Entrepreneurship is the process of starting (or improving upon) a business with the ultimate goal of making a profit.
It often involves great risk and uncertainty, but it’s also an opportunity to overcome those challenges and manage multiple aspects of a business operation. From marketing to accounting to logistics and beyond, entrepreneurs oversee the many facets of running a business.
But entrepreneurship isn’t easy. In fact, data shows that 90% of startups fail. Despite this, entrepreneurship remains an extremely enticing career path. Like many high-risk activities, it often draws people who see the risks as an exciting challenge rather than a disclaimer.
And while the risk might be great, so are the rewards — entrepreneurship is easily one of the most creative and rewarding forms of business. And some of the most well-known people across the world are/ were famous entrepreneurs, including Oprah Winfrey, Bill Gates, Walt Disney, J.K. Rowling, and Steve Jobs.
If you aspire to be like these successful people, entrepreneurship might be the path for you.
So, what is entrepreneurship?
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. (FitSmallBusiness)
- 82% of entrepreneurs work 40+ hours per week. 19% work 60+. (TAB)
- 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
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.
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).
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).
How to Find Funding
Anyone who’s built a business or multiple businesses will say there’s no scarcity of money available for entrepreneurial ventures. If you have valuable ideas, strong execution, and clearly communicate your vision, you’ll have no trouble raising funds.
Focus on determining which funding strategy best suits your needs and think about how you can offer value to potential backers. Here’s a quick look at the most common funding strategies:
Bootstrapping has many advantages over other forms of funding: It doesn’t incur interest and it allows you to maintain control over your business and its equity (to name a few).
So what is it? Bootstrapping means self-funding.
Meaning, no taking on any outside funds to grow the business. Instead, profits are reinvested. Bootstrapped businesses keep costs low and scale at a sustainable pace. We all know the stories of multi-billion dollar companies like Apple that started in a garage or a basement. According to SBE Council, 51.6% of new businesses do likewise.
The internet is your friend: Domain names are cheap. Social media offers free marketing. Online retail has a fraction of the overhead of a brick-and-mortar location. When it comes to generating cash early in the game, look at your business model. Consider pricing in a way that generates revenue in a recurring fashion (i.e., subscriptions over one-off sales).
Small Business Loans and Venture Capital
Traditional small business loans and venture capital funding offer big money … but often with big strings attached.
Small business loans provide an established source of financing that favors more traditional business models. If you go this route, expect to present a meticulous and clear business plan and account for every penny of it.
Venture capital is on the opposite end of the spectrum. VC backers look to put serious cash behind ideas that promise quick and massive growth. Very few have what they’re looking for. The ones that do can expect to trade some of their control of the business and a share of its profits in exchange for VC backing.
It’s essential to find a backer who shares your vision and offers more than just money. With that said, there are some less obvious benefits of equity financing. The process of honing your pitch will reveal areas for improvement in your business model that you might not have been otherwise discovered.
Funding is also validating. It means someone is willing to put a dollar amount on how much they believe in what you’re doing. And an influx of cash when you’re starting out makes all the difference when you need to quickly solidify your first-mover advantage.
Another option is to work with a silent partner. Similar to a VC backer, this is someone who puts significant funds into your project and expects significant returns. But unlike a VC, a silent partner doesn’t want any part
Crowdfunding sites, like Kickstarter and Indiegogo, are a new source of funding that
Crowdfunding sites also serve as marketing platforms. Your content, branding, and mission statement will attract people to your campaign and hopefully motivate them to back it.
Since you’re not giving crowdfunding backers an equity stake or seats on the board, you have to give them something. Campaigns on these platforms tend to offer backers prizes in exchange for their contribution: this can be early access to your product, tickets to a live event, etc. Here you have another learning opportunity. Designing a crowdfunding campaign forces you to consider the value you’re offering your customer.
They say that the best marketing technique is to design an outstanding product. If what your offering is really of value, your backers will let you know by paying you for it.
