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8.3: Entrepreneurs

  • Page ID
    3639
  • What you’ll learn to do: identify the common traits of successful entrepreneurs

    Free enterprise or entrepreneurship is ingrained in both the American legal system and psyche. There is a cultural ideal that people will be rewarded equitably for the work they put forth (though it’s certainly up for debate how accurately this ideal reflects reality). This ideal is often what prompts entrepreneurship: the idea that one person can work hard enough to make a good idea a successful company, product, or service.

    Although one’s “entrepreneurial DNA” and definition of success may vary, entrepreneurship is universally an act of self-actualization. In this section, we’ll explore what it means to be an entrepreneur, from definition to categories, traits and motivation.

    learning objectives

    • Define entrepreneur
    • Identify the common traits of successful entrepreneurs
    • Discuss the different types of people who become entrepreneurs
    • List common reasons for choosing to be an entrepreneurs

    What Is an Entrepreneur?

    “An entrepreneur is someone who has a bias towards action. Someone who views the world through a different lens. Someone who takes ‘no’ for a challenge, not an answer.”

    —Matt Mickiewicz, Owner of 99Designs.com, Flippa.com & Sitepoint.com

    Merriam-Webster defines an entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.” What’s missing—or perhaps understated—in this definition is the importance of initiative. That is to say, grammar aside, entrepreneur is a verb. Given this, it might be more accurate to define an entrepreneur as someone who sees an opportunity—some hole in the market, or some way to better provide a current service—and works effectively to create a solution, carefully designing how the solution will be made and distributed.

    In expressing an insider’s perspective, Atari and Chuck E. Cheese Founder Nolan Bushnell captures both the initiative and sense of urgency that is part of the entrepreneur’s DNA: “A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”

    practice question \(\PageIndex{1}\)

    Given the multiple definitions in this section, what is the most important common quality that captures the essence of the "entrepreneur"?

    1. promise of opportunity
    2. viewer through a different lens
    3. creator of ideas
    4. bias for action
    Answer

    d. The entrepreneur is a doer

    Example \(\PageIndex{1}\): young entrepreneur living the dream

    Jack Bonneau is the quintessential entrepreneur. In the three years he has been in business, he has expanded his product line, opened multiple locations, established strategic partnerships, and secured sponsorship from several national brands. His business has garnered publicity from The New York Times, The Denver Post, The Today Show, Good Morning America, and numerous other media. He has shared his business success on several stages, speaking at TechStars and the Aspen Ideas Festival, and recently delivered the closing keynote speech at a national STEM conference. He even landed a gig on Shark Tank.

    Jack Bonneau is smart, charismatic, an excellent spokesperson, and persistent in his mission. And he is only 11 years old—which also makes him very adorable.

    Jack’s business was born from a need that most kids have: a desire for toys. He asked his dad, Steve Bonneau, for a LEGO Star Wars Death Star. The problem was that it cost $400. Jack’s dad said he could have it but only if he paid for it himself. This led Jack to do what a lot of kids do to earn some extra cash. He opened a lemonade stand. But he quickly learned that this would never help him realize his dream, so, with the advice and help of his father, he decided to open a lemonade stand at a local farmers market. “There were lots of people who wanted to buy great lemonade from an eight-year-old,” says Jack. In no time, Jack had earned enough to buy his LEGO Death Star. “I had sales of around $2,000, and my total profit was $900,” Jack said.

    Jack realized that he was on to something. Adults love to buy things from cute kids. What if he could make even more money by opening more locations? Jack developed an expansion plan to open three new “Jack Stands” the following spring. Realizing that he would need more working capital, he secured a $5,000 loan from Young Americas Bank, a bank in Denver that specializes in loans to children. Jack made $25,000 in 2015.

