitch of eight words or less.
Write conversationally and always lead with the “what’s in it for me?” questions for your target market. Keep your message short and powerful with a clear benefit for your customer.
Build a relationship with your target market before selling. It’s a big turnoff to immediately jump into “sales mode” when customers contact you or access your website. Take the time to identify a customer’s pain, listen to them and then solve the problem.
What are the most common mistakes entrepreneurs make?
A great way to avoid mistakes is to study how other entrepreneurs have failed. Here are some of the most common pitfalls:
Money: Not spending enough or spending too much
Money will most likely become one of your biggest concerns. Pre-launch cash flow is likely to be close to nothing, so making and saving money will take priority over everything else. Spend startup cash wisely, but don’t be too cheap and neglect to invest in good people and quality products.
Thinking you are unique to the market
The excitement from new entrepreneurs can lead them to believe their product is so head-and-shoulders above those of their rivals that they’re in a category of their own. In reality, it’s extremely rare to have no direct competitors. Unless your product is completely new, there will be someone who already has market share in your niche. Do your research and innovate how you can stand apart.
Not setting attainable and measurable goals
New business owners are often so excited about their “big idea,” it is easy to work without a solid plan. But entrepreneurs must set realistic and attainable short term and long term goals in order to succeed.
Not prioritizing marketing
Many new entrepreneurs have an “if you build it, they will come” mentality. They believe their product is so revolutionary that they can rely on free PR and word of mouth. The vast majority of startups will need to invest heavily in marketing. This may include SEO, content marketing, PR and paid advertising.
How long does it typically take for a new business to stabilize?
Every business is different and it is impossible to define an average time to profitability for a startup company. Different startups measure profitability in different ways. In conventional terms profitability can take two to three years, but that doesn’t mean a company is doing poorly. The entrepreneur can take an income from a company even while it is making a loss on paper; investors can profit if they are paid back a fixed interest rate on their investment regardless of how the company is doing.
Measuring a Business’s Profitability
For most businesses, there are three ways to measure profitability: for the investors, principals, and the business as a whole. Payments to investors can be structured so they’re earning interest even when the business is officially breaking even or losing money.
Taking too much of the company’s revenues for your own income isn’t usually a good business strategy. A good rule of thumb says that in the first year of running your own business successfully, you take less than a prior salary, and re-invest most of your net revenue in the business. In the second year, if all goes well, you can draw your former salary. In the third and subsequent years, you can draw a larger salary – plus any proceeds from his ownership of the company if he sells shares or outright ownership.
The actual time frame to company profitability is entirely dependent upon how much startup capital is needed to create the products and services, and how much money is drawn from the company for compensation and investor servicing.