Most new entrepreneurs have an idea and dream but lack the framework for execution. And that framework is what matters most.
The idea is your sailing boat. Execution is the wind that drives it.
Michael Dell famously said,
“You don’t have to be a genius or a visionary or even a college graduate to be successful. You just need a framework and a dream.”
Without proper execution, you can’t make your business the next successful venture. This article is your manual on how to propel your sailing boat— a guide on entrepreneurship and how to establish your own business.
The Basics of Entrepreneurship
Let’s start with the standard terms in entrepreneurship. This will help you understand various notions generally used in the startup landscape.
Who is an Entrepreneur?
The word entrepreneur comes from the French word entreprendre, which means to undertake.
Simply stated, an entrepreneur is a person who creates solutions to potential problems and sets up a business that employs labor and capital to generate profit. This can include building an innovative product, plugging a market gap, or improving human efficiency.
There is no fixed definition of an entrepreneur. The concept is elastic depending on the various factors that affect an entrepreneur. Some descriptions are technical and focused on the process, while others are focused on skill sets. This is because entrepreneurship has been there for centuries and has gone through many evolutions.
Historically, the neoclassical economist didn’t include it in the formal models of economics and capitalism. It was in the early 20th century that Joseph Schumpeter introduced the concept of entrepreneurship. He stated that entrepreneurs are responsible for creating new products/services/solutions to make a profit.
Fast forward to the 21st century and the definition now is; an entrepreneur can be a person who has set up his online store or a freelancer who started his agency. Or someone who builds a side hustle and eventually makes it a profitable full-time business.
Now, let’s understand the journey.
What is Entrepreneurship?
The most succinct definition of entrepreneurship comes from Professor Howard Stevenson, the Godfather of Entrepreneurship Studies at Harvard:
“Entrepreneurship is the pursuit of opportunity beyond resources controlled.”
While the term entrepreneur defines a person’s attributes, entrepreneurship defines the journey of a self-made person who establishes his own business.
In the modern world, entrepreneurship also means solving big problems for humanity. It can include solving economic issues, social problems, or inventing a new product that uplifts the status quo.
The definitions don't tell you how exactly entrepreneurs ideate and implement their dreams. Real-world entrepreneurship includes both the micro aspects (ideation, nurturing, decision-making, etc.) and macro aspects (profits, product, market, etc.)
Entrepreneurship involves much more than the creation of a company or service. It’s about transforming the world with breakthrough products or solutions. Entrepreneurs are thought-leaders that push humanity forward.
Here’s what Steve Jobs had to say about entrepreneurs:
Definitions don't take the impacts and visions into account. Thus, it’s necessary to keep an open mind while understanding entrepreneurship.
Time to understand the venture an entrepreneur builds.
What is a Startup?
Literally, a startup means
- The act or an instance of setting in operation or motion.
- A fledgling business enterprise.
In simple terms, a startup is a company founded by an entrepreneur to develop and bring a new product/ solution to the market. A startup generally starts with a shoestring budget with money from either the founders or the early investors.
Paul Graham, the co-founder of Y Combinator, approaches a startup from ground reality. He explains:
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.”
This clarifies one of the biggest misconceptions that if you have a business, then it will automatically be called a startup. For a startup to exist, there must be growth in conjunction.
Now, let’s quickly look at the stages of a startup.
Stages of a Startup
The depiction of stages of a startup varies according to the metrics and evaluation. Some might evaluate the stages qualitatively, while others depict stages quantitatively. This results in different models depicting the stages of a startup.
Below is a widely accepted model that explains a startup journey:
Stage #1 Seed stage: The first step when your startup doesn’t exist officially. This is the stage where you test the feasibility of your idea and self-assess the requirements.
Stage #2 Early-stage: This stage is focused on launching products into the market, hiring new employees, market research, building a customer base, product development iteration, and balancing finances.
Stage #3 Growth and establishment: At this stage, the startup snowballs, acquiring new customers and bringing more revenue. It is the stage where a founder establishes order to mobilize a team as per the goals.
Stage #4 Expansion: At this stage, most operations in your startups are streamlined. There is adequate staff to manage ongoing projects, and you’re focused on critical decisions. Now, you might plan to expand your company or enter into new areas.
Stage #5 Maturity and Potential Exit: The startup becomes a profitable business, clocking stable yearly revenue. Some ventures continue to grow top-of-the-line while others might hit their maturity. The founder is faced with two options, either go for expansion or take an exit. Otherwise, you can go for full, partial acquisition, or IPO.
