SESSION TWO: AN ENTREPRENEUR

At the end of the session, learners should be able to:

1. Define the term entrepreneur.

2. Discuss the main reasons people decide to become entrepreneurs.
3. Identify five main characteristics of successful entrepreneurs.
4. Distinguish between different types of entrepreneurs.

An Entrepreneur
The word ‘entrepreneur’ is derived from the French words ‘Entre’ which means between and
“prendre” meaning to take. It was originally used to describe people who “take on risk”
between buyers and sellers or who undertake a task such as starting a new venture. An
entrepreneur is different from an inventor. An inventor creates something new while an
entrepreneur assembles and integrates all the resources needed, the money, human capital,
business model, strategy and the risk bearing ability to transform the invention into a viable
business.

Definitions of an entrepreneur
The one who undertakes to organize, manage and assume risks of a business. An innovator or
developer, who recognizes and seizes opportunities, converts those opportunities into workable
marketable ideas, adds value through time, effort, money or skills, assumes the risks of
competitive marketplace to implement these ideas; and realizes the rewards from these efforts.

An entrepreneur is someone who devises a new way of looking at things and comes up with
and output out of the new concept. Takes the risk of the success or failure of the new venture
and will also stand in to reap the rewards.

Joseph Schumpeter (1950), an entrepreneur is a person who is willing and able to convert new
ideas or invention into a successful innovation. Entrepreneurship forces creative distraction
across markets and industries by creating new products in the business models.

An entrepreneur combines the factors of production, land labor and capital to create and market
new goods and services. He/she identifies a market opportunity and exploits it by organizing
the resources effectively to accomplish an outcome that changes an existing interaction within
a given sector.
Entrepreneurs are individuals who have the ability to recognize opportunities and turn them
into profitable business ventures. They are aggressive catalysts for change within a market
place. The passion and drive of entrepreneurs move the world of business forward 2. An
entrepreneur is one who searches for change, responds to it and exploits it as an opportunity.
Difference between an entrepreneur and an Intrapreneur
Entrepreneurs are people who have the ability to identify and evaluate business opportunities,
gather the necessary resources to take advantage of the opportunities and initiate appropriate
action to ensure success. An intrapreneur is a person employed to work independently within
a company in order to introduce innovation and to revitalize and diversify its business. He/she
has freedom of action to explore and implement ideas. The outcome of such work will be
owned by the organization and not the intrapreneur. It is also known as corporate
entrepreneurship, concerned with innovation that leads to new corporate divisions or subsidiary
ventures in establish large firms. These are managers in large organizations who combine
resources in unusual way to create innovative new products or services. They create new
products or services inside an existing company rather than through an own venture. The
reward for entrepreneurship in the wealth creation process is profit; the reward for
Intrapreneurship reward is a salary or contractual remuneration.

A distinction between entrepreneurs and small business owners

Small businesses are independently owned and operated, are not dominant in their fields and
usually do not engage in many innovative practices. They may never grow large, and the
owners may prefer a more stable and less aggressive approach to running the business. They
manage the business by expecting stable sales, profits and growth. Small business owners can
be viewed as managers of small businesses.
Entrepreneurial ventures are those for which the entrepreneur’s principal objectives are
innovation, profitability and growth. The businesses are characterized by innovative strategic
practices and sustainable growth. They seek rapid growth and immediate profits and may even
seek the sale of their businesses if there is potential for large capital gains.
Why choose to become an entrepreneur?

The three primary reasons that people become entrepreneurs and start their own firms are;

1. To be their own boss; they want to fulfill their long-time ambition to own their
own firm or because they are frustrated working in traditional jobs. The desire
to be their own boss may come from the realization that the only way to achieve
a personal or professional goal is to start their own business.
 2. To pursue their own ideas: especially people who are alert and when they
recognize ideas for new products or services, they have the desire to see the
ideas realized. Others through a hobby, leisure activity or just everyday life,
recognize the need for a product or service that is not available in the market.
3. To pursue financial rewards: This motivation is mainly secondary to the first
two and often entrepreneurs realize when they start their own firms that
financial gains do not come easily.

