Everyday, the world over, thousands of people start their own businesses. Some of these fail entirely, most are moderately successful, and a few are overwhelmingly successful, so what differentiates between these? How do some people make such a success of something, and others fail completely? Is there a theory, a method that can be followed to ensure success, or at least increase one’s chances of succeeding in the business start up process?
Perhaps it is simply instinctive and some people are naturally adept at the process, others aren’t, or perhaps there really is things that can be learnt and entrepreneurial theories that can be studied in order for anyone and everyone who attempts, to have a better chance of finally becoming victorious with their chosen business. If we look at large, multi million and even billion pound corporations that are privately owned, such as Virgin, we may be able to discover how entrepreneurs such as the phenomenally successful Richard Branson have managed to grow such a huge empire. In his case, he started with capital, but it is no accident that he has turned his given capital into one of today’s most diverse, high revenue and largely respected conglomerates.
It is perhaps a poignant comment of Edward Lazear when he says that ‘choosing to be an entrepreneur requires an understanding of a variety of business areas.’ This statement supports the idea that in order to fully appreciate what the start up process of any business entails, the person attempting it, the entrepreneur, would benefit substantially from having the knowledge of many different business facets. Richard Branson’s incredible success in so many market sectors from aeroplanes to music to trains to mobile phones suggests that he did indeed research several different aspects of business and many different areas in order to gain understanding and knowledge and therefore power in a variety of areas. This knowledge allowed him the scope to expand safely because he understood the market space he was entering into;
‘I never get the accountants in before I start up a business. Its done on gut feeling, consumer knowledge and hard work.’
Branson here supports the idea that any business start up process is down the one individuals drive, hard work and knowledge of his market.
At this point it seems poignant to perhaps rest for a minute on what exactly qualifies ‘entrepreneur’? Well, a local DIY man who sets up his own business and works alone for the rest of his life, simply executing simple DIY jobs on various houses around the district in which he lives, is he an entrepreneur? He has after all, gone through the start up process of any business, he has just stopped short of any expansion. However, perhaps in order to be counted as an entrepreneur one needs to have gone through this start up process and had the creativity and the foresight to continue from there. To have the vision of expansion and take this, and build upon the start up, and create something bigger and better than initially ever seemed possible.
Branson is often hailed as the entrepreneur to end all, and perhaps, by this quantifiable process he is - he went though the start up process at the speed of light and hasn’t looked back since, the speed of the growth of his company and the diversity into the market sectors it has manipulated shows true market knowledge. The man who started up his DIY company and then stopped, needed to know little about the economic situation concerning DIY - he just needed to know that in his area there was enough people who needed a handyman to keep him busy all day.
Little research, little market knowledge went into starting that up, so can he really be classified as an entrepreneur despite the fact that he did go through the start up process. So maybe entrepreneurial theory is useful in the start up process for business that mean to grow - for someone who has vision, or maybe just in certain market sectors. Still, with more market knowledge, by following a more rigid theory, perhaps the little DIY store could have turned into a chain. And from there who knows, it really does seem to be an individual drive that spurs one person alone, to grow something, to create something, and this drive seems to be aided by basic entrepreneurial theory.
To begin, it transpires that entrepreneurial theory begins with knowledge of yourself. Self-knowledge seems to be marked by many authors of entrepreneurial theory such as Lazear, Irving and Langlois as the start of any eventually successful start up process. Balanced individuals seem to be more likely to be able to apply themselves as vigilantly as is necessary to make a success of something when starting with nothing. Multi-skilled, well rounded and emotionally stable individuals seem to be more likely to be able to deal with the stress of start up, with the scope of knowledge that needs to be absorbed, and with being able to tackle several things at one time. Any start up process requires the individual in question to be able to embark upon every aspect of the business until it becomes successful enough to be able to employ others to deal with certain sectors of the business. For this purpose it is therefore helpful if the individual is well rounded in all subjects, has attempted several different jobs before which have given them the stance to be able to feel confident in all areas from accountancy to marketing.
It seems that from here the basic knowledge of certain things which must surely be useful when entering any market place should be studied in detail by the individual attempting start up. A fundamental aspect of entrepreneurial theory is knowledge of the economic market. That is to say that without a basic understanding of the market place in to which you are attempting to enter, you are unlikely to be able to make a success of your business. There are certain things which must be thoroughly researched by someone entering the business start up process in any market sector. The chosen market sector must be fully understood and analysed, this will include substantial knowledge of the economic situation in the chosen market sector at the time, competitor analysis - which is highly important. Any market sector will certainly have lead players, and these will be the competitors for someone new entering the market place.
It is therefore essential to find out as much as possible about the competitors - how they started up, when, what their revenue is now, how much of the market sector they manipulate and how changeable this has been over the past few years. These are all issues which will assist in making the decision as to whether or not here is enough room in the given market sector in which to manoeuvre. Is the market sector a highly changeable one? Because if it is, it is likely to be easier to gain respect and placing. The demographic is as important, if not more important than competitor analysis. Demographic knowledge will give the product power. Data regarding the consumers wants and needs will give power to whoever follows this;
‘There will come a time when big opportunities will be presented to you, and you’ve got to be in a position to take advantage of them.’
When entering a start up process it is absolutely essential to have this power, Walton‘s comment supports this - without this knowledge, you will not be in a position to take advantage of anything, and you can be sure that someone else will have done the groundwork and therefore will be in a position. Is the demographic that is being targeted a fickle one? In this case the start up process needs to have leeway to change very quickly, to be able to cater to the ever changing needs of a market sector which is undoubtedly already saturated with settled businesses which provide the service already.
