In this article, we will discuss the difference between being a small business owner and being an entrepreneur. We’ll also examine the key characteristics of successful entrepreneurs. Finally, we’ll discuss the different ways of acquiring a small business, from purchasing an existing company to starting one from scratch.
Difference Between an Entrepreneur and A Small Business Owner
What Constitutes a Small Business?
According to the Small Business Administration (SBA), the U.S. government defines a small business as a business that:
- is independently owned and operated,
- is not dominant in its field of operation, and
- meets certain criteria set by the SBA for the number of employees and annual sales revenue.
A small business almost always has 100 or fewer employees, but according to some definitions, a small business may have as many as 500 employees.
What Is Entrepreneurship?
Entrepreneurship is the process of taking risks to try to create a new business. Entrepreneurs are business owners who see a new opportunity for a product or service and start a firm. In starting a new firm, they risk their time, money, and resources. Some entrepreneurs hope to grow their business substantially over the years, while others choose to remain small.
The entrepreneurial spirit is expressed in many ways. However, as the dream is pursued, the true entrepreneur “always searches for change, responds to it, and exploits it as an opportunity,” according to the late management philosopher Peter Drucker. The different types of entrepreneurs are summarized below.
Types of Entrepreneurs
Intrapreneur
An Intrapreneur work inside an existing organization sees an opportunity for a product or service, and mobilizes the organization’s resources to turn the opportunity into a profitable reality. The Intrapreneur might be a researcher or scientist but could also be a manager who sees an opportunity to create a new venture.
Entrepreneurial Team
An entrepreneurial team is a group of people with different expertise who form a team to create a new product. One variant is a so-called skunkworks, a team whose members are separated from an organization’s normal operation and asked to produce a new, innovative project.
Micropreneur
A Micropreneur takes the risk of starting and managing a business that remains small (often home-based). This allows them to do the kind of work they want to do and may offer a more balanced lifestyle.
Solopreneur
A solopreneur is a business owner who owns and operates their business alone.
Why Do People Become Entrepreneurs?
People usually become entrepreneurs for two different reasons—opportunity and necessity:
Many entrepreneurs are opportunity entrepreneurs. They are ambitious and start a business to pursue an opportunity (and profits).
Others are necessity entrepreneurs, people who suddenly must earn a living and are simply trying to replace lost income.
Do You Have What It Takes to Be an Entrepreneur?
Entrepreneurs seem to have psychological characteristics that make them different from those who want to become company managers.
Characteristics of Entrepreneurs
Self-Confidence and Belief in Personal Control
Managers need to be self-confident and to think they have personal control of their destinies. This is even more so for entrepreneurs, who need the confidence to act decisively.
Need for Achievement and Action Orientation
Managers are motivated more by promotions and organizational rewards of power and perks. Entrepreneurs are motivated to execute their ideas and realize financial rewards. They are also more action-oriented, wanting to get things done as quickly as possible.
Tolerance for Ambiguity and Risk
Managers need to be able to make decisions based on unclear or incomplete information. Entrepreneurs must have even more tolerance for ambiguity because they are trying things they haven’t done before. They also need to be willing to take risks, even personal financial risks, to pursue new opportunities.
Energy
Managers may have to put in long hours to rise to the top of an organization. But entrepreneurs are willing to invest even more time and energy.
Small Business: Opportunities from Home and Challenges
Many people run their small businesses out of their own homes. In fact, about 53% of new small businesses begin in the home, are financed on less than $10,000, and start with leased or used equipment.5 However, some businesses require special offices and facilities to run. This is because small businesses are found in every sector of the U.S. economy: farming, manufacturing, construction, wholesaling, retailing, services, and high technology, among others.
The Role of Small Business in the U.S. Economy
“Small business is the backbone of America,” the saying goes. But is it true? According to the SBA, the answer is yes.
Small businesses play a powerful role in the U.S. economy. In reality, small businesses represent the majority of U.S. sales. Small businesses also are a major source of jobs to communities across the country. In addition, small businesses help counteract the impact of downsizing by larger companies. Finally, small businesses drive growth and innovation in the economy.
Considerations for Starting a Home-Based Business
Many businesses can be started at home. According to the SBA, the average start-up cost is $30,000, but many micro-businesses can get started for as little as $3,000 or less.
Many home-based businesses are one- or two-person operations, such as clothing boutiques, interior decorators, website developers, and web-based stores.
Possible Opportunities
Among the possible opportunities for earning money from home using the Internet are the following:
Freelance work: Writers, programmers, designers, administrative assistants, even engineers, and business professionals can find opportunities by going to certain freelance websites.
Direct sales: Many companies have programs for selling from home via the Internet.
Customer service: Not all customer service has been outsourced to India. Many companies (such as JetBlue) hire people with experience to do this from home, provided you have a computer, landline, and quiet environment. A virtual concierge, for instance, handles errands and inquiries.
Transcription service: Doctors, lawyers, and others hire people to work at home transcribing audio recordings. You’ll need good English and typing skills.
Tutoring: You may be able to do online teaching, particularly if you’ve had teaching experience.
Beware of schemes advertised on radio and television promising lucrative at-home jobs that require little or no training.
The Challenges of Working from Home
Working at home has certain challenges, such as trying to manage your time and keep your work life and personal/family life separate. Some suggested rules:
Dress for work: Some people do just fine dressed in their pajamas, but others find that taking a shower and putting on office clothes gives them the discipline they need.
Set a routine and stick to it: You should get to your desk at about the same time every day, check your e-mail, contact your clients, and perform your work just as you would in an office.
Interact with other professionals: E-mail other professionals who work from home or arrange to get out and have lunch with them once in a while.
Should You Start a Business from Scratch or Buy an Existing Business?
Individuals interested in owning a business but not necessarily starting something from scratch can consider purchasing an existing business.
There are two reasons to purchase an existing business:
- To reduce uncertainty: When you take over a successful business, the previous owner has already dealt with and overcome most of the risks.
- To generate profits more quickly: When you step into an existing well-run enterprise, you should be able to earn profits fairly quickly.
Tips for Taking Over a Successful Business
If you take over a successful business, you will want to control your expenses to maximize your profit. Here are some inexpensive options to consider:
- Barter for supplies and services.
- Get a free conference call number through a service such as freeconferencecall.com.
- Obtain inexpensive website, hosting, blogging, and customer-contact services.
- Purchase inexpensive business cards and print marketing materials through web-based printing companies.
Here are some questions you should ask once you’ve located a good prospect for a business you may want to buy.
Questions to Ask When Considering a Prospective Business Purchase
Question:
How do the business and industry work?
Explanation:
You’ll need to understand the business and the industry, including the products, customers, pricing, employees, competition, and the cost of doing business.
Question:
Why is the owner selling, and what does he or she want to do next?
Explanation:
You’ll need to find out why the owner is willing to sell. You’ll also want to learn what the owner’s future plans are. (Is the seller planning to start a competing business?)
Question:
Is the price right?
Explanation:
The owner may have high expectations about what the business is worth. You’ll want to look carefully at the books, probably with the help of a financial consultant, to determine a fair and reasonable price for the business.