- What makes someone an entrepreneur?
- Entrepreneurship and business are two terms often used interchangeably in common parlance but there is a lot of difference between the two.
- Entrepreneurship is all about intent and innovation.
- There are five kinds of businesses often confused with entrepreneurship-lifestyle business, professional practices, home-based business, trading and local businesses.
- Any of these businesses can be turned into entrepreneurship with the right intent and vision of the entrepreneur.
Chef, the 2014 American drama, starts with an altercation between Carl Casper, the head chef and Riva, the owner of Gauloise, one of the biggest restaurants in Los Angeles. Carl eventually loses his job as Riva pushes him to “stick to the classics” rather than innovate new dishes. The film has much more to offer than a few titillating close-ups of Yuca fries and barbecued brisket. At its core, Chef is a movie about Carl’s entrepreneurial journey from losing a well-paying job to running a food truck serving Cuban cuisines that eventually become hugely popular with the local population through social media. But this lends itself to our question of the day: what makes someone an entrepreneur? Is it the mere act of starting a new venture or does it take much more than that? What differentiates a business from entrepreneurship? Is there a difference at all? We aim to have a clear answer by the end of this piece.
The first distinctive function of entrepreneurship is identification of a problem and a pursuit of solving it. A business might or might not be solving a problem.
Entrepreneurship v/s other businesses
1. Entrepreneurship and business are two terms often used interchangeably in common parlance. To understand the differences, we should first try to understand each concept separately. A business is usually defined as an entity or an organization engaged in a commercial activity or a service with a pre-defined end goal in mind. This may still sound a lot like entrepreneurship. Right? In fact, entrepreneurship can be seen as an extension or an evolution of a business venture.
2. The first distinctive function of entrepreneurship is identification of a problem and a pursuit of solving it. A business might or might not be solving a problem. For example, if there are four ice-cream parlours near my house and I decide to run a fifth one. I’m surely starting a new business but I’m not an entrepreneur till the time I solve a unique problem, or innovate in a way none of the others are able to do it.
3. The key difference between a business owner and an entrepreneur on the face of it is indistinguishable but if one looks closely enough, they’ll be able to spot it. For a business owner the administration of his/her business, short-term gains, logical and linear growth matter a lot. This is not cast in stone but these are observable characteristics. A business owner would focus more on measurable results rather than taking a leap of faith and innovating something. They would generally want minimal risks and a predictable behaviour out of their business.
4. Another characteristic that differentiates the two is that entrepreneurs are risk-takers while for someone running a business, profit is the major driving force. They often think of changing the world around them and making a difference through their work. But the important point to understand here is that a business and an entrepreneurial venture are not static and mutually exclusive. It is possible for a business to turn into an entrepreneur venture if a businessperson has the right intent to do so.
Entrepreneurship and its defining characteristics
Think of any Indian entrepreneur of recent times. Names like Bjyu Raveendran, the founder of Byju’s, Ola’s Bhavish Aggarwal and Oyo’s Ritesh Agarwal would be one of the first ones to come to your mind. All of their stories have some basic common elements like intent, conviction and a willingness to solve a problem in hand. Their start-ups weren’t profitable for the longest time but that didn’t deter them from trying again. Had any of them approached it with a business outlook rather than an entrepreneurial spirit, they would have been more concerned about developing a successful revenue stream, growth curve, expansion strategies, etc. rather than trying something new and being persistent about it.
Understanding different kinds of businesses
Most entrepreneurs can relate to the journey of finding a passion and establishing it enough so that it can be called a ‘businesses. The first and the foremost question for every entrepreneur is to understand different kinds of businesses before actually starting one. One would ask, why’s it important to know what business is right for them? The answer lies in this humble quote by Lewis Carroll: “If you don’t know where you are going, any road will get you there.” For early entrepreneurs to know what road to take can be easily confusing if they don’t know where they want to go with it.
Five different kinds of businesses are lifestyle businesses, professional practices, home-based business, trading and local businesses. All these businesses have distinct characteristics but they might or might not be entrepreneurship by nature.
Lifestyle business and entrepreneurship
A lifestyle business is mostly dependent on one factor: your lifestyle. This kind of business is essentially the one that helps you support or enable the kind of lifestyle one wants. This is probably also the reason it gets a bad rep in the entrepreneurial community. Entrepreneurs see themselves as someone who is willing to give up on basics in order to see profitability for their company and if something’s left, then take something for their own selves. Its only aim is to provide a good lifestyle to the owner of the company who usually runs the business on his own funds, savings or small business loans.
Key differentiating factors of lifestyle business when compared with entrepreneurship is that an entrepreneur will think of a new idea and an innovative means for that idea to succeed whereas for a lifestyle business, the sole purpose is to support the owner’s needs through the business.
Professional practices and entrepreneurship
In today’s times, people often confuse professional services like web designing, freelance writing, audit firm, financial advisories, law firms, and consulting firms, etc. with start-ups or entrepreneurial ventures.
Professional services business is usually a break away from a traditional setup process. It is easier for small businesses to reach out to them and get their services at a cheaper price which a large-scale firm might or might not be willing to take. However, it is also very likely for an entrepreneur to be born out of the traditional industries but it is the intent that makes all the difference. If X quits a company and provides the same service or a product independently, that’s not entrepreneurship. But if X has the capability of recognising a problem within the same industry and starts a company after identifying those pain points, that same person will become an entrepreneur.