    The following year, Jack wanted to expand operations, so he secured a second loan for $12,000. He opened stands in several more locations, including shopping malls during the holiday season, selling apple cider and hot chocolate instead of lemonade. He also added additional shop space and recruited other young entrepreneurial kids to sell their products in his space, changing the name to Jack’s Stands and Marketplace. One of his first partnerships was Sweet Bee Sisters, a lip balm and lotion company founded by Lily, Chloe, and Sophie Warren. He also worked with 18 other young entrepreneurs who sell a range of products from organic dog treats to scarves and headbands.

    Jack’s strategy worked, and the business brought in more than $100,000 last year. This year, he became the spokesperson for Santa Cruz Organic Lemonade, and he’s now looking at expanding into other cities such as Detroit and New Orleans.

    Even though Jack is only 11 years old, he has already mastered financial literacy, customer service, marketing and sales, social skills, and other sound business practices—all the qualities of a successful entrepreneur.

    Sources

    “About Jack’s Stands & Marketplaces,” https://www.jackstands.com, accessed February 1, 2018; Peter Gasca

    “This 11-Year-Old Founder’s Advice Is As Profound as Any You Could Receive,” Inc., https://www.inc.com, July 27, 2017; Claire Martin

    “Some Kids Sell Lemonade. He Starts a Chain,” The New York Times, https://www.nytimes.com, February 26, 2016.

    Common Traits of Entrepreneurs

    “The only skills you need to be an entrepreneur: an ability to fail, an ability to have ideas, to sell those ideas, to execute on those ideas, and to be persistent so even as you fail you learn and move onto the next adventure.”

    —James Altucher

    As Joe Abraham found in his research, there’s no blueprint for entrepreneurial success. There are, however, common characteristics of successful entrepreneurs. In Harvard Business Review’s Entrepreneurs Handbook, the editors draw on research from multiple authors, organizing these common denominators in 5 categories:

    1. Ideas & Drive
    2. People Skills
    3. Work Style
    4. Financial Savvy
    5. Entrepreneurial Background

    Ideas and drive—creativity, vision and an ability to identify opportunities, in particular—are the elements without which there is no entrepreneurial venture. People skills include not only leadership but the ability to build networks, communicate an inspiring vision and influence people. Critical work style traits include a goal and planning orientation, a tolerance for uncertainty, a boot-strapping mindset, a commitment to continuous improvement, resilience and core business and relationship characteristics such as the ability to close a deal and accept advice. While in-depth accounting expertise isn’t required, entrepreneurs should have a basic understanding of financial statements and associated concepts. Finally, entrepreneurship tends to run in the family, with 48% of entrepreneurs raised in a family business, Prior experience—from formal education, previous work experience, and past failures—are all factors that contribute to entrepreneurial success. In addition to the task-specific traits mentioned above, an ability to maintain balance; “grit and gratitude,” as Avi Savar phrases it in an Inc. article, is essential for long-term business and psychological health.

    Exercise \(\PageIndex{2}\)

    You are an investor looking to buy in to a new start-up. You are about to meet with the startup’s founder. Which of the following characteristics would indicate this person may NOT have what it takes to be a successful entrepreneur?

    1. Creative thinker and resilient personality
    2. Workaholic that follows orders without question.
    3. Well-connected and goal-oriented
    4. Charismatic leader with background in finance
    Answer

    b. Entrepreneurs do work hard, but they are usually the ones leading the charge and always thinking about how to do things better.

    To the health point, it’s worth noting that at the extreme, our strengths become our weaknesses or vulnerabilities. We see this most clearly in the Builder, but the downside risk is not limited to that personality type. In “The Psychological Price of Entrepreneurship,” Jessica Bruder provides perspective on the emotional toll a startup business can take on an entrepreneur. This is not just a rite of passage; veteran entrepreneur Elon Musk publicly exhibited and discussed the “excruciating” personal toll Tesla has had on him in 2018 and his claims regarding privatization cost him his role as Tesla Chairman (he remains CEO).

