Have you ever wondered, “What is the definition of an Entrepreneur?”. Maybe you see people who call themselves that, and your wondering what it really means. If so, you’re in the right place. Here, we’ll be talking about various definitions of an entrepreneur, so you can evaluate different perspectives on this.
This week, I’ll be working on the “What is an Entrepreneur?” series. I’ve found there are many people interested in entrepreneurship, but many myths surrounding what an Entrepreneur is. I plan to answer these questions:
- What’s the definition of an entrepreneur?
- What’s the meaning of an entrepreneur? Life Purpose, Vision, and Purpose
- Can you become an Entrepreneur?
- What are the Characteristics of an Entrepreneur?
- What’s the Evolution Process to become an Entrepreneur?
I hope this series can clear some myths for you and expand your entrepreneurial creativity. You can read the entire series by going HERE. Please read to the bottom and get all the AMAZING FREE STUFF at the end!
More and more people are losing interest in the corporate ladder, and turning to alternative styles of work. There’s a growing interest in buzzwords like “freedom”, “work on your own time”, and “ditch the boss”, but do these desires create entrepreneurs? The world economy desperately needs the rejuvenation of the commerce system with the contributions of entrepreneurs, and it would help if we knew what an entrepreneur is. In this article, we’ll answer the question, “What is the definition of Entrepreneur?”
- 1 What is the definition of “Entrepreneur” According to Dictionaries?
- 2 Did You See The Differences?
- 3 My Favorite Definitions of “Entrepreneur”
- 4 Most People Desire to Start a Business to…
- 5 Facts and Statistics About Entrepreneurs
- 6 Types of Entrepreneurs
- 7 Legal Types of Entrepreneurs
- 8 How Some Entrepreneurs Share Risk
- 9 The Fatal Assumption
- 10 How are Longstanding Entrepreneurs Able to Invent Business Entities as Money Machines? (Insights from Beyond the E-Myth)
- 11 A Playlist answering “What is the Definition of an Entrepreneur?”
- 12 Final Words answering “What is the Definition of ‘Entrepreneur’?”
- 13 Now, it’s Your Turn…
According to dictionaries, an Entrepreneur is:
- One who organizes, manages, and assumes the risks of a business or enterprise (Source: Merriam Webster)
- A person who organizes and manages any enterprise, especially abusiness, usually with considerable initiative and risk. (Source: Dictionary.com)
- Someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced. An entrepreneur supplies risk capital as a risk taker, and monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner, or the one who owns the majority of shares in an incorporated venture. According to economist Joseph Alois Schumpeter (1883-1950), entrepreneurs are not necessarily motivated by profit but regard it as a standard for measuring achievement or success. (Source: BusinessDictionary.com)
- Thousands of people search for a definitive answer on what makes an entrepreneur, so what does it actually mean to be one? It doesn’t mean you have to be setting up new business ventures every day; an entrepreneur is someone with the foresight, drive and ambition to take a risk and solve business or consumer problems. (Source: The British Library)
- An entrepreneur is an individual who, rather than working as an employee, founds and runs a small business, assuming all the risks and rewards of the venture. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services and business/or procedures.
Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative necessary to anticipate current and future needs and bring good new ideas to market. Entrepreneurs who prove to be successful in taking on the risks of a startup are rewarded with profits, fame and continued growth opportunities. Those who fail suffer losses and become less prevalent in the markets. (Source: Investopedia)
- An entrepreneur is the inventor of a separate entity that makes money in his or her absence. (Source: Michael Gerber)
Did You See The Differences?
There’s a wide range of differences in the definitions because there’s a huge range of entrepreneur types. There are entrepreneurs who are self-employed, entrepreneurs who chose funding options where the risk is disseminated, those who choose passive participation, those who license the idea, and those who become wildly successful–being the innovator, visionary, and leader of an enterprise. The differences between entrepreneur can vary widely dependant on the situation.
Some entrepreneurs “invent” a separate entity that can carry on from generation to generation because it operates as a product that makes money independant of its owner. Sam Walton (Walmart founder) and Ray Kroc (McDonald’s founder) are examples of inventors who created a money making machine that’s stood the test of time; even after they’ve passed on.
Still, others, create a job for themselves, bear majority of the risk, and may sacrifice their freedom because “they are the business”. If they don’t work, the business does not work.