Friends and Family
Mom and dad might not have as much money as a venture capital firm or a big bank, but they tend to have much better terms. Family and friends can be a great source of seed money, particularly when you’re young and inexperienced. They’re more likely to invest in your potential and your work ethic than a backer who might want to see proof of concept you’ve yet to produce.
There are entire industries out there — from co-working spaces to CRM software to government grants — dedicated to helping entrepreneurs succeed.
The recent boom in entrepreneurship has sparked competition between governments at local, state, and national levels to attract and foster business development. Business incubators provide essential infrastructure and tools that might otherwise be out of reach for small businesses.
Seed accelerators are highly competitive programs that put startups in head-to-head competition for seed funding. Winners often receive mentorship and educational resources along with financing. (Here’s a ranking of seed accelerators.)
And here at HubSpot, we have a few special programs of our own:
Looking for books to inspire and guide your entrepreneurial efforts? Here are some of the most popular reads:
1. “Tools of Titans” by Tim Ferris
From the #1 business podcast on iTunes: learn the tools, tactics, and morning routines of 200 of the world’s top performers in areas ranging from tech to powerlifting to special operations and the music industry.
2. “Influence” by Robert Cialdini
Based on 35 years of research, “Influence” breaks down the psychology of persuasion into six key principles. This is a must-read for anyone interested in hearing the word “yes” more often.
3. “The Lean Startup” by Eric Ries
A blueprint for the modern startup and a survival manual for a business environment where failure is the rule and not the exception. Learn how to innovate rapidly, put ideas to the test, and operate in the “extreme uncertainty” that is the startup ecosystem.
4. “Idea to Execution” by Ari Meisel and Nick Sonnenberg
“How to optimize, automate, outsource everything in your business… .” The authors used the process outlined in this book to take a business from an idea on a cocktail napkin to a 24-hour launch.
5. “Pivot” by Jenny Blake
“Pivoting” is the act of taking your existing strengths in a new direction. It’s about maximizing the opportunity presented by the question, “What’s next?” Blake explores the value of pivoting in business and in one’s own career.
6. “Built to Last: Successful Habits of Visionary Companies” by Jim Collins
Case studies of business that have stood the test of time. “Built to Last” breaks down the structural secrets to organizational longevity. This is inspiration for anyone hoping to leave a legacy in business.
7. “Smarter, Faster, Cheaper” by David Siteman Garland
A guide to marketing for entrepreneurs in the digital age. Garland includes practical advice to make the most of online marketing tools and platforms.
- “A year from now you will wish you had started today.” — Karen Lamb
- “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.” — Albert Schweitzer
- “Dream big. Start small. But most of all, start.” — Simon Sinek
- “Be patient with yourself. Self-growth is tender, it’s holy ground. There’s no greater investment.” — Stephen Covey
- “My best advice to entrepreneurs is this: Forget about making mistakes, just do it.” — Ajaero Tony Martins
- “Ambition is the steam that drives men forward on the road to success. Only the engine under full steam can make the grade.” — Maxi Foreman
- “The only way to do great work is to love what you do.” — Steve Jobs
- “The best way to predict the future is to create it.” — Peter Drucker
- “One of the huge mistakes people make is that they try to force an interest on themselves. You don’t choose your passions; your passions choose you.” — Jeff Bezos
- “Ambition is the steam that drives men forward on the road to success. Only the engine under full steam can make the grade.” — Maxi Foreman
- “Waiting for perfect is never as smart as making progress.” — Seth Godin
- “Entrepreneurship is at the core of the American dream. It’s about blazing new trails, about believing in yourself, your mission and inspiring others to join you in the journey. What sets [entrepreneurs] apart is the will, courage and sometimes recklessness to actually do it.” — Derek Hutson
Entrepreneurship is a learning process and a journey of discovery. You don’t need to know everything to take the first small step, and when starting your own business, oftentimes, the best way to learn is by doing. Now, you have the tools and information you need to start — all that’s left to do is to get to work.
Originally published Aug 13, 2019 9:33:00 AM, updated August 13 2019