Entrepreneurship is the process of founding a company or improving it with the ultimate goal of generating income. It often carries risks and a lot of uncertainty, but it is also an opportunity to overcome those challenges and learn how to manage various aspects of a business operation. From marketing and accounting to logistics and other sectors, entrepreneurs know all facets of a business. However, this is not an easy task. Research and data reveals that 90% of startups fail. Despite this disappointing number, the idea of becoming an entrepreneur remains very attractive. Like other high-risk activities, it attracts adrenaline lovers who, far from seeing it as a warning, are stimulated by this challenge. And let’s not forget that every risk has its reward. Starting a business is one of the most creative business endeavors, and it can bring a great deal of personal satisfaction.
What is an entrepreneur
An entrepreneur is an individual who starts his own company. If your goal is to be like this, it may be time to unleash your entrepreneurial spirit. Identify a business need and develop a product or service capable of meeting it. Entrepreneurs manage the business and assume all financial risks associated with the project. Among the most famous entrepreneurs are:
- Oprah Winfrey
- Bill Gates
- Walt Disney
- JK Rowling
- Steve Jobs
What does it mean to undertake
Howard Stevenson, a professor at Harvard Business School, states that “entrepreneurship is the search for opportunities that goes beyond the available resources.” What does this mean? Entrepreneurs dedicate all their time, energy and resources to creating a unique offer that arouses the interest of consumers. They keep going despite any constraints (eg lack of budget, working capital, production facilities, etc.). Here are some facts about business that you should not take lightly, if your goal is to start up from scratch:
- 82% of entrepreneurs work more than 40 hours a week, and 19%, more than 60 hours. (Source: TAB )
- In 2018, 75% of CFOs in midsize organizations reported that their work was becoming more strategic. (Source: Forbes)
- 64% of the entrepreneurs surveyed said they believed it was their responsibility to have a positive social and economic impact. (Source: HSBC)
- 7.4% of individuals seeking employment founded their own business in 2016. (Source: Fortune)
- Of the companies that entrepreneurs founded in 2016, 40% are owned by women and another 60% by men. (Source: Inc)
These may impact your life if you have kids or big responsibilities but it shouldn’t dissuade you if it is truly your passion either.
How to start a business (step by step)
When starting a business, there are some initial steps to follow. Let’s analyze each of them.
1. Determine the legal framework of your company
To begin with, you will have to decide the type of business you want to have from a legal perspective. This could change as your business grows but the most popular options include:
- Sole proprietorship. In a sole proprietorship, you are solely responsible from a legal and tax point of view. While this option is easy to organize, it can be problematic when it comes to raising funds, as you would be asking funders to invest in a person, rather than a company. Also, the sole owner is personally liable in case of debts or losses.
- Limited liability company (SRL). LLCs are more difficult and expensive to set up, but they do have some tax advantages and protect their owners from being personally liable (that’s where their name comes from).
2. Choose and register your business name
This is the time to select and register your business name. It might sound like fun, but in practice, it is a legal process that requires a lot of documentation, and it could have significant repercussions in the future. Look at where you are opening your business, as each country differs slightly and register it immediately.
3. Make sure you have the licenses, permits, etc. corresponding
Now you have to make sure you have all the permits and licenses to operate legally. If you sell “tangible goods” (i.e. physical products), you will need a sales permit. Let’s say you want to look at a Merchant cash advance, you will need to figure out exactly what you will need to purchase one. This will enable you to collect a sales tax from your customers. In some places, this permit is also required for companies that sell services. Get advice on the government page and on the site of the tax collector for your country. You will surely find other useful resources and tools there too.
4. Decide what your mission and vision statement will be
What is the function of your company? What values does it have? What problem do you help solve? How do you plan to make the world a better place? The mission and vision will answer these questions. This step will be key in your marketing strategy. Brands with a clear identity and a strong vision and mission statement produce more authentic and relevant content, effectively communicating their core values. If you need inspiration, take a look at the websites of your favorite startups. What is your mission? How do they communicate their vision?
5. Write the marketing plan
When you have the license to operate and the name of your company, you should start creating an online presence and telling your story. First, think about the target consumer. Ask questions like:
- Who wants what I sell?
- Who will find it useful?
- Who would promote my product or service?
From there, think about who these people are and with what message they would feel more identified. Think about the context, their interests, goals and problems, as well as their age, what they do and what social networks they use, among other things.
How to be a successful entrepreneur
There is no surefire recipe for success that applies to every business, because so much of starting a business revolves around creating our own path and doing what no one else has. That said, there are some key characteristics and good practices that the best entrepreneurs have in common:
Jump into the task for the right reasons
Don’t start out wanting to be an entrepreneur. Identify a need or problem and look for ways to solve it. Focus on the process, not the possible outcome. Being in business is a journey, afterall and it is something you need to work on and learn from.
Prioritize learning over income
Your previous experience (both in your day job and in past endeavors) is usually essential. 98% of company founders surveyed said their previous work experience was “extremely important” to their success (according to the Kauffman Foundation’s Successful Entrepreneurs document).
6. Understand that execution is everything
Guy Kawasaki said, and with good reason: “Having ideas is easy, the difficult thing is to implement them.” If you are the first to execute an idea on the market, you can take advantage of the “pioneer advantage”. In essence, if you are the first to enter the market with a good idea, your competition will have to catch up with you. Factors like brand recognition and switching costs work in your favor and make it difficult for others to replicate your success. The quintessential example is Amazon. By the time its level of popularity led competitors to found their own online book stores, Amazon had already captured much of the market, making competing with it nearly impossible. It was their execution (and not their brilliant idea) that changed the way the world shops.