- An entrepreneur is the inventor of a separate entity that makes money in his or her absence. (Source: Michael Gerber)
- A person with a vision to orchestrate other people’s time and talents to make the vision real. (Source: Dan Lok)
While, a business can be a vehicle to implement passions, the reality is that everyone’s working time is temporal. The business being formulated as a system is no means for laziness when the vision is real. It simply means the entrepreneur works ON the business rather than working IN the business. Strategy, system creation, and continuing the pursuit of the dream is the responsibility of the entrepreneur. They turnkey what they do to make it possible for anyone to do it.
Many entrepreneurs still find themselves working even when the business is established as a system, however, they are not working because they are trapped. They are working because they see the business as a vehicle for personal growth.
Businesses that are based on the entrepreneur’s work, shut down when the entrepreneur can no longer work. Businesses that are created as a separate entity can be succeeded, can be sold, and can continue to make impact beyond the working years of the entrepreneur–transcending their life and creating a legacy.
Most People Desire to Start a Business to…
- Have more freedom
- Get more work/life balance
- Make more money
- Help more people
- Control their time
- Leave an inheritance
- Create a legacy
Unfortunately, most people have less time, less freedom, less money or “just get by”, less work/life balance, and are not able to transfer the business successfully to another generation. The results that people want from business are not the results they get.
Don’t believe me? Let’s look at the facts and statistics…
Facts and Statistics About Entrepreneurs
- 39% of businesses ever make a profit, 30% break even, and 30% lose money (Source: National Federation of Independant Business)
- Most businesses were created to profit
- Most businesses lose money on “accident” by making one or all of the choices most small businesses make that lead to failure
- 6.02% of the US population works on their business as their primary occupation (Source: Kauffman Foundation)
- Less businesses are started annually now (452.835 in 2014) than in the 1970s (500,000-600,000 average startups). Source: CNN 2016)
- A survey of hundreds of entrepreneurs revealed:
- 19% work 60+ hours per week
- 30% work 50-59 hours per week
- 33% work 40-49 hours per week
- 14% work 30-39 hours per week
- 5% work less than 30 hours per week
(Source: The Alternative Board)
- 82% entrepreneurs work more than 40 hours per week, despite what many people broadcast online or elsewhere! Entrepreneurship is not the less work option (for most) in comparison to a job.
- Out 585 US billionaires, 62% are self-made. (Source: Wealth-X 2016)
- Less than one-third of businesses transition from first generation to second generation, and less than 50% of second generation businesses transition to third generation. (Source: Forbes)
Types of Entrepreneurs
Mompreneur – A mom who becomes an entpreneur
Solopreneur – A person who works alone with outsourced vendors but no staff
Intrapreneur – A person who innovates within a company. They may have entrepreneurial controls over certain products or product lines. For example, the Sony Playstation inside of Sony.
Inventrapreneur – An inventor
Serial Entrepreneur – A person who creates business after business
Small Business Entrepreneur – A person who maintains a small client base and employee count in their business
Home-Based Business – A Business that is run from home
Online Business – A Business that operates on the internet
Legal Types of Entrepreneurs
Sole Proprietors – The US government recognizes two entity types where the business is almost synonymous with the entrepreneur: sole proprietors are one entity type like that. Sole proprietors may operate under their own name or a fictitious name, however, their operations are almost always contingent on the entrepreneur’s presence.
Limited Liability Company Owners – Similar to sole proprietors, Limited Liability Companies, usually are run by entrepreneurs who feel synonymous with the business, however, there is less personal liability when documentation is done properly. The US government is willing to recognize Limited Liability Companies as separate entities.
Small Corporation Owners – Some corporations operate like LLC’s, but there are more administrative activities that are required. Despite the administrative shifts, the entrepreneur may not have shifted to manage the business entity as separate from themselves.
Big Corporations Entrepreneurs – Big corporation entrepreneurs have a bigger government than other structures. They have shareholders, a board of directors, and recurrent meetings where minutes are recorded. Power is distributed among the corporate governance and profits are divided also.
The definitions commonly mention entrepreneurs assuming the majority risk in a venture, so many people commonly think of entrepreneurs as being daring people. Alternatively, many entrepreneurs share the risk of their startup venture thru various funding options and education.
Funding Options That Share Risk
Though, I recommend bootstrapping, many entrepreneurs take their ideas and find people willing to share the risk of backing their ventures with them. When entrepreneurs share the risk, they also share control, and have to accept more feedback on their decisions from their shareholders.
