Entrepreneurship is the process that someone works through while starting a new business. That individual — the entrepreneur — must identify a market gap and develop a product or service to address that need. Entrepreneurs manage their business and assume any associated financial risks.
Also within the world of entrepreneurship, you may have heard about social entrepreneurship — what is social entrepreneurship and why is it unique?
Social entrepreneurship entails the same process as entrepreneurship but, instead of creating just any type of unique offering for consumers, it involves the creation of a solution to a community issue or problem.
Social entrepreneurs work to develop, fund, and implement a variety of solutions to a wide range of community issues related to social, cultural, and environmental challenges — they work to foster positive change in society through their initiatives and innovations.
Benefits to Entrepreneurship
Entrepreneurship can feel like a tedious and intimidating process at times — however, the rewards of entrepreneurship are so great they’re worth your hard work and time. Let’s take a look at some of the specific benefits of entrepreneurship.
- You control your destiny — you’re in charge of your business, goals, mission, and more.
- You manage your schedule including how and where you’re going to spend your time.
- You’re your own boss and manage all aspects of your business the way you see fit.
- You feel motivated to succeed, grow, and come to work — you believe in what you do.
- Your life is exciting — every day is filled with new opportunities to grow, develop your skills, and learn.
- You decide who you’ll bring onto your team as you grow (if and when you choose to expand your team).
- You determine your salary based on your efforts and the success of your business.
- You feel a sense of reward and motivation you most likely won’t feel in any other position, at any other company.
- You can change the world for the better — you’ll inspire others to pursue their dreams, create a product or service to solve a community’s (or group’s) needs.
- You will enhance the lives of your customers and anyone you cater to.
At a high level, one fact is clear about the entrepreneurship trend: It’s on an upward trajectory. After taking a steep decline during the U.S. recession between 2008 and 2011, it has rebounded and is now back to pre-recession growth rates.
A few other interesting stats and trends on entrepreneurship:
- Skills and expertise matter. Incompetence is the #1 reason small businesses fail, followed by inexperience.
- 82% of entrepreneurs work 40+ hours per week. 19% work 60+.
- In 2018, 75% of CFOs of mid-sized organizations reported that their job was becoming more strategic. (Forbes)
- 64% of entrepreneurs surveyed said they believe they must have a positive social and economic impact. (HSBC)
- 7.4% of all job seekers started their own business in 2016. (Fortune)
- Women were starting 40% of all new businesses, and persons of color made up 40% of entrepreneurs in 2016. (Inc)
- The United States is still considered the world’s most small-business-friendly country. (FitSmallBusiness)
- The U.S. also the best place to start a business as a woman. (HubSpot)
- 1 in every 18 people on the planet owns their own business. (HubSpot)
We’ve reviewed what entrepreneurship is, the benefits of becoming an entrepreneur, and statistics and trends related to the field. So, now it’s time to get the ball rolling and think about how you’re going to start your business. Let’s review five important, first steps to take when beginning your company.
How to Start a Business
- Determine the legal structure of your business
- Choose and register your business name
- Secure licenses, permits, and more
- Build your mission and vision statements
- Write your marketing plan
1. Determine the legal structure of your business.
First, you’ll need to figure out the kind of business yours will be from a legal point of view. This may change as you grow, and state laws vary. Let’s take a look at the four major types of legal structures you might choose to implement when starting your business:
- Sole proprietorship: In a sole proprietorship, you are the business as far as laws and taxes are concerned — you’re personally liable for debts and losses. When the time comes time to raise funds, you’d be asking backers to invest in a person rather than a business.
- LLC (limited liability company): With an LLC, you are not personally responsible for any financial or legal faults of the business. Although an LLC is more costly and complex to set up in comparison to some other legal structures, it comes with several tax advantages and protects owner(s).
- Partnership: A partnership is a single business where at least two people share ownership. Each owner contributes to all aspects of the business as well as shares in its profits and losses.
- Corporation: A corporation is a legal entity separate from its owners and has most of the rights and responsibilities an individual possesses (to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.)
2. Choose and register your business name.
Next, it’s time to select and register your business name. This might sound like a fun brainstorming activity, but it’s actually a paperwork-heavy legal process with far-reaching implications for your business down the road.
If you’re starting an LLC, your name will be registered automatically when you register your business with the state. Otherwise, you’ll need to go through a separate registration process. Start with a trademark search and then see if the domain name you want is available. (You can trademark your name and logo for around $300.)
3. Secure licenses, permits, and more.
From here, make sure you have all of the right permits and licenses to ensure your business is legal. If you sell “tangible property” (i.e., physical items) you’re going to need a seller’s permit. This allows you to collect sales tax from customers. Some states require it for certain service-oriented businesses as well.
The IRS can point you to the right office in your state, and SBA.gov has tools to help you find out what kind of license you’ll need to operate your business.