Benefits of Entrepreneurship
Global Entrepreneurship Monitor surveyed 65 different global economies and found that there are 582 million entrepreneurs in the world. At the end of the first quarter of 2020, there were 804,398 startups in the USA alone that were less than one year old.
These stats reveal how important and popular entrepreneurship is. From personal advantages to the economy, entrepreneurship holds a significant impact.
Let’s analyze the benefits of entrepreneurship in different areas:
- Innovative products and services have a cascading effect on economic development. This creates more companies and sectors that support the new startup.
- Future development of startups requires robust logistics, support, a qualified workforce, and capital investments that open up opportunities.
- From a construction worker to a computer programmer, entrepreneurship benefits a large part of the economy. For instance, small businesses created 1.6 million jobs in 2019 in the USA alone.
- Startup ventures create wealth by developing and capturing new markets. This increases employment and higher earning, which benefits the country in higher tax revenue and government expenditure.
- Through the development of new products and services, entrepreneurial ventures make livelihood better.
- Innovative startups dig deeper into current markets to identify people’s needs and offer viable solutions. This boosts social development.
- Entrepreneurial ventures ignite infrastructural development in their region. This leads to improved transport and communication networks that become a boon to society.
- Entrepreneurship contributes to the development of healthcare, education, and other social needs by taking part in corporate social responsibility (CSR).
- Be your own boss. Entrepreneurship allows you to nurture your vision and make it a reality with a venture.
- Entrepreneurs have control and flexibility over their time. They work according to their schedule and plan as there is no boss over them.
- Entrepreneurship is a high-risk game. You’ll be tested against uncertain tides of time and highs and lows of unemployment. But all that will build your patience and resilience.
- Self-employed persons don’t have an external cap on their earnings. The salary of an employee is restricted by the company that allows only occasional bonuses. An entrepreneur takes the most risk and enjoys high profits.
- As an entrepreneur, you’ll learn and test your knowledge a lot. You’ll be doing work as a manager, customer rep, salesman, and even bookkeeper during the early days. There will be a wide range of skills you’ll pick up. You’ll be in charge of thinking about how to establish your own business.
To Students, the Leaders of Tomorrow/Next Gen Entrepreneurs
Students are the next generation of young entrepreneurs. Training them for a rapidly changing future will need entrepreneurship education:
- Entrepreneurship education prepares students for the uncertain future. Today students face complex global, social, and environmental issues. WEF’s Survey reveals that half of today's work activities could be automated by 2055. This will create new responsibilities and demand new skills. But we don't know what they will be. That’s why students need entrepreneurship education to navigate an uncertain future.
- Schools are standardized because the same metric is used to measure students with varying capabilities. Entrepreneurship fosters creativity, vision, innovation, and collaboration.
- Schools teach problem-solving only on paper. Entrepreneurship education focuses on identifying real-world problems and solving them with minimum resources.
Challenges in Entrepreneurship
"If you want to enjoy the rainbow, you must endure thunder."
Entrepreneurship is not all gold; it’s a hard and uncertain path that only the most persevering can tread. If you’re dreaming of establishing your own business, prepare yourself for these challenges in entrepreneurship:
- Abandoning your Job: No matter how soul-sucking a day job sounds like, it’s still certain and gives a paycheck. But if you plan to execute a vision by setting up a business, you must take the risk of quitting your job. You can manage your business on the side, on the weekends or weeknights. However, it’ll demand more time once it scales up.
- Financing Startup: Experienced entrepreneurs have an unfair advantage over newbie ones in terms of raising capital. They may have capital from their previous acquisition or revenue from past ventures. New entrepreneurs have to network widely while exploring different funding options. A survey of 101 startups revealed 29% of startups failed due to insufficient finances.
- Assembling a Team: A team is a critical part of a successful startup. And if you’ve no experience of managing a team before, this will demand hard work. It’s difficult to pick the perfect employees for the roles. This becomes tougher when you want to fill the roles quickly to get the engine moving.
- Loneliness: An entrepreneur’s journey is filled with scary unknowns that can be isolating. Sometimes, you’ll be working day and night without being able to see your family. Entrepreneurship can be lonely.
- Decision-Making: This is one of the most stressful challenges in entrepreneurship. Entrepreneurs face hundreds of decisions daily and sometimes with far-ranging consequences and impact on the business. Decision fatigue is a real phenomenon in the business world.
