BLOG: What exactly is an entrepreneur?
I’ve been doing a lot of work around the nature of entrepreneurism lately, and thought it might be a worthwhile topic to explore with a wider group of people too.
Mention the term ‘entrepreneur’ to the public and you’ll get very different definitions. Probably because of programmes like the Dragon’s Den, many people actually confuse the individual with an idea with the investor providing the money to make it happen. Most will also assume that the term was an invention of the 1990s.
It was actually first defined by the Irish-French economist Richard Cantillon, in 1755, and for many years was applied to the ‘owner or manager of a business enterprise who makes money through risk and initiative.’
There are all kinds of emotional projections onto entrepreneurs – respect, an accolade, glamorous, playboy, risk taker, slightly unconventional, an eye for success, not put down by failure, arrogant, self-interested, emotionally detached, analytical, passionate, and countless more. I want to move away from these and see what constitutes an entrepreneur and what does not.
I don’t personally feel that any one definition is going to be adequate to capture what an entrepreneur is and what constitutes one. Hence this slightly longer article. So, what are the characteristics of an entrepreneur, and their ‘idea’, that warrants the term?
- They set up (or take over) an enterprise that has scope to be much more. This implies that they have seen, in their own mind, what that potential is, and have some kind of passion to want to pursue it.
- They have a vision of that enterprise being ‘more than’ just themselves. There is absolutely nothing wrong with someone wanting a business that is entirely them, and doesn’t involve other people. They are sometimes referred to as “solopreneurs”. Some of these are entrepreneurs because they fit the other characteristics and see their brand as being bigger than them, even if they remain the only person servicing it. However, there are many small firms consisting of one or two people who have no desire to grow any larger. These don’t fit into my model of what makes an entrepreneur.
- Their enterprise is scalable – it is capable of leverage – perhaps it could be reproducible elsewhere, perhaps it could organically expand. The key is that there is a potential for substantial growth that does not simply involve the proprietor from working longer and longer hours or doing bigger and bigger deals. They may do these things but the growth needs to come from somewhere else.
- Whose vision includes the life of the enterprise beyond their own period of influence. The term ‘exit strategy’ is sometimes bandied around. What I am referring to here may mean that they have considered their exit strategy and that they see the enterprise in new hands and continuing to grow, alternatively, they may plan for a buy-out, a floatation (which may leave them in the chair, but provides the means for them to be removed if their investors wish), and so on. The key is that the vision of the enterprise is that it takes on its own momentum and will continue to do so when the founder departs.
- Whose enterprise has a net positive environmental impact. For lots of people this will not be an expectation. There are plenty of enterprises which are established to make money, relatively quickly, and which then close down. Are their proprietors entrepreneurs? While this might well have been the case in the past, I don’t believe that it is acceptable today. It’s a personal moral viewpoint, but I’m happy with it. By ‘environment’, I do not mean purely ecological constraints – I am referring to the overall impact of the enterprise on its environment as a whole – local communities around it, its profession, its suppliers (and their communities), and its customers (and their communities). My argument is that if it is depleting its environment then ultimately it cannot meet the scalability and longevity criteria above.
- And, finally, for me, I do not believe that all entrepreneurs and their enterprise need to be businesses nor necessarily ‘for profit’. If someone establishes a new Art Gallery, a civic hall, a charity of some sort, and they do so with the vision that I have implied above, then to me they are as entrepreneurial as someone who is building a business.
An illustration that I often use is of two hairdressers. Both established their businesses in fashionable parts of London in the 1960s. Both continue to this day. One has, obviously, refurbished their salon, and has seen a steady transformation of the ownership, but it has never grown beyond what it was when it began. Thus it meets all the criteria but it hasn’t been scalable. The second opened up a few shops every month is equally fashionable areas of the world. Their staff all trained under the founder in London, and rather than buy in hair care ‘product’ they launched their own brand. They were acquired by a major fashion house but retained their brand and the founder continued as Chair and chief inspirer for many years. By the time he was ready to retire completely, he had already been simply a figurehead for a decade or more, and there was an able leadership team already really running the show. HE was an entrepreneur, in my terms.
So, those are my thoughts. It is not as precise an area as some people would like, so what do you reckon? Have I missed some essentials? Have I excluded some very important enterprises?