While the top five branches of the U.S. economy include industries from healthcare to technology and manufacturing, the entrepreneurs behind some of the most well-known companies are the lifeblood of wealth in the United States.
Whether you are planning on opening a small grocery store, launching your own digital startup, or both (hello, Blue Apron), you are on your way to joining a global community of entrepreneurs behind any business and private enterprise you can imagine.
Examples of entrepreneurs are everywhere. McDonald’s was founded by an entrepreneur. Facebook was built by an entrepreneur. Coca Cola was launched by an entrepreneur. Name a famous company, and there was an entrepreneur behind it.
But for every entrepreneur that becomes a success, there are many others who fail. According to a 2020 Investopedia article, 20% of business won’t make it through their first 2 years, while 45% may fail within the first 5 years. According to a 2014 Fortune Magazine article, a staggering nine out of ten startups will eventually fail. Those numbers may seem intimidating, yet it doesn’t mean you shouldn’t consider entrepreneurship for your career.
With genuine passion, hard-work, great ideas, and a knack for learning, anyone can build a business and become a success.
This article will cover what an entrepreneur is, what it isn’t, and what it takes to become an one. You should also understand what education, from previous work experience to college degrees, will help, as well as the pitfalls to avoid in building your own business.
Think you can be your own boss and blaze your own trail as an entrepreneur? Then let’s explore the exciting and unpredictable world of entrepreneurship.
What is an Entrepreneur?
When thinking of entrepreneurs, it’s viable to imagine business owners of all types. Restaurateurs, auto shop owners, CEOs of digital startups, self-employed photographers; all of these count as entrepreneur careers.
So what is the defining factor?
The word entrepreneur comes from the French word, à entreprendre, or, “to undertake.” So think, a person who undertakes risk and initiative with the end goal of financial profit.
Entrepreneurs are defined as anyone who takes a risk with the goal of financial profit.
While making money is not the only motivator for entrepreneurs, risk-taking, usually in the form of financial investments, is the underlying theme of all entrepreneurs.
Entrepreneurs are also working to build something that will last. One of the defining factors for an entrepreneur is that they take the necessary steps to create a business that will, when managed properly, continue making money while they are not working. A café owner, for example, will make money while the café is doing business, even if she’s taking on personal daily tasks outside her store.
Freelancers vs. Entrepreneurs
In today’s digitally-connected world, millions of people have taken their skills online and become freelancers. They take jobs as they come and work on their own terms, usually in writing, design, or as a consultant of some type. But are freelancers entrepreneurs?
Freelancers carry many of the same characteristics as entrepreneurs, but they aren’t building something that will eventually make a profit while they sleep, take a vacation, or leave for the day. While the two terms are fairly ambiguous, they are distinct. By most definitions a freelancer is not an entrepreneur.
Is Becoming an Entrepreneur Right for You?
How can you tell if the life of an entrepreneur is for you? There are certain traits, qualities, and values that most successful entrepreneurs share. While they don’t guarantee success, these entrepreneurial characteristics lay a strong foundation for a life of risk-taking and reward.
First and foremost, entrepreneurs value independence. They want to be their own bosses, set their own schedule, and run their own lives. They are people who dread the thought of a boss overseeing their work, although entrepreneurs have hundreds, thousands, or millions of bosses; they’re called customers.
Entrepreneurs are self-reliant. They enjoy being responsible for their own success and take pride in building something greater than themselves.
They must also be able to handle risk. If the thought of not getting paid on a regular basis, failing to sell your product, or simply falling flat on your face frightens you to paralysis, you may have difficulty dealing with the up-and-down nature of entrepreneurship.
Due to the higher levels of risk, long-lasting entrepreneurs are also frugal. Despite popular culture telling us that entrepreneurs are popping champagne and cruising on expensive yachts, most business owners are savers, not spenders. According to lifehack.org, the top financial habits of entrepreneurs include having a six-month financial backup, keeping a frugal mindset, accounting and budgeting for every purchase you plan to make, prioritizing personal and business spending.
How to Become an Entrepreneur
What are the steps to becoming an entrepreneur? There are many different paths you can take. For example, the owner of a delivery company wouldn’t take the exact same path as an interior decorator. But there are some similar steps all entrepreneurs should take.