Some one entering the start up process needs to know their demographic so well that they can anticipate the next step - they need to have an edge in order to persuade the consumer to change from a known brand to a new brand and the surest way in which to do this is to anticipate their needs and provide them with a product they didn’t even realise they wanted yet. This way the new business catches an original and innovative tag which will help propel it to the forefront of the industry and give it weight whilst it battles against more established businesses.
Kirzner suggests that entrepreneurial theory incorporates the individual having a healthy attitude towards competition.
‘Being entrepreneurs, producers are engaged in the very competitive- entrepreneurial process which is at the heart of the market process itself.’
Kirzner suggests that knowledge and indeed a desire for healthy competition within the market place will help propel any business forward. By this he means that the aspects which we mentioned earlier such as competitor analysis and demographic knowledge should be approached by any successful entrepreneur with desire and excitement in order to conquer. Anyone who approaches the undeniable fact that there will of course be competition within the market sector with trepidation is probably not cut out for the life of an entrepreneur. As he says, competition is at ‘the heart of the market process itself’.
This is one of the core factors in approaching any market and the sense of competition is something that most successful entrepreneurs not only savour, but thrive upon, it is this sense of competition which keeps a market healthy, mobile, and ensures the consumer is consistently given new and exciting products. Let us return again to Branson, who says on this matter, two things;
‘Business opportunities are like buses, there is always another one coming along.’
‘A business has to be involving, it has to be fun and it has to involve your creative instincts.’
These two comments support the entrepreneurial theory of what an entrepreneur needs to have as core characteristics in order to succeed. Branson is of course a good example because he has proven to be successful in so many fields. His sense that there is always another business opportunity coming along and that a business must be involving and fun supports Kirzners theory that competition and an innate sense of competitiveness within an entrepreneur will aid in becoming successful in a market place. The desire to always seek new opportunities and become entirely immersed in these seems to be a key characteristic, and one which will drive the start up process of any business forward at speed.
Another key aspect of entrepreneurial theory seems to be having the ability to see into the long run, not just the short run. The start up process requires so much time and energy that it is easy to forget what the overall aim is. Kirzner suggests that it is imperative to set sights and targets and keep view of them at all times. Never to forget that you are building towards something. This overall desire to achieve a whole vision and not just part of it, will aid the start up process by ensuring that every little detail is done properly, and never rushed. With the sheer amount of work to be done during a start up process it is easy to neglect certain aspects that seem unimportant at the time.
Kirzner suggests that by keeping sight of where you are heading, you will be less likely to make costly mistakes, which will at some point affect the business. If every stage from inception to completion is done meticulously, there is no fear of delusion. By this, it is meant that what has been built a year or two years down the line, is built on solid foundations due to hard work and precision at start up, and not built on the illusion of a solid base, with mistakes which were made or brushed over at inception which can later cause the business to crumble.
‘Market phenomena frequently represent the outcomes of long chains of decisions’
Kirzner implies that through focusing not just on the present, but also on the overall picture of what is going on, internally within the company and externally around the company and in the market place, a successful and even phenomenal business can be built. When this is reflected upon at a later date it will often appear that the most successful start ups which have turned into the most successful long term business have been based upon a long and at times tedious chain of decisions and therefore implications. It is important to understand even at inception stage that every decision taken even during the very first days, can have an effect on the future of the business further down the line.
Economists the world over argue constantly about the benefits that entrepreneurs bring to the world economy. Mostly it seems that they agree that they are necessary in order to drive the market place forward, to spur on creativity and to help create healthy competition and prevent lethargy amongst the large, stable corporations already in play the world over.
‘In general, entrepreneurs are risk-bearers, coordinators and organizers, gap-fillers, leaders, and innovators or creative imitators’
This is a common description of an entrepreneur, and is fairly ambiguous. It seems that no-one is quote able to pinpoint exactly what an entrepreneur is, but bits and pieces of theories from organisational management to environmental management have been pieced together over the decades, and successful entrepreneurs have been hounded for advice, books written by them and devoured by others searching for the same success, and ultimately an entrepreneurial theory that combines all these things has been developed. Fundamentally though, the one thing that stands out whilst sifting through all this, is that every single person who has an opinion on the topic agrees that the foundation for any entrepreneur begins with hard work and pure drive, in order to gain success.
‘A man’s worth is no greater than the worth of his ambitions.’
Even in Roman times, it appears as though this theory was already common knowledge, but through the centuries theories have been developed on how to help someone realise their ambitions. So can this entrepreneurial theory aid in the business start up process? Well it seems so, it seems that these theories provide some sort of structure for an individual who already has the ambition, the desire, the creative vision, but perhaps not so much of an idea of how to go about this.
The entrepreneurial theory can aid in letting the individual know how to search the market place - what to look for within the market place, how to learn about competitiveness and demographic, why every detail should be attended to right from the beginning and perhaps most of all, it may help someone to know themselves better and therefore learn more quickly which aspects of the start up they will thrive in, and which aspects they need to pay special attention to and work harder at.
‘Failure defeats losers, failure inspires winners.’
The author Kiyosaki perhaps sums up the essence of the entrepreneur best, it seems that those who have the ability to be inspired by mistakes, learn from them and move forward with still more vision than they had before, with bigger dreams and more knowledge, will be the ones who succeed, the ones who get past the start up process and keep building.
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