4. Build your mission and vision statements.
What does your business do? What do you stand for? What problem do you solve? How do you plan to make the world better? These are questions your mission and vision statements will answer.
This step is a key component of your marketing strategy. Brands with a strong identity and mission statement have an easier time producing authentic and meaningful content that effectively communicates their core values.
Vision vs. Mission Statement
A vision statement describes where your company aspires to be upon achieving its mission. It describes where your company wants the community, or the world, to be as a result of their products or services.
A mission statement explains the purpose of your organization and how your business serves customers. It typically includes a general description of your organization, its function, and objectives. Your mission statement should clarify the “what,” “who,” and “why” behind your business.
Your business should have strong and clear vision and mission statements. When you write vision and mission statements, define and explain the reasons why your business exists. Your statements should provide insight into who you are as a business and brand for both internal and external audiences including employees, partners, board members, audience members, customers, and shareholders.
(If you choose, you can combine your vision and mission statements into one, comprehensive statement for your business and brand to share and stand by.)
5. Write your marketing plan.
Once you have your license and your name, it’s time to start building an online presence and telling your story — or developing a marketing plan.
Ask yourself the following questions to help you with this:
- Who wants what I’m selling?
- Which people have a need for what I’m selling?
- Which people would become promoters of the product I’m selling?
To simplify this process, think about your buyer personas (in-depth, semi-fictional profiles designed to help you better understand the needs of your target customers).
Dig into who your buyer personas are and what messaging would likely resonate best with them. Consider their backgrounds, interests, goals, and challenges. Also think about their age, what they do, which social platforms they use, and so on.;
The Keys to Becoming a Successful Entrepreneur
There isn’t a one-size-fits-all recipe for success because so much of entrepreneurship is about blazing your trail and doing something that’s never been done before.
With that said, there are various key traits and best practices most successful entrepreneurs share — let’s take a look:
Get into it for the right reasons.
Start your life as an entrepreneur by identifying a need or a problem and looking for a way to solve it. Focus on the process, not the potential outcome.
Use prior knowledge and experience.
Prior experience — whether from your day job or past startup ventures — is often critical to your success as an entrepreneur. In fact, 98% of founders surveyed said their prior work experience was “extremely important” to their success. And, according to one UK Study, at least 50% of all startup ideas come from experience gained in previous employment.
Remember it’s all about execution.
Guy Kawasaki said it well: “Ideas are easy. Implementation is hard.”
By executing and being first to the market, you can seize the “first-mover advantage.” So, if you’re the first to market a good idea, your competition will have to play catch up. Factors such as brand recognition and switching costs work in your favor and make it harder for others to replicate your success.
The classic example is Amazon. By the time their success prompted competitors to start their own online bookstores, Amazon had already taken a big enough market share to make competition nearly impossible. Their execution — not their bright idea — is what changed the way the world shops.
Execution is a habit, it’s something you can hardwire into the DNA of your business. Make it a priority to develop a culture of action and execution.
Embrace uncertainty and risk.
Starting your own business is a journey into the unknown — you need to embrace uncertainty. Risk is not only an essential element of entrepreneurship, but it also tends to be directly related to success: The bigger the risks, the bigger the potential payoff.
Don’t fear failure, learn from it.
Studies have shown that one of the clearest indicators of future success for an entrepreneur is if they have experienced failure in the past. This may sound counterintuitive, but not when you think of failure as a teaching tool. In fact, many of today’s tech startups live by the mantra: “Fail forward,” and several businesses that are now household names — like Airbnb and Uber — took multiple launches to succeed.
In the long run, it’s better to focus on developing a minimum viable product, launching, and optimizing based on feedback, rather than trying to get it right the first time with an untested idea of a “perfect” product.
How much risk you take depends on you, your business, and specific circumstances. For example, buying a domain name doesn’t require the same level of commitment as building a prototype. What matters most is that you grow from your setbacks and maintain a willingness to try new things.
And speaking of risk and failure in entrepreneurship, let’s take a look at four of the most commonly made mistakes and risks entrepreneurs face. This way, you can be aware of and work to avoid them as you begin your venture. These common risks are related to demand, technology, execution, and finances.
1. Demand Risk
Are consumers interested in your product or service offering? Demand risk is the prospective customers’ willingness to purchase or adopt the offering.
2. Technology Risk
An entrepreneur assumes technology risk when engineering or scientific research and development are necessary to create the product. For example, if you plan to create a ground-breaking cure for a disease, you’d assume the risk if the scientific development wasn’t successful.
3. Execution Risk
To be a successful entrepreneur, you also need to be a strong leader. Execution risk is used to describe the entrepreneur’s ability to build a strong team of employees and partners to carry out plans.
4. Financial Risk
Every entrepreneur assumes financial risk, and oftentimes use personal funds to grow their business. They must operate under the assumption that they’ll be able to access external capital from other funding sources (e.g., investors, venture capitalists, crowdfunding).