In general, these are the steps to take to become an entrepreneur:
- Step 1: Find Your Industry or Niche
- Step 2: Research Your Market
- Step 3: Educate Yourself
- Step 4: Build Your Business Slowly
Step 1: Find Your Industry or Niche
The most important first step is to find your specific niche or profitable skill. Many people want to become entrepreneurs, but they don’t know what industry to get involved with.
More often than not, your niche will be something you have worked in for years. If you have been a carpenter for a local construction company, home remodeling and restoration may be your area. If you have worked at a restaurant for many years, you most likely have an understanding of how to run a food service business. Your current experience is a great place to start looking for your calling.
It will also help if you love your niche. To have years of success, you have to love what you do. Eventually, money may not be a big enough motivator to keep you working sixty to seventy hours a week to sustain a business. You’ll need more than money to keep you motivated, you will need a purpose.
Step 2: Research Your Market
Entrepreneurs should research the available market, analyzing the area for demand and need.
Maybe you want to open a Korean food truck in your hometown. Are other restaurants succeeding? Are there other, successful food trucks in your area? Do the local customers prefer a more-moderate place to eat, or are they interested in a high-end restaurant? Do they even like Korean food?
Finding the answers to questions similar to these, and more, will be essential to your long-term success.
Step 3: Educate Yourself
There is a common myth in popular culture that successful, self-made entrepreneurs never graduate from college. The numbers, however, don’t back this up. According to a team of researchers from Duke, Akron, and Southern California, over 95% of entrepreneurs in high-growth industries have at least a bachelor’s degree.
- Entrepreneur Education & Training
There are three types of education when considering a life as an entrepreneur. While these may not be essential to your work, they certainly won’t hurt your chances of long-term success.
A. Education in Your Industry
The first type of education to consider is work-related experience or research directly related to your field of interest. If you are looking to open an auto shop, you will obviously need some education and certifications related to car repair. If you are thinking about being a self-employed electrician, you will need the latest education and training with wiring and circuitry. If you want to run a restaurant, training in food service will be useful.
B. Entrepreneurship Degree
Once you’ve got your industry education down, many prospective entrepreneurs consider an entrepreneurial certificate or degree. Certificates are a great way to inexpensively learn foundational skills needed to launch a new career quickly while a bachelor’s will provide a general studies foundation and entrepreneurial specific courses. Shorter courses in entrepreneurship can be completed quickly and are useful for jump starting a new venture successfully.
C. Education Related to Business and Finance
Every entrepreneur, from owners of roadside cafes to global startups, needs to be versed in management, finances, taxes, and other business-related topics. You don’t necessarily need a master’s degree in economics, but an educational foundation in business will certainly help. An entrepreneurship education could mean an actual entrepreneurship degree or a more general business education that will prepare you to meet the day-to-day challenges of an entrepreneur career.
- University of Arkansas Grantham Certificate in Practical Entrepreneurship
- Colorado Christian University Certificate in Entrepreneurship
- John Tyler Community College Business Entrepreneurship Career Studies Certificate
Step 4: Build Your Business Slowly
Many aspiring entrepreneurs think that fast, rapid growth is the sign of a successful business. However, most businesses are built slowly, over years and even decades. Whenever possible, entrepreneurs will build slowly, starting with the very first sale and crawling forward. Building slowly allows you to learn and make adjustments before plunging headfirst into the business. Dealing with new situations provides valuable on-the-job entrepreneurship training you won’t get from any formal degree. In many cases, entrepreneurs will keep their day jobs while building the business in their spare time.
Potential Earnings for Entrepreneurs
There is difficulty in predicting earnings for entrepreneurs. According to Ziprecruiter, as of July 2021, the average entrepreneur makes $43,430 per year. Indeed.com reports the average earnings of entrepreneurs to be a much higher $64,051 per year! Considering that most entrepreneurs are also working a second job, this profitability can be difficult to reach.
Trying to determine the entrepreneurship salary must be the ultimate challenge for a statistician. There are so many variables, including investments, taxes, certifications, product purchasing, and payroll, any of which can quickly sap the earnings of an entrepreneur. So while you may sell $2 million worth of product, that doesn’t mean you will earn $2 million.