These challenges are not specific as the industry and market vary. If you’re a young entrepreneur, you must continuously iterate to tackle these challenges. Remember, a seemingly tiny decision can have a cascading effect on your business. That’s why it’s necessary to learn and correct the mistakes in entrepreneurship.
How To Avoid The Mistakes Of Entrepreneurship
“The beginning is the hardest.”
The leverage point in a startup is not incubating the idea and letting everything fall into place. It’s the execution part that tilts the whole business in your favor. Entrepreneurship requires that you submit yourself to the process.
Eric Ries, the author of The Lean Startup, throws golden nuggets on this point:
“I have learned from both my own successes and failures and those of many others that it’s the boring stuff that matters the most. Startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.”
But it’s not easy even if you’re prepared. According to the Small Business Administration, “about two-thirds of businesses with employees survive at least 2 years and about half survive at least 5 years.”
The initial years are crucial for a startup. Thus, it’s vital to learn the common mistakes entrepreneurs make and better prepare for the process:
Don’t Try to Control Everything
When you start your new venture, you’ll have the tendency to micro-manage every aspect of your business. But as a first-time manager, this isn’t an effective strategy. When you’re pushing every wheel by yourself, you’ll only get drained. Understand that a startup runs by hiring, managing, and trusting your team.
You may feel the need to touch every single aspect of our business, which is the biggest roadblock in order to grow and maximize the potential of your startup. Step back and realize that you may be getting in your own way and inhibiting your team's ability to flourish and grow.
Don’t Hire on the Basis of Cost
Hiring is another critical determining factor in a startup. After realizing that you need a team, the next step is to build a team. Often, a startup suffers from a tight budget, which might make you skimp on the cost of new hires.
The issue is that this mistake will cost you more in the long run. Low-cost employees will produce less value. Invest in a skilled and experienced team which might cost more but will bring in benefits in the long run.
Think about Marketing
Overconfidence about your product might be your next biggest mistake. New entrepreneurs think that their products are revolutionary and will attract PR and word-of-mouth. That’s hardly true in the real world when there are 804,398 startups in the USA alone.
Marketing is about communicating your product to the target market (customers and collaborators). In reality, companies need to invest heavily in marketing. That’s why in a survey of 1000 businesses:
- 78% stated that they want to invest more in digital marketing.
- 73% want to invest more in their social media.
- 57% wanted to increase their investment in email marketing.
If you ignore marketing, you might not attract enough customers to generate a positive cash flow. In fact, marketing (22%) is one of the primary reasons for startup failure, as per a survey. Take a look at where your competitors are spending their marketing budget and plan how you can outperform them.
Don’t Put your Product over Customers
“Your most unhappy customers are your greatest source of learning.”—Bill Gates
A CB Insights report suggests that five out of the top ten reasons for a startup failure were related to customers.
Ask yourself, why are you even running a startup?
Is it to generate money or to serve target customers?
If you wonder how to establish a new business, think from the customer’s POV. The startup’s success is built on a customer-first mentality. Many young entrepreneurs only go after the monetary gains and end up bankrupt. You should not forget that a loyal customer army will help you sail against the uncertain tides of business.
“The first iteration of our company relied on partners to drive our growth. Working with partners takes you away from your users -- and nothing, nothing, nothing is more important than staying close to your users or customers. If you're starting a company, ask yourself constantly: "How am I staying close to my users?" Then do more.” - David Hammer, Emissary.
Don’t Think your Know it All
It’s natural to be confident that no one knows the product more than you. You might think that no one can do the job better than you. After all, it’s your vision and passion!
But this approach has many flaws. First, it will cause severe burnout if you try to do everything by yourself. 8% of startups fail due to burn-out, reveals a survey. Second, if you’re just starting out, there are a million things you still don’t know about the business domain. Thus, it’s better to consult with an experienced leader or a mentor to gain new insights into the market.
How To Develop Entrepreneurship And Management Skills
“Entrepreneurship is having an idea to do something great and not entirely have a plan on how to do it but the drive and willpower to make it work.” - Michael Bloomberg.
Entrepreneurs are not born magicians. They learn everything in the pursuit of changing the world. Eric Ries has said this best:
“Startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.”
Let’s take an example of two piano players, both with a passion for excelling.
Both of them start with zero skills and knowledge of music.
- One of them goes out of his way to learn everything on his own: trial and error.
- The other looks for specific guides and skills needed to excel. He figures out the leverage points that will ace his game—a systematic approach.
Those two people are learning by doing. Both of these people are equally passionate, and both of them would become successful in playing the piano. However, the time taken to achieve that differs.