    Entrepreneurship can also have a steep financial toll: it’s difficult (if not sometimes impossible) to maintain a separate job to pay the bills while working to create a new business. Any new venture will take up-front financial investment, and sometimes that investment comes from the entrepreneur’s own pocket rather than a third-party investor. However, if your idea pays off, the financial reward can make it worth it in the end.

    learn more

    Do you have what it takes to be an entrepreneur? Here are a few self-assessment options:

    • Entrepreneur and angel investor Barbara Corcoran’s Entrepreneur IQ Test
    • Harvard Business Review’s Should You Be an Entrepreneur? Test developed by Babson College Management Practice Professor Daniel Isenberg
    • SBA’s Small Business Readiness Assessment

    If the assessments leave you undecided, consider one additional trait, drawn from Entrepreneur’s “The 7 Traits of Successful Entrepreneurs” article: confidence. This is also a point made by LISNR Co-Founder & CEO Rodney Williams in his “So, You Want to Be An Entrepreneur?” article. His position: if you have to ask whether you’re an entrepreneur, you’re probably not. He refers to this as the “Miles Davis Test.” Late in life, Davis was asked if he planned to continue making music. His response: I have to. I can’t help it. That, according to Williams, captures “the soul of the entrepreneur.”

    Types of Entrepreneurs

    How do we begin to understand entrepreneurship and entrepreneurs? Entrepreneurs can be categorized by a number of dimensions including the size and scalability of the business, the form of business, whether a business is home-based, brick & mortar or online and other dimensions.

    It’s tempting (and, quite frankly, comforting) to believe that a successful entrepreneurial game plan can be used by another entrepreneur with similar success. The problem with this logic is that it assumes that all entrepreneurs are essentially the same. Clearly, that’s not the case. In working with a number of startups, “Entrepreneurial DNA” author Joe Abraham realized that although entrepreneurs share common traits, they have distinctly different personalities and to be successful, the strategy has to match the person. Abraham found that entrepreneurs exhibit one of four distinct types of “entrepreneurial DNA,” each with its own strengths, weaknesses and characteristics. In presenting his concept in a TED Talk, Abraham proposed thinking of the DNA types as “presets on your radio.” Each button is associated with a set of predisposed behaviors and decision-making matrix. And for each preset, there’s a different path to market.

    Abraham translated this insight into the BOSI Framework, with four entrepreneurial DNAs: Builder, Opportunist, Specialist, and Innovator.

    Builders

    A builder is, as one would expect, focused on scaling the business quickly. They tend to be serial entrepreneurs, perpetually building and selling businesses, often in completely unrelated industries. To a builder, success is measured in infrastructure terms—for example, office square footage and size of payroll. Builders tend to excel at attracting talent, investors and customers, but can exhibit a Dr. Jekyll and Mr. Hyde behavior that results in high turnover. As Abraham notes, “if you look back on their history, you see a wake of dead bodies: key employees, spouses, children.”

    Brothers Jeff and Rich Sloan are a good example of builders, having turned numerous improbable ideas into successful companies. Over the past 20-plus years, they have renovated houses, owned a horse breeding and marketing business, invented a device to prevent car batteries from dying, and so on. Their latest venture, a multimedia company called StartupNation, helps individuals realize their entrepreneurial dreams. And the brothers know what company they want to start next: yours.[1]

    Opportunists

    An opportunist measures success in financial terms and is always scanning for the next money-making opportunity. Opportunists tend to be impulsive decision makers—for better or worse.

    Jeff Bezos recognized that with Internet technology he could compete with large chains of traditional book retailers. Bezos’s goal was to build his company into a high-growth enterprise—and he chose a name that reflected his strategy: Amazon.com. Once his company succeeded in the book sector, Bezos applied his online retailing model to other product lines, from toys and house and garden items to tools, apparel, music, and services. In partnership with other retailers, Bezos is well on his way to making Amazon’s vision “to be Earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”—a reality.[2]

    Specialists

    Specialists are experts (e.g., accountants, doctors, lawyers) who generally spend their careers in one industry. They measure success based on their personal income. With an aversion to selling, their primary weakness is demand generation.

