Business Owners: Not All Entrepreneurs

The definition of an entrepreneur is someone who is in possession of a venture, idea or innovation around which he or she builds a business. However, not every …

The definition of an entrepreneur is someone who is in possession of a venture, idea or innovation around which he or she builds a business. However, not every business owner is pursuing a new idea, therefore they are not truly entrepreneurs. Learn more by reading this article by The Street.

What is an entrepreneur? A standard definition is someone in possession of a venture, idea or innovation around which he or she builds a business. It is a person who takes risks to succeed. Today’s entrepreneur has become almost synonymous with "business owner," but the reality is that there are many business owners who are not entrepreneurs — they are not pursuing a "new idea."

Entrepreneurs and business owners face significantly different issues. When using the term "entrepreneur," think about people (and their companies) that want to become the next big thing, the next Facebook, Apple (AAPL), Google (GOOG), Amazon( AMZN) or Zappos. They are not in business simply to achieve a level of income to support their lifestyle. Entrepreneurs want more than to pay the bills today; they want future wealth.

Entrepreneurial companies are oriented to growth and expansion. From inception to death, they live and thrive (or die) on innovation, adaptation and implementation of a technology, product or service. From day one, entrepreneurial companies are focused on growth and recognize that they will need funding to achieve growth. Entrepreneurs are savvy and see the trade-off between size and control.

Lifestyle companies, on the other hand, are created to fund the day-to-day desires and needs of their owners. Lifestyle companies may be highly successful and grow to substantial size, but the key difference between a lifestyle-based and entrepreneurial company is the degree of control the founders are willing to surrender to external parties. Most lifestyle companies are closely held, with a limited number of investors who tend to be "related" in some way, such as being family, or friends. Lifestyle companies are referred to frequently as "mom and pop" stores.

When it comes to deciding whether to found a lifestyle or growth company, it comes down to understanding your personal and professional goals. What are the roles various constituencies — family, friends, investors, suppliers, creditors, banks, employees and the community — will play in your life and business?

One important fact to understand about business ownership is that regardless of the type of company you have, the concept of "being your own boss" is contextual. You may not work for someone else, but you will answer to a lot of people. The same constituencies influencing what type of business you found will ultimately be stakeholders in your decisions and hold you accountable. You will work for your customers, investors, board and any other party that has a stake in doing business with you.

When it comes to being your own boss, you will have the latitude to make decisions about who you do business with. You can accept a customer or turn down a customer. You can choose one vendor over another. And overall you can choose when, where, how and how long you work — as long as you meet your commitments. One saying you may have heard is that "As an entrepreneur you have the luxury of choosing which 80-plus hours a week you work." In other words, don’t expect to work less, just with more flexibility and with the end goal of building your own wealth.

Here are a few factors contrasting lifestyle versus entrepreneurial (growth) companies:

 


Life-Style
Entrepreneurial
Size

Micro

Small

Large

Starts Small

Growth Focused

Becomes as Large as it is Successful

Exit

Death

Sale

Retirement

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Family Succession

Sale

Acouisition

Merger

IPO

 

Control"Your Own Boss"

Investors

Board of Directors

FocusFund a Lifestyle

Marketplace

Rapid Development

Value-added Products

Ownership

Closely held individual Founders

Family

Investor backed
Funding

Private

Personal Debt/Equity

Individuals

Venture Institutional

Public

RevenuesLifestyle defined

$5 Million and up

$100 Million

Expansion

Operational

Revenues

Debt

Operational Revenues

Investors

Debt

Legal Structure

Any

Sole Proprietor

Partnership

L3C

LLC Corporation
(C or S)

LLC Corporation
Tax Structure

Individual

Flow Through

Separate taxable

Separate Taxable

Flow Through

Type/Structure

Franchise

Licensee

Family-owned

Inherited

New

New

 

This article republished with permission from The Street.

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