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To examine why only a small proportion of people become entrepreneurs
As companies continue to compete globally, they feel an increasing need to restructure their workforce to have new sets of skills. Increasingly, some of the most sought after candidates are those with entrepreneurialskills. A recent survey by the Center for Creative Leadership revealed that 88% of the companies surveyed wanted entrepreneurs or employees with similar skills (De Bettignies & Chemla, 2006). This is because individuals with entrepreneurial backgrounds have more to offer than the average job candidate as entrepreneurs have experienced the rigors of business, entrepreneurs are more willing to take risks. In addition, they are thought to be more proficient in their field, in need of less supervision and more motivated to reach their goals (Landier, 2005). Hellman (2005) points out that people with entrepreneurial skills don't really watch the clock, they have a drive to excel and find better ways to do things. They create something new, something different; they change or transmute values and are often called the perfect storm of talent, confidence, personality, drive, energy, vision, and creativity (Lee, 2007). But, not all people have entrepreneurial capabilities. The study examines the differentiating traits of entrepreneurs. It analyzes their characteristics, behaviors, attitudes and business acumen and determines why only some people are successful in setting and managing their entrepreneurial venture.
Analysis and Discussion
An entrepreneur is a person willing and able to convert a new idea or invention into a successful innovation (Schumpeter, 1950; cited in Lee, 2007). Entrepreneurship forces creative destruction across markets and industries, simultaneously creating new products and business models. Schumpeter (1934) and Knight (1921) define entrepreneurs as people who are willing to put their financial well-being on the line in risky business ventures, with the expectation of earning large returns and expanding their wealth. In simplistic terms, an entrepreneur can be described as an individual who, through his or her own persuasive powers, is able to gather resources from other people to pursue a distinct opportunity. They risk their personal investment to set up and manage their own business. Although the business world has seen many successful entrepreneurs, not all entrepreneurs are successful. Also, while many people may desire to start up their own business, only a few are actually able to do so. Although the personality and mindset of entrepreneur is hard to describe scientifically, entrepreneurs do have some common personality attributes. Most of them have are passionate individuals and have something to prove to this world.
One of the biggest characteristics that differentiate an entrepreneur from a normal person is their understanding of ‘risk'. What differentiates them their understanding of the internal and external risk factors. Amador & Landier (2003) state that entrepreneurial risk-taking is thought to be an important way that individuals with skills, ideas, and business savvy introduce new products, technologies, and business strategies into the economy. Successful entrepreneurs take very educated and calculated risks. They not only know how to identify, manage, and reduce risk, but also are highly attracted to risk and reward. They embrace risk and challenge them. Besides, unlike people who look for instant or short term return, entrepreneurs look for a long term return on investment on business ventures because they know that starting a new business is risky, and there is no sure thing. Planning is another area where entrepreneurs are very strong. Planning goes hand in hand with risk minimization. To minimize risk, entrepreneurs carry out a proper business planning process which includes feasibility studies, market assessments, careful financial projections, and development of a full business plan (Landier, 2005). This reduces the risk of disaster but never completely eliminates that risk. But, it to be understood that entrepreneurs don't like risk just for the sake of it. Bates (2005) believes that the notion of entrepreneurs is highly romanticized in most literature and goes on to say that while many entrepreneurs are charismatic and flamboyant, some successful entrepreneurs are also was low-key and mild mannered.
The willingness to try out new things and embrace change is another one of the many differentiating entrepreneur behaviors. Entrepreneurs, unlike ordinary people, embrace change and are not afraid to challenge the status quo, they are always looking to maximize efforts and continually improve. They are eager to see change and progress, and hate to get held back. In the process, they try new things and look at change as an opportunity, not as a barrier. Modern day entrepreneurs also have to stay close to the customers to understand their needs and wants. When things are going well, they rethink and try to provide services in a different and more appealing fashion, and are willing to take a chance (Cassar, 2006; pg 610). They are willing to experiment and ‘test-and-learn' on a regular basis (bearing in mind that the budget for experiment does not greatly impact the cash flow if the experiment fails). But, the experiment attitude to business also requires analysis, monitoring, and the willingness to quit if an idea doesn't work out (Carter et al., 2003; pg 13). Successful entrepreneurs know when to divorce themselves from their great but failed idea. Idea generation is just one aspect if entrepreneurship, implementing those ideas is another. Entrepreneurs make sure that the idea that they generate are practical and have a scope for implementation. In the process, they have to understand the dynamics of the market. Entrepreneurs also have the ability to foresee and judge market conditions and forecast customer's wants.
Also, doing a business from scratch means that, the entrepreneur has to have a fair understanding of the real costs of a project. They have to have a reasonable understanding of the relationship of their programs to the financial well-being of the overall organization or project. Most entrepreneurs have the knowledge of cash flow, working capital, break-even analysis, and long-term results on investment in. They also align these skills to the budgeting process to assess the entire financial mix of the organization. Debt management or management of cash flow is another area where entrepreneurs have to be prudent in. They have to assess the impact of losses and how to deal losses.
The ability to learn and add to their existing knowledge is another trait which normal people do not possess. Entrepreneurs know that they never know it all and at the heart of their activity is their desire to learn, to and to implement that learning to change processes and behaviors. They are constantly learning new things, packing in new information, going to training (Gartner et al., 2004). This willingness to accept the fact that school is never out strengthens both them and the organization. They firmly believe that learning is an evergreen differentiator that helps to add to the knowledge quotient of the organization.
Entrepreneurs have the vision and the ability to see the unique opportunity and are able to persuade others to invest. They have good negotiation and persuasion skills to back their idea. One of the other characteristics that entrepreneurs have in common is ‘passion'. They are dedicated and committed towards attaining their entrepreneurial goal. Entrepreneurs are also champions of adversity and perform well under extreme and challenging situations.
Innovation capabilities also make a unique entrepreneurial attribute not possessed by many. Entrepreneurs focus on innovation and creativity within the organization. Eg. at Microsoft, Bill Gates has done a great deal to create a vision for innovation in the business. Two or three times a year, he sets aside dedicated time to think about the future.
While entrepreneurship is one of the ways to build wealth, there are a lot of risks that come with it and having all the information to make sound business decisions is extremely important (Robinson, 2007). The intrepid capitalists at the wheel need all the tools at their disposal (Gundry & Welsch, 2001; pg 453). ‘Decision making' is one of the important attributes of business and entrepreneurs have sound judgment and are good decision makers. They have the ability to make the right decisions most of the time. Hllmann (2005) attributes this to their understanding of their organization and market structure.
Entrepreneurship deals with creating a new way of doing business that changes the landscape. The reason all people are not entrepreneurs is because entrepreneurs require to know every function of the business. The knowledge and experience of an entrepreneur is not limited to a particular area of management, it rather covers all areas (Marketing, Finance, Economics, Human Resource, IT). They are not only responsible for setting up the business but also for managing which means they have to be good managers and investors. Apart from having good risk assessment acumen, they need to have good market awareness. They need to understand customer minds, have good product knowledge, have a fair understanding of econometrics and understand the financials aspects of the business (like cash flow, profits). Entrepreneurs' relationships with their businesses are anything but at arm's length. As managers, they make all of the day-to- day decisions about the firms' operations and as owners, they reap most of the rewards of success. The reason only some people become entrepreneurs is because it is difficult to possess all the characteristics of an entrepreneur. Having attributes such as passion, ability to forecast future, desire to challenge the status quo, willingness to come out with radical idea, ability to risk assess the invested capital and the expertise to deliver and implement the ideas cannot be found in every individual.
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