    Sarah Levy loved her job as a restaurant pastry chef but not the low pay, high stress, and long hours of a commercial kitchen. So she found a new one—in her parents’ home—and launched Sarah’s Pastries and Candies.[3] In 2011, she rebranded her company as S. Levy Foods, expanding beyond her pastry focus. She now has five operating restaurants in airports across the United States where she seeks to bring “real food” to those traveling.[4]

    Innovators

    Innovators are the mad scientists of the world. They measure success based on impact; it’s about the mission, not the money. Innovators are often accidental entrepreneurs; their weakness is business operations. They often start businesses just for personal satisfaction and the lifestyle. Miho Inagi is a good example of an innovator who built a company just for her personal satisfaction.

    On a visit to New York with college friends in 1998, Inagi fell in love with the city’s bagels. “I just didn’t think anything like a bagel could taste so good,” she said. Her passion for bagels led the young office assistant to quit her job and pursue her dream of one day opening her own bagel shop in Tokyo. Although her parents tried to talk her out of it, and bagels were virtually unknown in Japan, nothing deterred her. Other trips to New York followed, including an unpaid six-month apprenticeship at Ess-a-Bagel, where Inagi took orders, cleared trays, and swept floors. On weekends, owner Florence Wilpon let her make dough.

    In August 2004, using $20,000 of her own savings and a $30,000 loan from her parents, Inagi finally opened tiny Maruichi Bagel. The timing was fortuitous, as Japan was about to experience a bagel boom. After a slow start, a favorable review on a local bagel website brought customers flocking for what are considered the best bagels in Tokyo. Inagi earns only about $2,300 a month after expenses, the same amount she was making as a company employee. “Before I opened this store I had no goals,” she says, “but now I feel so satisfied.”[5]

    practice question \(\PageIndex{3}\)

    The author cites Joe Abraham’s work classifying entrepreneurs by personality type, i.e. Builders, Opportunists, Specialists, and Innovators. Why would it be important for a entrepreneur to understand their entrepreneurial DNA?

    1. To better work with your strengths and hire to cover for your weaknesses.
    2. To better grasp the importance of your work
    3. To better understand your competitors' strategies.
    4. To better develop a business model for a targeted market
    Answer

    a. Knowing yourself is the key to being successful-leveraging your strengths and surrounding yourself with people who can compensate for your shortcomings.

    To put faces on the labels, Donald Trump and Elon Musk are typical Builders, Virgin Group Founder Sir Richard Branson is a classic Opportunist, Bill Gates was a Specialist, and Mark Zuckerberg is an Innovator.

    So why does the “type” of entrepreneur you are matter? Knowing yourself—your strengths and weaknesses—is key to selecting a business, assembling a team and developing a strategy that leverages your individual and collective (team’s) entrepreneurial DNA. Specifically, it allows you to work with your strengths and hire to cover your weaknesses.

    In an article for Entrepreneur, veteran startup mentor and angel investor Martin Zwilling recommends that every aspiring entrepreneur understand their DNA before they commit to a business venture. Indeed, he notes that investors and incubators have adopted the use of formal assessments such as StrengthsFinder as part of their screening process.

    learn more

    To identify your entrepreneurial DNA type, take the free assessment at the BOSI DNA site: https://bosidna.com/.

    Reasons to Be an Entrepreneur

    Photo of woman sitting on a boat working on her laptop.As entrepreneurs often caution, being an entrepreneur is not a job, it’s a lifestyle. Of course, that’s precisely the attraction for many potential entrepreneurs. Life is more than a paycheck. Entrepreneurship is an alternative way of looking at the world and your place in it. For many, it’s an opportunity to achieve their potential—a potential that may be limited or managed in a traditional job.