Another problem with predicting entrepreneurial salaries is the vast differences in business. For example, Elon Musk, founder of PayPal, Tesla Motors, and SpaceX, is an entrepreneur. The owners of a local mom and pop diner are also entrepreneurs. Now, maybe mom and pop have a couple of million in savings and are very comfortable, but the chances are strong that Musk made far more money than Mom and Pop over the past 15 years.
Tips for Becoming a Successful Entrepreneur
There are many actions you can take to increase your chances of success as an entrepreneur.
- Entrepreneurs need many tools, skills, and traits to maintain a business, and one of the most important things they can do is to maintain positivity. No, this doesn’t mean happy-thinking your way to a successful business, it means keeping an attitude of positive thoughts, even when times are down. When something goes wrong, a negative-minded person would dwell on their failings and maybe call it quits, while a positive mind will look at the failure to determine what went wrong and how to fix it.
- A good entrepreneur will also be focused on learning and growing, both from a personal and professional standpoint. This means getting the latest certifications if needed, taking classes to improve communication skills, or subscribing to industry publications that provide vital information for future decisions. Actively and purposefully working towards improvement, and evolving their efforts, is a common theme for successful entrepreneurs.
- Also, entrepreneurs will often keep personal and work finances separated. In order to set budgets and pay yourself properly, it is recommended that entrepreneurs have separate bank accounts for money that belongs to the business and money that belongs to the person. This might seem like a trivial difference, but it can affect how you work and how you spend.
- Another important strategy is to build a network of support, both emotional and business-related. Entrepreneurs have a lot to worry about, and taking some of these tasks off your shoulders can help you focus on running your business. Many entrepreneurs will have a support group that includes an accounting or financial expert, a marketing consultant of some type, and a mentor that can provide advice and guidance.
Pitfalls to Avoid
There are many pitfalls for upcoming entrepreneurs to avoid, and while some of them are obvious, some of them can sneak up and ruin success. These pitfalls can come before you’ve even made your first sale, or they can come after you have finally started to build your success.
Practically across the board, successful entrepreneurs will tell you to avoid debt whenever possible. Some, like Mark Cuban, will tell you to avoid debt entirely. According to Cuban, if you are starting a business by borrowing money, you are already doomed to fail. Other entrepreneurs will take a more moderate stance on debt, saying instead that debt should be kept to a minimum. Becoming an entrepreneur with no money is hard, but high amounts of debt is a pitfall for entrepreneurs.
It might sound counterintuitive, but rapid success can actually be a pitfall for entrepreneurs when it’s not managed properly. When a business gets too busy, they may not be able to process all the orders, flaws in management may begin to reveal themselves, and communication may begin to break down. The result? A steady drop in revenue until the bottom falls out. Being prepared for success with scalable management models and quality control is essential.
Another pitfall to avoid is over-dependence on a single income source. A good entrepreneur will avoid over-dependence by not letting a single client represent more than 25% of their income. If a single client or customer represents too much of your sales, what happens when they decide to stop doing business? You lose a significant portion of your income.
This concept was witnessed on a grand scale during the financial meltdown of 2008. American Axle made parts primarily for General Motors, with GM representing roughly 76% of their income. After the automaker significantly reduced orders, American Axle was nearly forced into bankruptcy. Having a diverse client-base can help you avoid this pitfall.
There are other pitfalls to avoid, including internal conflict and high employee turn-around, but with good management, a solid business plan, and quality support, a good entrepreneur can keep moving forward.
Becoming an Entrepreneur: Is it Really So Risky?
Becoming an entrepreneur is never easy, but it may not be as risky as many people think. It includes long days, working weekends, and dealing with a variety of unknowns that make most people quit before they start.
Risk is often the major reason why people avoid becoming an entrepreneur, but consider this: someone who works for a company has one source of income, their employer; while an entrepreneur has many different sources. If the employee gets laid off, they are out of a paycheck, but if an entrepreneur loses a customer, they have many more to fall back on. When managed properly, being an entrepreneur can develop into one of the safest and most lucrative careers possible.
- Grand Canyon University Bachelor of Science in Applied Entrepreneurship
- Lindenwood University Bachelor of Science in Fashion Business & Entrepreneurship
- Spring Hill College Bachelor of Science in Entrepreneurship