TYPES OF ENTREPRENEURS
1. Craft entrepreneurs; People with the technical background, who go into business
based on their technical expertise, eg accountant forming an accounting firm.
2. Opportunistic entrepreneurs, those who go into business to pursue opportunities, they
focus on growth and diversification. They seek new opportunities and delegate
technical work to others.
3. Innovative entrepreneurs: they are aggressive in experimentation and clever in putting
attractive possibilities into practice. They like introducing new products, new services
and even improving the existing products. (silicon valley)
4. Imitative entrepreneurs: They adapt successful innovations started by innovative
entrepreneurs and duplicate the technology and techniques innovated by others.
5. Social entrepreneurs: These are individuals with innovative solutions to society’s
pressing social problems. They are ambitious and persistent, tackling major social
issues and offering new ideas for a wide-scale change. They do not wait for government
or business sector to solve problems; they find what is not working and solve the
problem by changing the system. Spreading the solution and persuading the society to
take new steps. A social entrepreneur is someone who recognizes a social problem and
uses entrepreneurial principles to organize, create and manage a venture to make social
change. The success is measured in terms of the impact she /he has on the society. They
work through nonprofit organizations and citizen groups. Example of social
entrepreneur is Muhammad Yunus founder of Grameen Bank and its growing family
of social venture businesses, he was awarded the Nobel Peace Prize in 2006. In Kenya
we have ApproTech, Honey care, Kenya Agricultural Commodity Exchange are among
the organizations that advance social entrepreneurship.
6. Opportunistic
They start a business and expand as fast as possible in order to be able to hire other
employees. The additional employees have needed expertise that the owner does not have.
7. Pattern Multipliers
They look for an idea someone else has already created and then create their own businesses
based on following another model.eg. Franchise operations, and chain stores.
8. Economy of scales exploiters
They benefit from large volumes of sales by offering discounts prices and operating with low
overheads costs.
9. Acquirers
The take over a business started by another and use their own ideas to make it successful.
Fresh management idea may save the business.
10. Buy-Sell Artists
These are entrepreneurs who buy a company for the purposes of improving it before selling it
for profit.
11. Speculators
Purchase a commodity and then resell it for a profit.eg... Real Estates, art, antiques, and crops
are speculator items.
CHARACTERISTICS OF ENTREPRENEURS
1. Desire for personal responsibility for the outcome of the business ventures they have
started. They prefer to be in control over their resources and use them to achieve self
–determined goals.

2. Preference for moderate risks, or calculated risks, they prefer to minimize risks, manage
their finances carefully and focus on profitable growth opportunities. They prefer
setting realistic and achievable goals. Entrepreneurs usually spot opportunities in areas
that reflect their passions, knowledge, backgrounds or experiences which increases
their possibility of success. Entrepreneurs are risk eliminators, who systematically
remove obstacles in order to establish successful ventures. One of the most successful
ways of eliminating risks is to build a viable business plan for a venture.

3. Self- reliance and do not shy away from responsibility of making their businesses
succeed. They are persistent in building their businesses

4. Confidence in their ability to succeed, high level of optimism. Most successful

entrepreneurs have failed in business often more than once before finally succeeding.
They learn from their mistakes and move on to success.

5. Determination; the ability to focus on achieving a single, long term goal.

6. Desire for immediate feedback, the feedback they receive from their businesses drives
them to set higher standards of performance for their companies and themselves.

7. High level of energy: Entrepreneurs are usually more energetic than the average person,
this is a critical factor required to start up a business.

8. Future oriented: they have a well-defined sense of searching for opportunities, they stay
focused on the future, they see potential where other see problems or nothing at all. E.
g opportunity entrepreneurs start businesses because they spot an opportunity in the
 market place; necessity entrepreneurs start businesses because they cannot find any
work other way, while serial entrepreneurs start businesses and grow them to a
sustainable size and then sell it to start another.

9. Skill at organizing; they know how to put the right people together to accomplish a task,
they effectively combine people and jobs in order to transform their visions into reality.

10. Value of achievement over money, achievement is an entrepreneurs’ primary

motivating force, money is a symbol of achievement.

