The word “entrepreneur” has taken on an almost mystical quality in today’s business world. So do you need to be a Steve Jobs type genius to be a business success?
Pick up the paper or any business book and you’ll read stories of the incredible rise of the garage entrepreneur. You know what I’m talking about, the guy who comes up with a bright idea in his parent’s garage and then somehow in a few years is running a global power house. Think Steve Jobs. Think Google, Amazon, Disney and Harley-Davidson.
A good friend of mine started selling quality golf brands at a discount and within five years had built a network of retail outlets across Australia.
But just like the thousands of kids keeping their parents up with the thrashing of their guitars and rhythmic pounding of their drums less than 1% will become the next Nirvana.
It is within these incredible stories of success that the truth is missed. That every day millions of businesses around the world are in operation because an entrepreneur had the courage to try something new.
MBA courses are filled with the case studies of the monumental rise to power and success. Yet these examples are the exception and not the norm. From a statistical point of view they are the outliers, who are disregarded in the analysis. One can go looking for the secrets of Microsoft’s or Apple’s stellar expansion, but the reality is these examples tend to veil the fundamentals necessary to succeed in business.
So, what defines an entrepreneur?
I hate to say it, but the best definition I have ever come across was in my economics textbook at uni. (Note to self, one day I will need to write an article of the fallacies of modern economics).
To understand entrepreneurship we need to examine the four factors in production (whether production of a good or service):
Land refers to the ‘gifts of nature’ used to produce goods or services. This includes all natural resources, the land itself plus minerals, oil, gas, water, air, forests, animals and fish.
Labour refers to the time and effort that people devote to the production of the goods and services.
Capital includes all the tools, instruments, machines and buildings used in the production process. Most people talk about money, shares etc. as capital. These are but a specialised form of capital known as financial capital.
Entrepreneurship is the human resource that organises the land, labour and capital in order to produce the goods and services. The Entrepreneur is the one who comes up with the new idea and what should be produced, makes the decisions and takes on the risk inherent in those decisions.
And that’s really all there is to it. If the entrepreneur is skilled at the items listed above and makes the right decisions, they will make a profit from bearing the risk. Otherwise they will make a loss.
So what is the one quality that truly makes you an entrepreneur? In my opinion it is the willingness to take the risk. There are many people with the skills necessary to organise the land, labour and capital – they are generally called managers. In fact, the right manager can take an entrepreneur’s idea and achieve fantastic growth and expansion.
But how often do you hear the names of successful managers spoken with the same reverence given to the great entrepreneurs? Jobs, Branson, Ford, Zuckerberg and so on all took on the risk inherent in organising their new idea. It is the entrepreneur, with the vision and willingness to take on this risk that we so respect.
My friend starting up in his garage took on the risk of buying inventory and making sure he could sell it for a profit. He has taken on subsequently bigger risks each year in opening stores, hiring employees and taking on some of the biggest golf retail brands in Australia. While he will probably never reach the exalted levels of those spoken above he has done extremely well in five years, recently buying his dream home and taking home a yearly profit that most managers will never make in a year.
So are you an entrepreneur?
Do you have an idea? A solution that people need? It doesn’t need to change the world, but it does need to improve someone’s life or business. Are you willing to take on the risks inherent in brining that idea to the market place?
If you answered yes to these two questions you are well on your way. Now it is only necessary to organise the land, labour and capital and you are on your way.
So really, there is no mystic quality to be a successful entrepreneur. It is simply a willingness to take on the risks and organise your idea into a good or service that will solve people’s problems.
Kane Hooper is an entrepreneur and owner of Cloud Accounting Partners, specialising in providing real management information to SMEs. He has extensive experience in turning around failing companies, achieving profitable and sustained growth. Kane has run eight businesses and consulted many more across of wide range of industries.
Author of the Business CPR Series, books designed to assist owners of distressed business.
He graduated with an MBA from Deakin University in 2014, being awarded the prestigious Brookes Scholars Medal.
Kane is a member of several boards and has a strong interest in the Not-For-Profit sector.
Please visit: www.kanehooper.com