What Is Entrepreneurship? – Types & Importance
Did you know that there are 582 million entrepreneurs in the world today? This means 1 in every 13 people owns a business! Well, the talks about entrepreneurship are everywhere nowadays. But what exactly does entrepreneurship mean?
What Is Entrepreneurship?
The process of launching, developing and running a business venture along with its financial risks is called entrepreneurship.
In simple terms, it is the willingness to launch a new business venture. It is very important for the economic development of the expanding global marketplace. A person who undertakes entrepreneurship is called an entrepreneur.
Generally, starting your own business is a tough proposition as 90% of startups fail each year. However, it comes as no surprise that more and more people choose to be independent in their professional careers. According to statistics compiled by dealsunny.com, 2 out of 3 people worldwide think entrepreneurship is a good choice.
Majority of the people think that entrepreneurship has just one meaning. But there are different types of entrepreneurship as described below:
Types Of Entrepreneurship
1. Small business entrepreneurship
In today’s world, the majority of businesses are still small businesses. In the U.S, 99.7% of all companies are small businesses and they employ 50% of all non-governmental workers.
They are mostly barely profitable, but they make profits only to make a living and support their families. Such businesses lack the scale to attract venture capital and they are funded via friends/family or small business loans.
Examples of small business entrepreneurship include hairdressers, grocery stores, electricians, carpenters, plumbers, consultants, etc.
2. Scalable Startup Entrepreneurship
In this type of entrepreneurship, entrepreneurs start their company believing that their vision can change the world. Their funding comes from venture capitalists and they hire the best employees. Finding a scalable and repeatable business model is their goal. Once they find it, further funding from venture capitalists is required for growing their business.
Scalable startups only make up a small proportion of all businesses due to the risk capital and outsize returns.
Examples of scalable startup entrepreneurship include Facebook, Instagram, Online shopping for electronics, etc.
3. Large Company Entrepreneurship
Large companies through sustaining innovation, offering new products that are variants around their core products. New products are developed in order to meet with changing customer needs and advanced technology. Often, companies do this by partnering with or buying innovative companies.
Examples of large company entrepreneurship include Google, Microsoft, Samsung, etc.
4. Social Entrepreneurship
Social entrepreneurship is where an entrepreneur creates products and services to solve social needs and problems. Their only goal is to make the world a better place and not to make profits or acquire wealth. They can be non-profit, profit or hybrid.
One example of social entrepreneurship is an organization named Safepoint Trust by Marc Koska, which works to redesign medical tools and introduce inexpensive non-reusable syringes for underfunded clinics around the world. This organization was able to deliver 4 billion safe injections across 40 countries with their breakthrough Auto-Disable syringes.
Importance of Entrepreneurship
Haven’t we all wondered at least once in our lives why entrepreneurship is so appealing to the majority? Why is it so important?
- Entrepreneurs create jobs: Entrepreneurs, in addition to employing themselves, also create a number of job opportunities with their business venture. And as their businesses grow, more job opportunities are created, thereby reducing unemployment.
- Entrepreneurs create change: When an entrepreneur makes a product in the hopes of solving a problem or when they explore a new idea, it brings a change into the world. Their ambitions and ideas thus improve the world.
- Entrepreneurs give to the society: It is a common notion that the rich are greedy, but it is mostly wrong. The more money they make, the more in taxes they pay which in turn funds social services. Some entrepreneurs as we know, like Bill Gates, the founder of Microsoft, are the biggest donors to charities and non-profits.
Factors affecting entrepreneurship
As much appealing the idea of entrepreneurship may seem, there are a few factors to be kept in mind before choosing when and where to start your business. Some of the factors that affect entrepreneurship are:
- Political Factors: The market in a place can be capitalistic, communistic or a mixture of both. Capitalism requires innovation while communism requires entrepreneurs and the political class to be well connected with each other. Ideally, a country should be capitalistic for entrepreneurship to flourish in the region.
- Legal Factors: The strength and fairness of the judicial system in a country has a big role to play in the quality of entrepreneurship. This is because entrepreneurs in many cases might require the courts to enforce the contracts agreed between two parties. But in many countries, such contracts are not enforced properly, and this risk prevents the development of entrepreneurship in those countries.
- Taxation: Governments sometimes resort to excessive taxation as they adopt the policy of taking from the rich and giving it to the poor. However, the basic principle of entrepreneurship believes in the survival of the fittest and the excessive taxation rule contradicts it. Hence, entrepreneurs want to set up businesses in places where there is very little interference from the government on taxation.
- Capital Availability: Capital is the first requirement to start risky ventures and they might also require instant capital to scale up the business once an idea becomes successful. Therefore, entrepreneurship helps the economies to grow in those countries where there is a well-developed system of providing capital at every stage i.e. seed capital, venture capital, private equity as well as stock and bond markets.
- Labour and raw materials: Availability of skilled labour and required raw materials at reasonable prices are an important factor for the launching of a business venture in a region. Countries like India, Bangladesh and China have witnessed a huge rise in entrepreneurial activities because of the labour markets being favourable for them.
Make sure to plan your business startup keeping all these factors in mind to improve the chances of your success.
Any independent individual with leadership qualities would opt for entrepreneurship in today’s world even though there comes a lot of risks and responsibilities along with it. “Entrepreneurship is about being able to face failure, manage failure and succeed after failing” – Kiran Mazumdar Shaw
If you believe you have the skills and talent to be an entrepreneur, do read our article “How to Become an Entrepreneur” to guide you in your journey towards success.
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