What Are the Basic Concepts & Characteristics of Entrepreneurship?

Entrepreneurs are a different breed of businessperson. Where a typical business executive develops a careful plan and conducts market research before launching a new initiative, the entrepreneur is more likely to act first and plan later. Where a typical business founder has a clearly defined goal, the entrepreneur looks at the available means and resources, and then tinkers with them until a product develops. These differences spring from the characteristics and thinking patterns of the entrepreneurial mindset.

Conceiving and developing a new business is an inherently creative act. Entrepreneurs have been found to embody a distinctive thought process, called effectual thinking, that highlights creativity. Unlike the more familiar causal thinking, which starts with a defined goal and plans to reach that goal step-by-step, the entrepreneur who thinks effectually starts from what’s available in the present. This is similar to the novelist who starts with an idea or a character and lets the novel develop out of the writing process, rather than outlining the plot before writing. It’s like the Iron Chef who creates a delicious meal from the ingredients at hand, rather than the traditional chef who begins with a planned meal and must assemble the ingredients beforehand. Simply put, entrepreneurs don’t follow recipes.

Entrepreneurs have a tendency toward action, and they may even skip some steps, such as writing a business plan, which traditional business teachings consider essential to starting a business. Rather than conduct market research, for example, the entrepreneur is likely to take the prototype of a new idea and immediately offer a few dozen copies to customers in a limited market, such as at a small trade show. The response of the customers and their feedback on the prototypes might be all the market research the entrepreneur needs to decide whether or not to further develop the idea, or to put it on hold and move on to a new concept for the next business venture.

Working without a fixed plan requires flexibility, and entrepreneurs are more than willing to make needed adjustments to their ideas and prototypes, as they develop their business concept. This flexibility is also an asset during times of economic uncertainty and unstable markets. A business founder that has a more traditional mindset might not be able to shift focus in time to adjust to the changing circumstances in which many businesses operate.

Starting a new business venture is risky, and entrepreneurs are comfortable with that. Some even seek out risky opportunities and strategies because they recognize that overcoming the greatest risk also produces the greatest gains. However, entrepreneurs do take steps to manage their risk, such as determining how much loss they are willing to accept, and then monitoring their development process to stay within this acceptable boundary.

With characteristics such as creativity, effectual thinking, risk tolerance and flexibility, entrepreneurs appear as a group of freewheeling mavericks. Indeed, many of them are. However, entrepreneurs need to ground their innovative activities in basic, real-world principles of conducting a successful business. Two of the most important concepts are profit and customer focus. Profit is the difference between revenue taken in and expenses paid out. Without profit, there is no revenue to invest in future growth of the business, and in instances where there is negative profit, there is no money to keep the business going. Customer focus is essential because it drives profit. A business needs customers to buy its products and services. An entrepreneur can develop the most brilliant and innovative business concept imaginable, but without willing customers to buy the product and therefore generate a profit to keep the business going, the idea will remain only a prototype left sitting on the entrepreneur’s workbench.