Entrepreneur as Risk-Taker - Essay Example

Introduction Many people experience difficulty in creating new a venture and bringing different ideas into the market place. Yet entrepreneurial decisions and entrepreneurship has led to the creation of several businesses across the world. The process of entrepreneurial decision entails the movements from something to something new. It entails forming of new enterprises. Entrepreneurship is the willingness and the capacity to organize, develop, and manage a business venture together with its related risks in order to make profits. The spirit of an entrepreneur is characterized by risk taking and innovation. Entrepreneurship is an essential part of any nation to be successful in the global competitive market (Malin and Brännback, p 8). This paper is a self-guide on how to become a successful entrepreneur in the 21st century. Entrepreneurial behavior is the study of the human behavior that is involved in the identifying and exploiting different opportunities through creation of new ventures. Entrepreneurial behavior is recognized as an agent of social change which facilitates innovations within the business venture. Entrepreneurial behavior is focusing on the observable actions of individuals in creation of a business venture. An entrepreneur needs to have positive behavior in his or her business venture (Hitchcock and Jean, p 5). This will lead to the success of the business. Some of the entrepreneurial behaviors includes: Entrepreneur as Risk-taker According to Richard Cantillon, an entrepreneur is an individual who possess a foresight and the willingness to assume any risk and take an appropriate action to make profit or losses. Cantillon argues that an entrepreneur should be forward looking, and take calculated risks. Frank Knight differentiated different types of risks; one risk can be measured and shifted from an entrepreneur to the other party by insurance. The other risk is un-measurable; this is the in ability of the entrepreneur to predict different consumer demands. Successful entrepreneurs are willing to risk their time and money on the unknowns, but they keep resources and plans for dealing with the unknowns. When evaluating different risks, an effective entrepreneur asks himself/herself if the risk is worth the cost of his time, career and money. And what will be done if the venture does not pay off (Timmon, p1). Entrepreneur as innovator An entrepreneur is a central figure in advancing wealth of different nations and creation of the dynamic disequilibrium in the global economy. The entrepreneur is able to assimilate acknowledge that is not used currently and set up new forms of production to market and produce new products. The knowledge underlying innovations should be discovered or any existing knowledge that has never been utilized before in production. Therefore an entrepreneur should be an inventor. According to Schumpeter, a successful innovation needs the act of will but not intellect. It hence depends on the economic leadership, not intelligence. Schumpeter felt that such hazardous activity cannot be undertaken by an ordinary person but by entrepreneurs who have the drive, vision and commitment to sustain the turbulence and the uncertainty that is involved (Timmon, p1). Creativity An entrepreneur should be able to offer different solutions to difficult problems that may break the growing business. The ability of the entrepreneur to come up with different solutions is the key to his or her success. Entrepreneurs may be faced with situations of scarce resources, he or she needs to budget how to use the scarce resources in his or her business venture. Again, the entrepreneurs should be creative on their ability to locate team members, capital, or markets. Entrepreneurs always bank their different businesses on the ability to use the available limited resources. They need to be creative enough in order to make good use of the limited resources (Colette and Bruin ,p 104). Communication Through effective communication, an entrepreneur is able to know about his business, mission statement, services and vision. If the entrepreneur is not able to express the mission and the vision with the right words, then the growth of the business can be minimal. An entrepreneur should be a good communicator with excellent communication skills. If they possess any idea or plan, they should know how to communicate that idea or plan effectively to the world. As a result, the entrepreneur needs to master communication skills for them to expand their market place (Gillin et al, p 45). Key Elements in formulating and evaluating an entrepreneurial business plan for a start-up organization A business plan is necessary for starting and running a business. A well written business plan allows the entrepreneur to achieve success in his business venture. The entrepreneurs are able to acquire finance, create good plans, and follow sales and marketing plans (Azhdar, p 104). The business plan is important in determining whether to start a business venture or not, the elements an entrepreneur can use to formulate an effective business plan are as follows: Executive Summary The Executive Summary or the vision statement is an outline of the goals and purpose of the business venture. A good executive summery entails brief description of the services and products the entrepreneur is dealing with. The business objectives and mission statements are also contained in the executive summery. The entrepreneur may also provide a brief outlook on the competitors of the business venture, the potential growth and the funding requirements needed to start and run the business. In evaluating the business enterprise using its executive summary, the executive summery should be able to solve different customer problems. If the executive Summery cannot describe how particular problems can be solved, then the business is likely to fail. The executive summery is a point where the steak meets the sizzle (Rhonda, p 55) Products and Services The entrepreneur should clearly describe different services and products that the business is likely to provide. Technical or highly detailed descriptions are unnecessary. The entrepreneur should use simple terms and avoid unrealistic terms. The entrepreneur should also describe how his products and services will differ from that of the competitors. And how their products and