Are you a Business Owner or an Entrepreneur?
Whats the difference and why does it matter? Today we discover all, and ask you to have a little blind faith.
Across social media on every platform, I frequently see some use the title Business Owner, and others Entrepreneur! So, what is the difference?
Entrepreneurship is one of the most popular words in the English language today. People are buzzing about entrepreneurs and entrepreneurial companies. In addition, today’s media information makes us believe that anyone qualifies as an entrepreneur in some fashion way- from lawyers and doctors to artists and teachers. However, the term is so often used that many people are not quite sure what it stands for?
Furthermore, despite intensive analysis, we still know relatively little about the entrepreneur, particularly how an entrepreneur differs from a small business owner. Research has indicated that small business owners and entrepreneurs have different goals and decision-making styles. An entrepreneur has a kind of behaviour intent on opportunities rather than on capital and the small business owner that tends to run the business for a living.
Definition of Entrepreneurs
According to Birley, an entrepreneur is “an individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterised principally by innovative and creative behaviour and will employ strategic management practices in the business”. Thus, the modern thinkers emphasise that an entrepreneur is an individual who creates and recognise opportunities for something new, handles the uncertainty and risk of that new venture and is not restricted to stand alone business ventures. Has the managerial competence to gather required resources from the environment without necessarily owning these resources, which includes an ability to plan, to lead a team and to network.
Definition of Small Business Owners
A small business owner is “an individual who establishes and manages a business for the principal purpose of furthering personal goals. The business must be the primary source of income and will consume the majority of the owner’s time and interest. The owner perceives the business as an extension of his or her personality.
Entrepreneurs versus Small Business Owners
Entrepreneurs are motivated by their goals of profit and growth for their ventures and by their use of strategic planning, for example, Bill Gates, the best known entrepreneur in personal computer revolution. Alternatively, small business owners focus on providing family income and view the venture as an extension of their personalities, for example, the Chinese takeaways.
Characteristics of entrepreneurs and small business owners are different for different ages, different industries and different stages of the business’ life cycle. Indeed, the personality characteristics are both born and made, there is also a good deal of evidence that certain attitudes and behaviours can be acquired, developed, practiced and refined through a combination of experience and study.
In a nutshell, research suggests there are five major attitudes and behaviours that characterise entrepreneurs:
- Commitment and determination
- Need for achievement, with its related attitudes towards risk
- Internal locus of control
- Opportunity orientation
- Creativity and innovation
Don’t get me wrong, in a thriving business environment, we need both. And both small business owners and entrepreneurs are of equal importance to the economy. However, it is useful to recognise a distinction between them since small businesses and entrepreneurial ventures serve different economic functions.
Innovation and Creativity
The successful entrepreneurial venture is usually based on a significant innovation and creativity. This might be technological, an innovation and creativity in offering a new service; or a new way something is marketed or distributed; or possibly an innovation or creativity in a way the organisation is structured or managed. An entrepreneur is recognised for their innovative and creative ability, for example, James Dyson, who came up with the creative idea of the ball-wheel- barrow business and continue his innovation by moving on to the cyclone vacuum cleaner business. On the other hand, the small business is usually involved in delivering an established product or service. So, while a small business may be new to a locality, it is not doing anything new in a global sense for example, cost-cutters shop, whereas an entrepreneurial venture is usually based on a significantly new way of doing something.
Potential for Growth
An entrepreneurial venture has more potential for growth than a small business does. This results from the fact that it is usually based on a significant creativity. The market potential for than innovation, will more than enough to support a small firm. It may even be more than enough to support a large firm and signal the start of an entire new industry. For example, Adam Osborne (1939 -2003) was the best-known entrepreneur as creator of the first portable computer, but he was also an author who made a successful move into publishing computer books. On the other hand, the small businesses which operate within an established industry are unique only in terms of its locality. Therefore, it is limited in its growth potential by competitors in adjacent localities. A small business operates within a given market; the entrepreneurial venture is in a position to create its own market.
Most businesses have at least some objectives. Even the smallest firm should have sales targets if not more detailed financial objectives. Objectives may be set for the benefits of external investors as well as for consumption by internal management.
The entrepreneurial venture will usually go beyond the small business in the objectives it sets itself in, that it will have strategic objectives. Strategic objectives relate to such things as:
- Growth targets
- Market development
- Market share
- Market potential
- Growth Potential
- Strategic objectives
However, not all entrepreneurial ventures will necessary show an obvious innovation, clear growth potential or formally articulated strategic objectives, and some small businesses may demonstrate one or two of these characteristics. Yet, in combination they add up to distinguish the key character of an entrepreneurial venture, that is, a business that makes significant changes to the world.
Therefore, entrepreneurs and small business owners pursue and create new opportunities differently; they fulfil the ambitions of their founders and managers in different ways. Supporting them presents different challenges to economic policy makers.
