Lessons from the Entrepreneur (Part 2 of 3)
In our first lesson, we described a few basic concepts that entrepreneurs follow in managing a business. We will now expand on how entrepreneurs create value by looking at some characteristics of entrepreneurs. One common characteristic behind almost every entrepreneur is a strong commitment to a set of skills. Invariably you will find that entrepreneurs are extremely highly skilled in their chosen profession and as a result, they can attract customers based on this high level of expertise. Entrepreneurs are able to exploit this expertise and build a business around what they are good at. Entrepreneurs do not digress or move into areas where their skills are weak. If an entrepreneur requires other skills, the entrepreneur will seek out partners or build a management team. Keep in mind that almost every entrepreneurial business will require at least three skills: marketing, product, and finance. You have to be able to sell and reach the customer. You have to be able to create a product that creates value for the customer. Finally, you must be able to raise the money to execute your business. Entrepreneurs know how to cover all three of these skills.
Another common characteristic to most entrepreneurs is a love for what it is they do. Entrepreneurs have a passion for their work which helps them persevere through hard times. This strong commitment allows entrepreneurs to compete and overcome numerous obstacles. Failure is part of the process of building the entrepreneurial business. Most entrepreneurs will experience a lot more failures then successes. However, they persevere through failures by learning from failures and they build on this new knowledge. Therefore, "intelligent" failing is an integral part of how entrepreneurs create value.
A third characteristic common to most entrepreneurs is a low resource need. Entrepreneurs are customer dependent and not resource dependent. Entrepreneurs seem to create value with minimal resources. This low support need is one of the reasons why so many entrepreneurial businesses create so much value. Contrast this to the big corporation where huge resources are plowed into projects, resulting in wasted resources and the destruction of value. Entrepreneurs create businesses with minimal capital investments. This in turn generates an extremely high return on invested capital and thus, high valuations for the business.
In summary, we can list several characteristics common to entrepreneurs:
- Extremely high skills resulting in benefits to customers.
- Strong commitment to building value with failure as a normal part of the process.
- Low support needs and thus, high valuations are possible.
- Focused on the needs of the customer. The customer is the ultimate solution within every business.
- Does not follow a pre-set path or structure; experiments through a meandering journey.
- Informal, open communication style that allows a conversation to take place and thus, entrepreneurs are always learning.
- Very sensitive to what works and what does not work. Entrepreneurs are very observant.
In our final lesson on entrepreneurship, we will look at how your organization can create an entrepreneurial culture.
Written by: Matt H. Evans, CPA, CMA, CFM | Email: firstname.lastname@example.org | Phone: 1-877-807-8756
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