services can be accessed by the customers. The patents trademarks and copyrights owned by the business venture should be listed. This will help the entrepreneur plan for his or her operations well (Amir et al, p 755). Market Opportunities Conducting a market research is very important for a business venture. A good business plan tends to evaluate and analyze the customers purchasing habits, willingness to use new services and products and buying circles. The entrepreneur should know his or her market. They should be able to tell who their customers are. They should elaborate the part of the market they want to focus on. They should be able to tell the size of their intended market, the needs of customers and the prices of his goods and services. Market opportunities answers the question “who?” (Fiore, P 5). Competition This part analyses the competition of the business venture. It tells the current competitors of the business venture and the potential competitors who may attempt to compete with the business in case it is successful. The entrepreneur should tell his or her current competitors, their market share and how successful they are. They should have adequate knowledge on the market the competitors are targeting. They should find the way in which their products and services will differ from those of the competitors. The entrepreneurs should have an idea on what they can do if in any case a new competitor enters the market place. Competition answers the question “Against whom?” (Rourke and Karlson , p 17). Operations The entrepreneur needs to develop operation plan to serve the customers while maintaining the cost of operation in line to ensure there is profitability. The operation should explain how to manage and run the business on daily basis. The entrepreneur should know the equipments, facilities and supplies needed to start and run the business. They should be able to tell the staffing needs and when to add staff to the business venture. The entrepreneur should also identify who to establish relevant business relationship with and he or she should be aware how the relationship will impact his day to day operations. The operation answers the question “How?” (Karlsson, P 27 ). Management Many lenders and investors feel the experience and quality of the management body as one of the most significant factors in evaluating the success of a business venture. A business plan tends to evaluate different experiences, skills and resources that the management body needs. The entrepreneur should be able to tell who the leaders are, their educational background, skills and experiences. They should elaborate the duties of all the managers in the business venture. The entrepreneur should prepare table of specification to explain all the duties of the leaders in the business organization. The salary ranges of the management should be well stated by the entrepreneur (Sviatoslav, p18). Financial The financial estimates and projection helps the investors and entrepreneurs evaluate the success of a business venture. If the business organization seeks funding from outside, there should be a comprehensive financial analysis and reports. The basic projections or reports include the balance sheet. Another projection is the income statement which includes loss and profit statements. This will tell if the business venture will be able to be profitable in the future. The cash flow statement projects the cash receipts and payment expenses. The financial statement answers the question “what are the numbers?”(Art and Derammelaere, p 18). Managing Rapid Growth Rapid growth provides a quick boost on the volume of sales, people and the costs of the company on a short period of time. When these features suddenly take place, it can create certain side effects that risk the future and profitability of business. Rapid growth always reflects the atmosphere and the solidity of the business (Gillin et al, p 45). In order for the entrepreneur to manage the rapid growth of a business, they need to plan, reinforce objectives and wide operations of the business venture. During the period of managing rapid growth, managing skills and decision making skills becomes very vital to the entrepreneur. The ability of the entrepreneur to recognize the indications of rapid growth and find the medication is an effective skill of management (Dafna,, p 234). There are several elements an entrepreneur needs to take into considerations when managing rapid growth in an environment since the business environment changes more often in the today world of business. The elements are as follows. Know the clients who are right for the business The entrepreneur should be clear about the clients for them to be selective when there are several business opportunities and when there is no adequate time to accept all the clients. By knowing and understanding the clients who are important for the business growth, the entrepreneur can identify them easily without going through the difficulty of attracting and filtering the clients. This will help the business venture to overcome different challenges of selecting the right clients for different positions in the business organization. The entrepreneur should be aware of his clients; this will help him or her make sound decisions in his or her business venture (Key, p 25). An entrepreneur should have a specialty for which he or she is known Even though it is a recommendation that entrepreneurs should diversify their business into different areas that relate to the main business, so that it may be able to support the main business in a number of ways. However, when the business venture is undergoing rapid growth stage, the entrepreneur should be able to specialize so that the operations can be effective and efficient. This will enable them to serve more clients in lesser time. The entrepreneur will be able to overcome different obstacles in the business environment if he or she specifies his or her area of specialization (Dafna , p 234). Off-loading routine tasks to other individuals As the business is growing rapidly, the entrepreneur should focus on the strategic part of his or her business rather than on the daily administrative tasks. For the entrepreneur to offload the administrative tasks, they can hire another person who can do the same work more effectively and pays him or her certain amount of money. For instance, a secretary in