Other characteristics that entrepreneurs tend to exhibit are:

• High degree of commitment

• Tolerance for ambiguity and ever-changing business environment
• Creativity, ability to come up with new products, new ideas, unique ways of marketing
their businesses and unique business models
• Flexibility: ability to adapt to changing needs and preferences of their customers and
the changing demands of the business environment.
• Resourcefulness: They are skilled at bootstrapping – a strategy that involves conserving
money and cutting costs during start up so that all funds are directed towards growing
the business.
• Willingness to work hard and build their businesses and have no short cuts around the
work load.
• Tenacity: obstacles and distractions do not stop them from pursuing their vision.
The 5 Ps of entrepreneurial Behaviour

There are five aspects of behaviour that most successful entrepreneurs display. Research has
shown that these behaviors relate to success among entrepreneurs.

1. Passion; an intense positive feeling toward the business or even the idea behind the
business. Passion is displayed in three ways: by looking at the challenges of the business
in a creative way, by being persistently focused on the business, by being absorbed by
the tasks and concerns of the business. It has multiple benefits such as increasing your
commitment to the business, and inspiring key stakeholders like potential investors,
employees and subcontractors.
 2. Perseverance: this is a type of learned optimism, the ability to stick with some activity
even when it takes a long time. It is knowing that you can and will keep at this until
you have mastered it.

3. Promotion focus: an entrepreneur’s attention to maximizing gains and pursuing

opportunities likely to lead to gains. Prevention focus is an entrepreneur’s attention t
minimizing losses, with a bias towards inaction or protective action to prevent loss.

4. Planning style; Comprehensive planners – take long term view , develop long-range
plans for all aspects of the business; critical point planners – plan around the most
important aspect of the business first, and act on it and then consider if additional plans
are needed; opportunistic planners – they start with a goal and look for opportunities to
achieve it, once they find a good opportunity, they act on it, so it is a very short term in
orientation, Reactive planners – are passive, waiting for cues from the environment to
determine what actions to take, have a short term focus and there is little in the way of
goals driving their efforts, Habit based planners – do not really plan because their
actions are dictated by their routines. Research has shown that in terms of getting a
start-up launched, keeping it going and making a living from it, comprehensive planners
do the best, followed by critical point planners and opportunistic planning types;
reactive and habit planners do very poorly in business.

5. Professionalization: successful entrepreneurs usually do at least one thing much better

than average. The average is called a standard business practice and every industry has
them; expert professionalization is when most aspects of the business meet or exceed
the industry’s standard, specialized is when one or two aspects of the business are at
this level.

NB: These behaviors are relevant to more than starting a business. For an employee, the bosses
will want you to show passion (engagement) in the business, be persevering and strike a balance
between promotion and prevention. These are behaviors you can learn how to display them,
through education, skill development and practice.

Functions of an entrepreneur
1. Opportunity identifier
2. Entrepreneur initiates the business activity
3. Resource mobilization.
 4. Entrepreneur is the manager – planning, organizing, directing –organizes things and
people
5. Entrepreneur is a decision maker
6. Entrepreneur coordinator and organizer
7. Entrepreneur as an innovator - According to Schumpeter, the true function of an
entrepreneur is introducing innovations.
8. Entrepreneur as the financial manager
9. Entrepreneur as a risk bearer
THE BENEFITS OF AN ENTREPRENEUR
1. The ability to create your own business and be independent and be your own boss
2. Opportunity to make a difference. Especially social entrepreneurs
3. Opportunity to reach your full potential
4. Opportunity to reap impressive profits
5. Opportunity to contribute to society and be recognized for your efforts
6. Opportunity to do what you enjoy and have fun at it
7. Job security
8. Independence, self-reliant, be your own boss and control your destiny and use the
skills and knowledge to the maximum
9. Higher incomes in form of profits
10. Recognition and fame; due to their participation in community development activities
11. Control and power through management of your business
THE POTENTIAL DRAWBACKS OF ENTREPRENEURS
1. Uncertainty of income, or variability of income
2. Risk of losing your entire investment
3. Long hours and Hard work
4. Lower quality of life until the business gets established, due to long hours of work
sometimes taking priority over family time.
5. High levels of stress
6. Complete responsibility
7. Discouragement due to the many obstacles that they face.