For instance, the self-employed owner of a neighbourhood pub has very little in common with the founders of T.G.I. Friday’s. Furthermore, studies of the psychological characteristics of the small business owners and the entrepreneurs suggest differences that affect both the management styles and cultures of the firms.
Entrepreneur’s tend to operate at a high energy level, a preference for high risk/high return activities, a desire for control, a separation of personal and professional activities and little need for support from others. On the other hand, the small business owner, the self-employed owner, were found to have priorities that tend to suggest that family and social factors are more important that the business.
The Differences between the Entrepreneurs and Small Business Owners
Small Business Owner
- Low propensity towards growth
- Preference for low-risk taking and low return activities
- Non business concerns more important
- Less control-driver
- Prefers repetition of tried and true ways
- Sceptical of inspiration
- Works at steady pace
- Rarely makes errors of fact : Works problems all the way through
- Patient with routine delays
- People-oriented, Aware of people’s feeling
- Trustful of others
- High propensity towards growth (looking for new opportunities)
- Preference for high-risk taking and high return on activities
- The business itself takes priority
- Strong need for control (an internal locus of control)
- Likes to experiment with novel approaches (innovation)
- Does not take time for precision
- Driven by aspiration (needs for achievement)
- Works with bursts of energy
- Often makes errors of fact; jump to conclusions
- Impatient with routine details
- Task-oriented, oblivious to people’s feeling
- Distrustful of others
Entrepreneurs tend to spend more time finding new and different ways of doing things. For example, Richard Branson, who is a portfolio entrepreneur, has diversified his virgin group into different areas. While small business owners concentrated on making established procedures more efficient, for example, small local pub; or corner shops all selling the same types of products and service.
There are however other noticeable differences in many entrepreneurs also. Including a tendency for entrepreneurs to work with bursts of energy rather than steadily, to jump into conclusions, to be patient with complicated situations and impatient with routine delays and to follow their inspirations.
However simply stating entrepreneurs are task-oriented is quite misleading. Top entrepreneurs like Bill Gates; Warren Buffet and Richard Branson have proved in their ventures to be people-oriented, looking for the best interest in people.
Furthermore, entrepreneurs have an internal desire for self control. They actively look for opportunities to place themselves in situations where they do not have to rely on other people or luck- they think life is under control and they can affect what happens around them. For example, Duncan Bannatyne from the Dragons Den TV Show started his entrepreneurial life by trading in cars. Being brought up from a poor family background, Duncan did not believe in luck, on the contrary, he believed in his determination and commitment to be successful. He had a control over his life and he also take up risks.
Motivation and Aspirations
Motivation, the condition that makes individuals undertake, or at least desire to undertake, certain courses of action, is a subject that has received lot of attention from psychologists over the past hundred years. Different approaches will be used to understand motivation and adding up to a general picture of what motivates an entrepreneur.
Entrepreneurs and small business owners have different set of needs, which hence, motivate them differently. The idea of a series of needs that can be resolved into separate components was the basis for Maslow’s well-known hierarchy of needs in which physiological, security, social and self-actualisation needs were satisfied in that order of priority. Maslow hierarchy of need can be used to provide a distinction between the set of needs that motivate an entrepreneur and small business owners.
Entrepreneurs are at the highest level of needs, which, is self-actualisation. These needs can be supported by their characteristics and personality traits. Entrepreneurs are driven by their aspiration. They are motivated by the goals of profit and growth. They are committed and determined individuals who want to be successful; creative and innovative by creating new opportunities.
Entrepreneurs have an internal locus of control which enables them to transcend all the needs. For example, lord Alan Sugar, is at a self-actualisation stage, he has satisfied all the other needs. He was brought up in a council flat in Hackney and despite leaving school at 16, his driven aspiration of being a successful British entrepreneur, made him climb the hierarchy reaching at the transcendence needs where he is satisfying his desire for self-fulfilment and personal growth.
One of the distinctions I have made along the way, both from being brought up in a Business Owner family. Through to becoming a Business Owner myself, and quickly determining the desire to take risk, to challenge the status quo and as such ‘become’ more entrepreneurial has been the willingness and ability to take risk!
For me, this is the key differentiator between the two groups. Entrepreneur’s in their endeavour to attain and maintain self-actualisation are willing to risk all. (Often because they know if it doesn’t work out, they will learn the lessons as to why and apply this on their next venture) whereas business owners become more stoic in approach, more risk averse, more concerned as to responsibility and perception of others if they were to make any significant change.
Therefore, every year, we host an event entitled BLIND FAITH. Your chance to challenge yourself to step outside of your comfort zone, to try something completely new, different, foreign. To be willing to step up, and off the ledge of safe and predictable and take that roller coaster ride through fear and uncertainty to determine what lies on the other side!
You can learn more about this, by simply clicking here…
Don’t forget to drop a comment and let me know your thought?
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