How to Become a Better Entrepreneur 6
HOW TO BECOME A BETTER ENTREPRENEUR
Table of Contents
4The nature of entrepreneurship and its role in business 1
5An entrepreneurial business plan 2
5Important elements in formulating and evaluating an entrepreneurial business plan for a start-up organization 2.1
5The business 2.1.1
6The market 2.1.2
7The finances 2.1.3
8Managing rapid growth and overcoming obstacles in entrepreneurial environment 3
10Significant sources of information and assistance for entrepreneurs in Australia 4
The concept of an entrepreneur and entrepreneurship has no standard version of definition as different authors and scholars have varying contentions regarding the topic. However, various contentions seem to agree on the fact that an entrepreneur is someone who assumes the risk of undertaking a business enterprise and managing to profitability[ CITATION Kev15 l 1033 ]. An entrepreneur is framed as a risk taker who dares to try where other ordinary individuals would rather avoid. Joseph Scumpeter (1912) in The Theory of Economic Development introduced a rather insightful meaning of an entrepreneur and his role in the capitalist economy. According to Schumpeter, an entrepreneur is someone agent of change in the economy who engage in creative destruction of traditional industries to introduce new concepts and ideas that lead to new goods, production methodologies, new markets, new sources of supply, and reorganization of industries[ CITATION Chr12 l 1033 ].
From Schumpeter’s view, it can be argued that an entrepreneur is not only a risk taker, but also an innovator with a keen eye to identify opportunities that can be exploited successful to translate into successful enterprises[ CITATION Chr12 l 1033 ]. Steve Jobs, the former Apple Inc CEO may be the best example of Schumpeter’s view of an entrepreneur. In Early 2000’s, Jobs introduced the iPhone “Smartphone”. The Smartphone changed how people communicated, worked, socialized and accessed information. It was essentially a new product that disrupted the industry translating into massive profit for Apple Inc[ CITATION Sch15 l 1033 ]. Clearly, entrepreneurship is not about operating businesses but rather having the ability to spot opportunities and innovatively turn them into profitable undertakings that involve a certain degree of risk that other people are not willing or able to take. Schlender and Tetzeli (2015) essert that an entrepreneur is also a visionary manager that is able to guide a business through challenges into profitability and growth.
The nature of entrepreneurship and its role in business
The role of entrepreneurship in starting and running successful businesses cannot be gainsaid. Entrepreneurship involves development of new ideas that can be commercially exploited or transforming existing ideas into profitable business projects [ CITATION Sto101 l 1033 ]. Essentially, businesses need entrepreneurship at the very start-up stage evaluates ideas and mobilize the resources required to transform the ideas into profitable undertakings. Entrepreneurship focuses on creativity and innovation to solve common problems and achieve profitability in the processes. For example, Howald Schultz, realized that there was a ready market for coffee cafes that doubled as social and meeting space for customers and thus founded the Starbucks coffee restaurants in the U.S.[ CITATION Joh12 l 1033 ]. Entrepreneurship is indeed very important in generating and evaluating ideas that can be transformed into profitable enterprises in light of prevailing market factors.
Entrepreneurship also entails calculated risk-taking in businesses [ CITATION Kev15 l 1033 ]. Entrepreneurs have the ability to asses the degree of risk that they are engaging in by pursuing a business idea or project. Such ability to consider all factors that determine the success of the undertaking such as human capital, nature of market demand and financial resources is instrumental in achieving success in a business. Entrepreneurs are also transformative leaders who leaders who strive to develop highly productive teams by emphasizing teamwork and creativity at the workplace[ CITATION Sto101 l 1033 ]. Johnson (2015) further notes that entrepreneurial organizations often prefer a flat organizational structure that encourages constant communication between team players and collective effort in solving problems or advancing project ideas. An entrepreneur is also able to create a strong organizational culture anchored on ultimate vision of the organization by interacting closely with employees particularly at the start-up stage of the business[ CITATION Spi12 l 1033 ]. Indeed, entrepreneurship encourages innovation, creativity and constant communication at any organization thereby making the organization flexible enough adjust to market threats and opportunities in a timely manner.