    In an article for Entrepreneur, Uber Brands founder Jonathan Long cites 60 reasons to be an entrepreneur. Number 1 on his list: You have full control over your destiny. That’s a particularly powerful motivator. Especially when you factor in the “at will” employment law (that is, you can be fired without cause), increased use of contingent labor (no benefits), gender and racial wage gaps and other predatory behaviors.

    To the salary point, a woman earns on average 80.5 cents for every dollar a man earns. Breaking it down, the percentage of a white man’s annual earnings by race is 87% for Asian women, 79% for white women, 63% for Black women and 54% for Hispanic women. A November 2017 World Economic Forum study projected that will take 100 years to close the gender pay gap. Further, instead of decreasing, the gap appears to be widening; the 2016 prediction was 86 years. What’s particularly disturbing is what’s been termed the “mommy penalty.” A Senate Joint Economic Committee report found that women with children often earn less after returning to the workforce, while the opposite is true for working fathers. Key takeaway: if you’re a woman and/or minority, the game is stacked against you. Perhaps it’s time to take your marbles and start your own game with your own rules.

    statistics for minority-owned businesses[6]

    • The number of Hispanic-owned businesses almost tripled between 1997 (1.2 million) and 2012 (3.3 million).
    • The percentage of U.S. businesses with 1 to 50 employees owned by African Americans increased by 50% between 1996 and 2015.
    • Almost a million firms with employees are minority owned: 53% are Asian American owned, 11% are African American owned, and almost a third are Hispanic owned.
    • 19% of all companies with employees are owned by women.

    Entrepreneurial motivation short-list:

    1. Opportunity to make an impact.
    2. Ability to live by your own rules, from values and culture to dress code, work environment and location.
    3. Membership in an elite group of leaders and doers.
    4. No bench time or waiting to be chosen
    5. Opportunity based on performance rather than degrees
    6. Relative freedom from discrimination
    7. The thrill of creation and the ongoing challenges of growth
    8. Unlimited upside (financial) potential; no growth ceilings
    9. Extreme learning & personal growth
    10. Working with stimulating people and emerging ideas/technologies
    11. Recognition—after all, entrepreneurs are the rock stars of the business world.
    12. Build something for future generations.
    13. Defining “success” in your own terms.

    Employment dynamics and dysfunctions aside, the key is to understand your values and priorities and decide whether the entrepreneurial lifestyle is a fit of you. For more on this point, read The Balance Careers article How to Use Self Assessment Tools to Help You Choose A Career.

    The following short video is an example of the entrepreneurial spirit in action!

    practice question \(\PageIndex{4}\)

    According to the author, what would be the most important reason to be an entrepreneur.

    1. To be your own boss
    2. To be idolized
    3. To be among the elite
    4. To be compensated well above the norm
    Answer

    a. The entrepreneur having control over their own destiny, cannot be fire "at will", and being relatively immune to discrimination is the top reason cited by the author to become an entrepreneur.


    1. “About StartupNation,” https://startupnation.com, accessed February 1, 2018; Jim Morrison, “Entrepreneurs,” American Way Magazine, October 15, 2005, p. 94.
    2. Barbara Farfan, “Amazon.com’s Mission Statement”, The Balance. April 15, 2018, https://www.thebalance.com/amazon-mi...tement-4068548.
    3. Martha Irvine, “More 20-Somethings Are Blazing Own Paths in Business,” San Diego Union-Tribune, November 22, 2004, p. C6.
    4. S. Levy Foods, “About Us,” http://slevyfoods.com.
    5. Andrew Morse, “An Entrepreneur Finds Tokyo Shares Her Passion for Bagels,” The Wall Street Journal, October 18, 2005, p. B1.
    6. Robert Bernstein, “Hispanic-Owned Businesses on the Upswing,” International Trade Management Division, U.S. Census, https://www.census.gov, December 1, 2016; The Kauffman Index of Main Street Entrepreneurship, https://www.kauffman.org, November 2016.