1.5.1 Role of an Entrepreneur

Role of an Entrepreneur

Key Definitions

Entrepreneur: Someone who looks at business opportunities that currently exist and then turns the idea into something of a reality, but they are not affiliated with a business.

Intrapreneur: Similar to an entrepreneur, they turn business ideas into a reality however they are working for a company and doing this exclusively for the company.

Innovations: These are new ideas that are brought into the market, often completely new. 

Franchise: A business that sells the rights to the use of its name and trading methods to local businesses, which can help them take off and become a successful business. 

Geographical Mapping: Plotting the locations of existing businesses in your market on a map to show where the competition is. 

Market Map: A visual tool in which each existing brand is plotted on a grid with two axis based on two important features of the market.

Market Niche: A gap in the market due to no one offering the same kind of product offered by you.

Line Manager: A manager that is responsible for meeting specific business targets and responsible for certain people in the business.

Creating and Setting Up a Business

Generating Business Ideas

The key to being a successful entrepreneur is to be able to spot a good business idea, and this is usually based on a good understanding of consumer tastes and/or the needs of the market and the retail trade. The main sources of business ideas are as below:

• Observation
  Observations made can reveal where something new is needed in the market or in the real world.
  
• Brain-storming
  Groups of 2 or more people are encouraged to come up with new ideas without criticizing each other's ideas.
  
• Thinking ahead
  Sometimes new opportunities will arise in the future, especially if the weather gets warmer or something else triggers a form of change.
  
• Ideas from personal or business experience
  Someone may say or do something that gives you an idea to start a new business, or you may have your own ideas.
  
• Innovations
  These may come from new developments in science or from clever adaptations and improvements of existing knowledge.

Spotting an Opportunity

It can be easy to think that all the great business ideas and opportunities have already been done by existing companies. This is, however, wrong. Society and social attitudes are constantly changing, with different attitudes or fads making each generation unique. The ways of spotting a new business opportunity include the following:

• New technology
  
• Changes to society
  
• Changes in the economy
  
• The local market
  
• Small budget market research
  
• Market mapping

Small Budget Research

Even before spending money on market research a good entrepreneur will take the time to gain a general understanding of their chosen market. This can be done in the following way:

• Walk around town and do geographical mapping of any potential rivals.
  
• Whilst doing this prices, special deals, student discounts etc. should also be checked.
  
• Arrange to spend a day with a similar business in a nearby location to gain an understanding into the customer and the way services are provided.
  
• Produce a market map of similar companies in the chosen location to help identify a potential market niche.

Small budget research can also help point the business towards new business opportunities, this information can come from publishings that highlight consumer markets. This information could provide the basis for a new small business launching into a particular market sector. 

Running and Expanding a Business

For a first-time entrepreneur running the business can be just as psychologically daunting as starting it up initially. The start-up may be scary, but it is also bathed in the optimism about the future of the business - contrasting the day-to-day running of the business. There are also practical issues involved that matter hugely when running a business. The success of most businesses depends on customer satisfaction, requiring a combination of flair and warmth in the customer service with meticulous organisation. It is this that makes being a successful entrepreneur difficult, as the start-up of a business requires flair, vision and energy, where running the business is about establishing systems that don't fail - few people are strong in all of these qualities. 

To run a business successfully needs:

• The ability to obtain and listen to objective measures of performance, as it can be easy to listen to compliments and shut out criticisms.
  
• An obsessive eye for detail, whether in the service a customer gets or in the accounting details of the business finances.
  
• To be able to step back from day-to-day issues and think strategically about the long-term plans for the company.
  
• To love what is being done and to love making the customers happy. 

Successful Expansion

Some businesses need to expand to be successful, but some also don't. This could be due to the fact that the business model relies on the expansion of the business because one outlet of the business will never be able to generate enough profit to keep the shareholders happy. 

To expand a business there are 3 main issues that need to be addressed by the owner: 

• Ensuring the extra demand exists
  This can be seen as an obvious factor, but it does cause problems for the business if the extra demand doesn't exist as, without the demand, the business could stop generating profits and the money would run out.
  
• Ensuring the finance needed is in place
  The most important factor is the money needed, as without the money to support the expansion the expansion could fail and the business could collapse. Sometimes a business wants to expand quicker than profit level allows, so they will source money from external sources, such as bank loans.
  
• Ensuring that the people, especially the new managers, are in place.
  First-time entrepreneurs tend to think the toughest aspects of the business are finding a market and finding the finance. A more experienced leader will say that the greatest problems come from the people. Rapid expansion quickly stretches the human resources of the business, meaning new people will need to be hired and trained to do their jobs. 

Intrapreneurships - Innovation within a Business

An intrapreneur has the personal qualities of an entrepreneur, however they work in a large organisation and are paid to think 'outside of the box'. They are encouraged to think creatively, take risks and show leadership in making things happen, however sometimes they are also treated as wayward executives who need to be supervised and checked up on. The factors determining the differences between companies celebrating and mistrusting intrapreneurs are as follows:

1. High tech vs Low tech
High tech companies need bright, sometimes 'disruptive' ideas to keep themselves one step ahead in the fast-changing environment. 

2. Stage in the Company's Life Cycle

Companies in an early growth stage want to have bright new ideas to continue growing, whereas companies in a maturity stage want to avoid making mistakes that could impact their growth. 

3. Leadership

The personal characters of the overall leader can be very important as some may go out of their way to encourage younger staff, but some may prefer to keep all important business decisions at the top of the hierarchy.

Barriers to Entrepreneurship

Entrepreneurs get praised for their risk-taking, but remember some are risking a lot more than others are. Some people invest their life savings into their business venture, but some entrepreneurs come from a wealthy family so they are risking less in the pursuit of their ideas. 

An obvious barrier to entrepreneurship is the lack of personal finance. A business cannot be set up without having the savings to support the venture. Some can avoid this by starting on a market stall, but this is not realistic for everyone. A report done in the UK in 2012 outlined the following in regards to the barriers to entrepreneurship in the UK:

• Since the 2009 crisis banks have become a lot less willing to lend money to small firms, regarding this business as risky and unprofitable.
  
• Government research shows that 29% of the entrepreneurs in the UK are women, arguing that if the women had full 50/50 representation then 150 000 start-ups would be created every year.
  
• It was also found that employees in the public sector struggle to understand or trust the motives of entrepreneurs, with a tendency to assume people running small businesses are motivated by greed and the desire to avoid tax.
  
• Small businesses tend to be pay proportionally higher amounts of tax than large firms do, which is not only deemed unfair, but also another barrier to entrepreneurship. 

Anticipating Risk and Uncertainty in the Business Environment

Entrepreneurs pride themselves on their sensitivity to the market, typically because they are used to dealing with customers face-to-face so they can pick up changing trends and/or moods among consumers. Most firms knew the economy was looking unstable before the economic crash in 2009, they could sense it in Autumn 2008. To anticipate the risk it is important to try and quantify it so they can be compared with the potential rewards. 

In regards to uncertainty, the wise businesspeople see this as a natural state of affairs, so they accept that tomorrow's trade could be completely different to yesterday's trade. This makes it vital to keep some capital in hand to cover day-to-day variable finances.