An entrepreneurial business plan
An entrepreneurial is an important document that is used to develop a strategic plan that the business can rely on to achieve its goals and objectives [ CITATION Edw11 l 1033 ]. A business plan outlines the business’s vision, mission and goals that can be transformed into an actionable plan with objectives that leads into success for the business. The business plan also outlines the financial, marketing and organizational plans for a business in line with its strategic orientation. In essence, a business plan is a road that encompasses all the important aspects of a business that should lead to success in a particular industry. Butler (2007) also contends that entrepreneurs should have effective business plans that guide them through the various growth stages of their business. A business plan may also be written for the purpose of accessing funding from venture capitalists and banks.
Important elements in formulating and evaluating an entrepreneurial business plan for a start-up organization
It is important to evaluate nature of the business that one intends to engage in terms of structure and products offer [ CITATION Dav07 l 1033 ]. Every business structure has an implication on operating, shareholding and legal status. For example, a sole proprietorship is owned by one individual and has no separate legal entity from the owner. The entrepreneur must also know the core product(s) of the business, its anticipated demand and the industry the market they are intended to service. Butler (2007) also notes that at this stage, it is possible to identify the key product attributes such as price, uniqueness, and quality that enhance the business’s competitiveness in the market. Factors such as product warranty, guarantees and quality standard must be considered during the formulation of the plan. The entrepreneur must also consider the location of the business when formulating the business plan.
The roles and experiences of key employees are also of important consideration during development of a business plan. The entrepreneur must be able to identify key strengths and skills that employees should have to support the business strategic goals and objectives. Human capital adequacy and relevance is critical to the realization of success in any entrepreneurial undertaking. The entrepreneur must envision training needs for the business during various stages of growth. Some other business aspects such as insurance policies, R&D, risk-management, sustainability and legal requirements must be clearly evaluated and aligned with the business plan accordingly. The operational plan in relation to the business objectives should be clearly outlined [ CITATION Edw11 l 1033 ].
This section of an entrepreneurial business plan enables the entrepreneur to formulate an appropriate marketing strategy for the business products/services in light of the analysed data from a market research [ CITATION Edw11 l 1033 ]. The entrepreneur should be able to identify the target market for the business’s product by analysing their demographic, psychographic and behavioural characteristics. The business can also detail a plan of sustaining high standards of customer service. Tools such as SWOT analysis, Porter’s generic strategies matrix and Five Forces analysis model may be very useful in analysing an industry and developing an appropriate strategy for the business.
According to Blackwell (2011), the market section should also enable the business to analyse its competitor’s market share and their strengths and weakness in relation to the entrepreneur’s business. The business will identify promotion and advertising strategies it will use to counter competition and acquire a market share. The entrepreneur should also highlight probable distribution channels and their advantages and disadvantages in relation to the strategic vision of the business. Overall the market section should be a tool to help the business understand its market, its products, and competition in order to develop appropriate strategies that add value to the business strategic plans.
According to Butler (2007), finances are an important consideration in the formulation and evaluation processes of a business plan. The entrepreneur first highlights all the start-up costs required to transform a business plan or idea into an actual business. Such costs may include registration fees, equipment, insurance, licences, premises and working capital. The entrepreneur should also formulate a balance sheet forecast for the first three years of a business to give an indication of the expected state of the business in terms of assets and liabilities. A profit and loss forecast should also give an indication of the entrepreneur’s projection of revenue generation and expenses in the first three years of the business. A cash flow projection for the first one year of business is another important element of the finances as it shows the expected cash receipts and payments in the business. The cash flow is an important indicator of the health of a business; a business that pays more than it receives during a financial year has low chances of survival. A break-even analysis is another important indicator of expected profitability and sustainability of a business over a particular period [ CITATION Edw11 l 1033 ].
Managing rapid growth and overcoming obstacles in entrepreneurial environment
Rapid growth of a start-up business can be somewhat challenging to an entrepreneur given the unique contextual challenges facing the business at a given phase of growth. Small entrepreneurial businesses do not face the same nature of challenges as large enterprises that may not be entrepreneurial in nature [ CITATION Chu83 l 1033 ]. The various growth stages in a small business are highlighted in the diagram below.
Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
Existence Survival Success Take-off Resource
Young small business
Mature large business
In the existence stage, the business is small and serves a relatively small market. The entrepreneur is highly engaged in everyday running of the business through a semi-informal organisational structure. The most important factor that the entrepreneur should focus on is product ability to meet customer needs, growth of sales and prudent management of available resources to ensure a business idea moves from a concept into an actual business [ CITATION Chu83 l 1033 ].
In the survival stage, the business has already proved it can meet customer needs and has probably generated a growing demand for its products/services in the market [ CITATION Chu83 l 1033 ]. The business must keep up with the demand to pay for its expenses and acquire production assets. Oliver and English, (2012) advise that most of the profit at this stage should be ploughed back into the business. The business should employ bootstrapping techniques to avoid cash flow problems. The entrepreneur should monitor expenses to sustain the growth of the enterprise into an established entity.
In the success stage, the business has adequate resources and has established a strong foundation for revenue generation from its existing market. The business can remain at this stage provided the environmental changes do not disrupt the status quo. The business can also grow and expand by exploiting its asset-base and brand. To manage growth, the business should be run by a professional team that considers its strategic future goals and the vision of the owners. The entrepreneur should revisit the vision of the business and align it to a growth strategy that will protect the company from emerging “me too” competitors [ CITATION Chu83 l 1033 ].
The take-off stage is a direct implication of a decision to grow the business in the success stage. The major problem for the entrepreneur is how to grow the business rapidly but profitably [ CITATION Chu83 l 1033 ]. The entrepreneur must consider his sources of financing for the business. Most businesses seek debt and equity financing at this stage. It is highly imperative that an entrepreneur acquires professional financial counsel to make proper decisions. The business is also highly reliant on formal structures and highly-trained employees who understand their roles clearly. If the business is able to manage its resources prudently and develop a strong human capital it can transition into the resource maturity stage[ CITATION Spi12 l 1033 ].
In the resource maturity stage, the business is faced with the challenging of consolidating its financial and market share gains from the rapid growth [ CITATION Chu83 l 1033 ]. The entrepreneur should balance between making the organisation as flexible as possible to avoid getting stuck into the problems of large business such as bureaucracies and slow decision-making. However, the entrepreneur must also integrate professionalism by using tools such as strategic growth plans, costing systems, employee appraisal systems, and training and development plans.
Significant sources of information and assistance for entrepreneurs in Australia
Entrepreneurship has been identified by most governments and stakeholders as a source of solution to socioeconomic and sometimes political problems facing society. Most governments, Including the Australian Government have programmes in place designed to provide business support in form of advice and management training. The Entrepreneur’s Programme of the Australian government supports entrepreneurship through three elements as listed below [ CITATION Aus16 l 1033 ].
Business management advice
Entrepreneurs and small business owners can access information and support from organisations such as The Entourage which runs programmes and hosts events to support entrepreneurs through mentoring, coaching and provision of a platform to access funding for ideas and start-ups [ CITATION The16 l 1033 ]. The Small Enterprise Association of Australia and New Zealand has also been hosting highly impactful annual conferences for small business owners for the past 28 years [ CITATION Sma16 l 1033 ]. The Chamber of Commerce and Industry Queensland (CCIQ) has been running annual free events for small businesses. CCIQ has been supporting businesses through such initiatives since 1868[ CITATION Cha16 l 1033 ]. Entrepreneurs should be committed to attending such events and enrolling in beneficial programmes to be more knowledgeable and develop valuable business networks.
Evidently, the role of entrepreneurship in starting and running successful businesses is critical to the success of small businesses. Entrepreneurs are risk takers who have the ability analyse business environments to spot opportunities that can be transformed into profitable business opportunities. Entrepreneurs must rely on well-researched and formulated business plans that outline the marketing, operations, finance and strategic plans of a business at a given time. With a proper business plan, the entrepreneur should monitor the growth a small business into an established outfit to adjust the business to the changing environmental factors such as enhanced operational scale and competitive forces. Entrepreneurs should network extensively with other business owners to gain information and valuable networks. Some entrepreneurs’ forums also host regular events that are important sources of information and mentoring for entrepreneurs. Government programmes also offer critical financial and other business support for entrepreneurs in countries including Australia. Indeed, entrepreneurship is critically important to the growth of economies and provision of employment to the masses.
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