The former will have to invest more time to experiment and fail all by himself. In comparison, the latter will build his success on others’ experiences and insights.
Thus, it’s crucial to know how to develop entrepreneurship and management skills. Grit and perseverance may be innate, but you need to learn business skills.
Recall the definition of a startup, and you’ll understand the importance of money. An entrepreneur should have a working knowledge of various financial aspects such as budgeting and financial statement analysis.
It’s also imperative to learn how to read and write financial statements. They give you an overview of the balance sheet, income, and cash flow statements. These are also useful for tax purposes and also help in managing future expectations and expenses.
Successful entrepreneurs create a reasonable budget and modify it as per needs. Having financial knowledge is critical in entrepreneurship as it helps avoid overspending. It will aid you in making smarter decisions regarding resource allocation.
Focus on Networking
Networking is the key leverage for entrepreneurs. It allows you to connect with like-minded people that broaden your business perspective. You can even gather several products and market insights if you network with the experts. They can show you the ground report of a niche market, which otherwise would need tens of hours to assemble.
You can network with the following people:
- Former and current co-workers.
- Alumni from your educational institutions.
- Former professors and teachers.
- Industry leaders and speakers.
- Former and current clients.
- Friends and family members.
- Business professionals in your geographic area.
- Others in your industry with similar interests, responsibilities, and goals.
Networking is a pillar in building entrepreneurship and management skills. Talk to people who can guide you on your journey. Perhaps, some people started their own venture and have vast on-field experience.
Share a coffee with them and listen to their advice in hiring employees, funding, market research, and listen to their productivity tips. They may connect you to their contacts which will further expand your network circle.
LinkedIn is a great way to connect with professionals from your domain. The feed and algorithms will help you discover people with the same interest and job titles as yours. You can also sign up for virtual networking events, as they are rising since the pandemic.
Accept and Value Feedback
An entrepreneur often remains stuck in his or her own perception of the work and world. Feedback is the best way to learn the ground reality and think from a different perspective. But these skills require you to remain humble and eager to learn. Perhaps, your idea or product is perfect for your vision but not for the customers.
One effective way to evaluate feedback is to organize customer validation interviews with target prospects. These interviews help in validating your business idea. They can also provide constructive criticism about the product, market, and assumptions you made about users.
Of course, you don’t need to accept every feedback and advice. You can ask yourself: Would their suggestion increase the quality, value, or user experience of your product? If it does, there is a good chance that you can improve your offerings.
Patterns help evaluate data related to business. Pattern recognition is an underestimated but crucial skill for entrepreneurs. As a young entrepreneur, you should learn how to derive trends from market shifts and user behaviors.
Also, it’s effective to formulate patterns in cash-flow statements. It helps in predicting future cash flows. Pattern recognition is a critical aspect in sales analytics, as it identifies seasonality or other time-related trends that affect the business bottom line.
Pattern recognition is especially valuable if you have a digital product/software. Closely look at the user behavior on your platforms and patterns will emerge gradually. Of course, this skill needs more practice than theory. You’ve to actually dive into the database and use software to build a stat.
For instance, if your product is an app, then you can identify a pattern that the users are opening the ‘order’ section as soon as they open the app. This will help you learn more about your customers and design the product to their needs.
Have a Growth Mindset
“Startup is a company designed to grow fast.” - Paul Graham.
If a startup has to grow, the person behind it should have a strong growth mindset.
A growth mindset believes that intelligence, talents, abilities can be learned and improved. In contrast, the fixed mindset views those traits as inherent and inflexible.
Successful entrepreneurs always keep their minds open to new knowledge. They still accept the things they don’t know but are always ready to learn them. Elon Musk doesn't have a formal degree in Rocket Science, but he taught himself with books.
Most processes in entrepreneurship will require that you learn several topics at once, all by yourself. If your mind is rigid, it’d be difficult to gain a new perspective. An entrepreneur should aim to be a generalist to move a startup forward. For instance, if you’re well versed in one of the business disciplines but lack others like finance, marketing, valuation, etc., you might struggle.
Of course, don’t try to do everything yourself because it’s a common mistake of entrepreneurship. Gaining breadth in many domains will ignite creative ideas and aid in innovation. Skills are not fixed; they can be learned and trained to excellence. By having a growth mindset, you can capitalize on opportunities and build an empire.
How To Find A Mentor For Entrepreneurship
Let’s see what a billionaire has to say about the importance of mentorship.