The perfect example of a professional service-turned-entrepreneurship that comes to mind is Gurugram-based firm Toffee that wants to change insurance for millennials. The company is founded by former insurance executives Rohan Kumar and Nishant Jain, and it offers ‘micro insurance’ or smaller insurance packages called ‘toffees’ for millennial-specific needs like a 15-day backpackers’ insurance, or an anti-dengue insurance. An established insurance company might not be able to give such personalised insurance policies. That’s where Toffee has a chance to add value.
Digitisation has given new wings to the professional services business. They now have a platform to monetise their assets and services and through subscription-based packages. Customers also get a better deal as these businesses are mostly focused on desired business outcomes. One can choose to either remain into professional services if there is enough demand or turn into an entrepreneur by innovating within the framework of the existing industry setup. It takes that one extra step to turn into an entrepreneur from a simple business-minded framework.
Home-based businesses and entrepreneurship
What do Apple Inc., Hewlett-Packard and Amazon.com have in common? These are certainly not the first companies that come to your mind when you hear the term ‘home-based business’. But that’s what forms a common ground for them. Many businesses like them started as home-based companies and have now expanded to become larger corporations.
But what’s the difference between these companies and lakhs of others that operate out of a garage or a home-based setup? The answer is vision. These companies were envisioned to be where they are today. They were never meant to be just a home-based business. This is the main difference between a home-based business and entrepreneurship.
Some of the advantages of a home-based business are flexible work timings, work-life balance, low input cost, and a near-close guarantee of quick financial success. It’s very important to choose a business that’s not saturated so that it’s not too challenging for business owners to start. Many people also choose to do it on the side and then later monetize it to break-even with their full-time jobs.
The COVID-19 pandemic has given way to many such enterprising minds to turn their home-based business to a helping hand in times of crisis. Spriha Neogi, a former Google employee, has fulfilled the target of making one million masks to be distributed amongst stranded migrant labourers, the transgender community, slum dwellers, and police personnel, etc. In March, she put a post on Instagram asking for volunteers who could stitch masks. There are many such examples of how home-based business can be used to make a difference in society and also create value through one’s initiative.
Trading and entrepreneurship
Trading usually starts as a way for people to make some extra bucks on the side but more and more people are now considering the possibility of turning it into a full-time revenue stream. There are two ways in which people can indulge in trading as a business: either they trade as individuals or sole proprietors or trade through a business entity. Someone who runs a trading business would identify trade-worthy markets, create a demand for a product and successfully create business by getting more and more buyers to invest in his/her product. The word entrepreneurship is rarely associated with financial traders. That is because they essentially act as a bridge between the product and the customers and their “business” is not really concerned with innovation, creativity or manufacturing.
Like lifestyle business, trading is also considered to be driven by personal goals of the owner and is therefore far away from the traditional concept of entrepreneurship. An entrepreneur rarely thinks of profit-first and is often focused on problem-solving rather than think about business models that make money right at the start. In contrast, for a trading business to work, money is a key driving force and hence till the time one doesn’t innovate the business model, he/she in trading business cannot be termed an entrepreneur.
If we tried to think of a good idea, we wouldn’t have been able to think of a good idea. You just have to find the solution for a problem in your own life.
Brian Chesky, Co-founder, AirBNB
Local businesses and entrepreneurship
Last but not the least, we come to local businesses. Out of the all five categories that we’ve discussed. Local business comes the closest to entrepreneurship, as we know it. Often, the most defining characteristic of a local business is that it’s scalable and has the potential to be replicated.
Out of all the businesses that we have discussed so far, local business comes the closest to entrepreneurship because it is well versed with the problems, demand structure and area-specific concerns of their target audience. A local business owner is in a very good position to turn his business into an entrepreneurial setup. The most distinct characteristic of a local business is that it creates goods and services targeted at a particular local population. It can either be a small business or a large one, but local target groups are the key.
A local business is often also called “brick and mortar” business. Opening up of digital marketing activities have given even physical businesses a reason to reinvent themselves and think out of the box. They now have access to digital media promotions and online listings to use in their favour for wider online visibility and a hope for greater conversion rate.
Why the confusion?
There is often a lot of confusion when it comes to telling business and entrepreneurship from one another. The real question is “What do I want from my business?” One needs to be clear why they’re getting into it and what’s their expectation, both in the long and the short term. While starting a business, it’s important for an individual to have a clear understanding of their vision, aim and end goal. Start-ups sound very glamorous and there’s an enigma attached with it but people need to look beyond the greys while making a decision to start something new.
Airbnb co-founder famously said Brian Chesky, “If we tried to think of a good idea, we wouldn’t have been able to think of a good idea. You just have to find the solution for a problem in your own life.” One can’t be forced to become an entrepreneur. People who fail at various businesses lack the theoretical understanding of the concept of entrepreneurship and what kind of business they wish to set up or what is the problem that you’re aiming to solve. There needs to be an introspective questioning of the mind long before one sets out to set up a business.