Education to Minimize Risk
Contrary to what many people think, many entrepreneurs take very calculated risks rather than acting blindly like what is commonly perceived. In his book, The Reluctant Entrepreneur, Michael Masterson talked about this mythical stereotype of entrepreneurs.
Rather than sporadically making decisions, most successful entrepreneurs base their decisions on working metrics. In their article, This is the Biggest Mistake People Make When it Comes to Taking Risks, Inc Magazine talks about calculating risks. Rather than blindly taking risks based on emotion, entrepreneurs have to gain the skill to balance their emotions with logic, determine what’s fear versus their gut, and analyze facts rather than acting on personal desires.
The Fatal Assumption
The E-Myth says, “The fatal assumption is that because you know how to do the technical work (law, treat medical patients, build houses, etc.), you can run a business.”
Instead, business owners should become students of business to increase the skills that are necessary in addition to their technical trades, so they can learn how to build systems rather than lock themselves into work.
How are Longstanding Entrepreneurs Able to Invent Business Entities as Money Machines? (Insights from Beyond the E-Myth)
In his definition of entrepreneur, Michael Gerber mentioned that an entrepreneur is the inventor of a system that makes money in his or her absence; however, this type of business setup is the minority in business circles. To add onto that, he does not consider an entrepreneur a “company of one”. Gerber calls solopreneurs and “companies of one”, self-employed people, or those who have created their own jobs.
According to statistics, most entrepreneurs stay bogged down to their workload, dedicating more than 40 hours weekly, and potentially not enjoying themselves as a result of feeling “trapped” by the work-for-pay correlation. Most of us haven’t made the shift to create a system that makes money in our absense, so how is this definition of entrepreneur attainable?
In his book, Beyond the E-Myth, Gerber lays out the steps to inventing a machine that makes money in the Entrepreneur’s absence. The steps include:
Step One: Create the “Job”
The job is the “Client Fulfillment System. It is how the products or services fulfill the promises given to the customers. Before the business is created, or the machine is created, the job has to be created. This is the solopreneur phase where the entrepreneur is systemizing the method of delivering satisfaction to the customers.
Step Two: Create the “Practice”
The practice builds on the job. Before building on the practice, the job should be clearly systemized where a process is laid out to fulfill the customer expectations can be met consistently in a systemized way. The “Practice” adds a Lead Generation System and a Lead Conversion System onto the Client Fulfillment System.
Now, the job and the practice is developed. To create the business, Gerber defines it as “Seven turnkey practices, and a turnkey management system”.
The “Practice” is the prototype of the “Business” and the “Enterprise”. Each practice should be replicated seven times to equal the business. Each practice has to deliver the same results to the customer in order to be a successful prototype and grow into a successful enterprise.
The Turnkey Management System is the system that teaches others how to manage the business in your absence. It tells others how to make decisions necessary to run the business at its optimal levels.
Step Four: Create the “Enterprise”
The “Enterprise” is seven turnkey businesses, and a turnkey Leadership System”. Now, the “Business” is the prototype and one successful business prototype is replicated seven times, and a turnkey leadership system is added to make the Enterprise run properly.
To create a successful enterprise, the entrepreneur has to change from being a work-minded thinker to a system-minded thinker.
The Turnkey Leadership System directs Enterprise leaders how to strategically orchestrate competitive advantages, stay top of the market, and lead the enterprise towards the Vision, Purpose, and Mission.
A Playlist answering “What is the Definition of an Entrepreneur?”
This playlist further expounds answering the question, “What is the definition of an Entrepreneur?”:
Final Words answering “What is the Definition of ‘Entrepreneur’?”
The goal of this article was to answer the question, “What is the definition of entrepreneur?”. There are several different schools of thought on this issue, however, I have chosen to show favor on the definition that an entrepreneur by Michael Gerber that the entrepreneur is an inventor of a money making system. I’ve also chosen to show how an entrepreneur can become the inventor of a system that makes money in their absence.
Hopefully, this was all helpful. For more information like it, please continue to follow along in the series, and check out Michael Gerber’s books (links take you to Amazon):
- The E-Myth Revisited (available in Kindle, Paperback, Hardback, and Audio)
- Beyond the E-Myth (available in Kindle and Paperback)
I’d love to help you out as you take this journey with your business!
Now, it’s Your Turn…
What is your definition of “Entrepreneur”? What are your thoughts on creating a system that makes money in your absence? Leave your comments, questions, and feedback below.