“If you ask any successful person, they will always have had a great mentor along the road.”
That’s Richard Branson, Founder of Virgin Group with over 400 enterprises.
He credits that his uncle taught him invaluable lessons in entrepreneurship.
Oprah Winfrey says poet Maya Angelou had a profound influence on her as a poet, friend, and mentor.
Warren Buffet credits Benjamin Graham for helping him in becoming a savvy investor.
It turns out; mentorship is a foundational pillar of business success. In a survey of 180 business persons, 70% of the entrepreneurs that had mentors managed to survive their business for more than 5 years.
Lois Zachary, the author of The Mentee's Guide, says:
"Mentor is the guide on the side that asks questions that take people to deeper places of insight. It's a dance, it's a partnership, and a mentor should not be giving the answers, they should be raising the questions and should be helping the mentees to seek answers to their own questions."
A mentor is not someone that you hire to guide you. A mentor is not there to give answers that even Google can. S/he is there to help you check your own gut feeling and how you think about problems.
Finding a mentor isn’t like searching for light in a cave. If you follow a systematic approach, you can find your inspiration!
Participate in Industry Events
Startup events are organized at every place and most events can be easily attended virtually. Check Eventribe or Meetup and search for keywords like entrepreneurship and startup. This is an effective way to connect and network with other entrepreneurs. Don’t hesitate to ask for advice or build a conversation. The whole idea behind these meetups is to propel the startup community forward.
Talk and Learn from Local Business Leaders
This advice comes from Richard Branson. In one of the Mentor Mondays episode, he talks about how he used to pitch his ideas to the businessmen in his domain. Richard used to request their time and ask for advice for his own venture.
"Don’t be shy - people are usually flattered by requests for advice. Since they were once in your shoes, they probably had to seek out a mentor at some point themselves.” he adds at the end.
Thrive on a Support Community
YouTube, Y Combinator, Mentor Mondays, TED are some of the best resources for entrepreneurs. The forums here are incredibly useful because they let everyone join a conversation. Reddit is another great place to share doubts and generate solutions, e.g., r/entrepreneur or r/smallbusiness. You’ll learn several mistakes that entrepreneurs make and how to avoid them.
LinkedIn, in place of a better analogy, is Facebook for professionals.
Build connections with people in the same domain or other domains that interest you. Mostly, genuine people on LinkedIn are ready to offer their help and mentorship. In fact, around 89% of the senior leaders are ready to advise on LinkedIn. The primary benefit of using LinkedIn is the feature to filter out connections by profession, region, company, skills, past roles, experience, etc.
Tools to Find Mentors
In addition to the above tools, there are other mentorship platforms that help in mentor search.
- MentorsMe: An online platform for UK entrepreneurs to connect with mentors.
- MicroMentor: Claims to be the World's Largest Community of Entrepreneurs and volunteer business mentors. A Free resource for US entrepreneurs to search and find mentors.
- Founders4Schools: The platform bridges the gap between school and business. Mentors and role models share lessons with school children.
- Institute of Enterprise and Entrepreneurs: A community built to help entrepreneurs and their ventures.
Entrepreneurship Advice From Real Entrepreneurs
Till now, you’ve understood the standard or ‘academic’ definition. Now, let’s hear what entrepreneurship is according to those who actually get their hands dirty.
Elon Musk: "I think it's very difficult to start companies, it's quite painful. A friend of mine has a good phrase for doing a startup: it's like eating glass and staring into the abyss. If you are wired to do it, then only do it, not otherwise. So think of it this way - if you need inspiring words, DON'T DO IT!"
Reid Hoffman: “Is this massive and different? It's got to be ten-times different. It's got to be something that changes an industry.”
Steve Jobs: “I think you should go get a job as a busboy or something until you find something you’re really passionate about. You’ve got to have an idea, or a problem, or a wrong that you want to right that you’re passionate about; otherwise, you’re not going to have the perseverance to stick it through.”
Jump off the Cliff
Reid Hoffman summed up entrepreneurship in a line:
"An entrepreneur is someone who jumps off a cliff and builds a plane on the way down."
The reason entrepreneurship is challenging is that it has no fixed rules for success. There are some critical patterns and advice that help to build foundational success. If you’re keen to dive into entrepreneurship and how to establish your own business, you’ve to keep learning rigorously.
You’ll never become perfectly ready to do business. Instead, you’ll have to jump off the cliff and then trudge your way to success.
And that’s the beauty of entrepreneurship. We’re our own boss.
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