a business venture is able to perform different services such as accounting, bookkeeping, preparing balance sheet, income statements and income tax returns. This will help the company or business organization to overcome challenges of work overload ion the entrepreneur (Daft R et al, p202). Provide GEMS services Even though the business venture is rapidly growing, not all the clients are ideal clients to the entrepreneur. Or they can be ideal clients to the entrepreneur yet they are not able to afford the fee charged by the entrepreneur. This leads to variations. If this happens, the entrepreneur can Go the Extra Mile for services (GEMS) through referring the clients to the other business owners of whom he can refer. This may make the clients to develop an impression that the entrepreneur is not only concerned with making profits but also spares the needs of the clients (Daft R et al, p202). Success often comes after different obstacles and it depends on the growth. For the business venture to be a successful, the entrepreneur needs to overcome all the obstacles that they encounter. Good business strategy is essential for the success of the business. A successful entrepreneur is able to form good and proper business strategies. The entrepreneur can learn from the past failure and discover what is working best well and what to be avoided in the future (Daft R et al, p202). Discovering different ways of improving products or services Competing business ventures are able to produce similar services and products. For the entrepreneur to do away with this obstacle, they need to discover different ways of improving their services and products to meet changing demands of their clients. For the business to achieve growth, the strategies of the business should be improved, in order for the business to move to the next stage of success. This will enable the business to compete favorably with other business ventures. The entrepreneur should also ensure their products and services are improved than those of the competitors (Hisrich p. 43). Seek opportunities constantly An entrepreneur is aware that opportunities do not come looking for them. They have to pursue their dreams actively. For them to improve their products and services effectively, they need to explore several opportunities that gives them the potential for improving the business and bringing great success to the business. They need to recognize their weakness and find ways of improving their weaknesses in order to achieve success. This will enable the business to avoid different obstacles and be successful in its operation (Hisrich, p, 43). Significant Sources of Information and Assistance Sources of information include the observing the local market and speculating the future trends of the market. Information can also be found on the general data, books, articles, surveys, internet, interviews and operations. The entrepreneur can also get relevant information by analyzing the competitors, focusing groups, promotional materials such as brochures, yellow pages, pamphlets, flyers and websites. Trade shows and trade magazine, business magazines and advertisements are also sources of information to the entrepreneur. Business information is any type of information that allows the business organization to know and understand its environment. The entrepreneur is able to access the materials and get relevant information to start a business venture (Greene, p54). Significant Entrepreneurial Events of Last Fifty Years In the past fifty years, there have been various important entrepreneurial events. For example, there existed an economic development in Japan, Asia and China. The International bodies like the World Bank and the IMF were created and used in stabilizing the world economy. The Entrepreneurial economy progressed and replaced the industrial and agricultural economies. With this, information technology was introduced into the economy which resulted in the overhauling of different entrepreneurial practices. For example, there is the introduction of plastic money in place of the paper money. Most transactions are done without using money itself. This has led to the improvement in the business sectors across the world (Classiqu, p 1). Conclusion Becoming an entrepreneur entails following all the steps required for effectively startup and running a business. For one to be an effective entrepreneur, he or she needs to be creative, innovative, risk taker and a good communicator. The entrepreneur should manage rapid growth effectively and manage any obstacle that may hinder his or her operation in the business venture. The entrepreneur should also consider all the necessary elements in formulating a business plan for the new venture. He or she should identify relevant sources of information and be conversant with the entrepreneur events in the last fifty years. Reference Art D, and Derammelaere S. Writing a Convincing Business Plan. New York Barron's Educational Series, 2008, pp18. Amir M ,Gail S, McMinn R, and Lucio W. Business plans for new or small businesses: paving the path to success, Management Decision, Vol. 40 Iss: 8, 2002. pp.755 - 763 Azhdar K. Strategy Formulation in Entrepreneurial Firms. New York: Ashgate Publishing, Ltd, 2012pp 104.  Classiqu Managing Entrepreneurial Environment 2013. http://www.classiqueblog.com/business/managing-entrepreneurial-environment/ Colette H, Bruin A. Entrepreneurship and the Creative Economy: Process, Practice and Policy. UK. Edward Elgar Publishing, 2011.Pp 104. Dafna , K .Entrepreneurship: An International Introduction. UK. Taylor & Francis, 2011 pp 234. Daft, R. Martyn K and Natalia V, Management. Boston: Cengage Learning EMEA, 2010, pp 202  Fiore, F. Write a Business Plan in No Time.USA: Que Publishing, 2005 .PP5.  Gillin L ,Burshtein S and Spinelli S. New Venture Creation: Entrepreneurship for the 21st Century : a Pacific Rim Perspective. New York City McGraw-Hill Education, 2010.Pp 45-78. Greene C .21st Century Business Series: Entrepreneurship.Boston : Cengage Learning, 2010. Pp 54 Hitchcock J and Jean G. Opportunity Discovery and Entrepreneurial Behavior: Theory and Evidence. Mill City Press, Incorporated, 2012, pp 2-15. Hisrich R. International Entrepreneurship: Starting, Developing, and Managing a Global. New York.SAGE Publications Inc, 2010.Pp 43. Hisrich, R, Michael, P. and Dean A . Entrepreneurship. New York. McGraw-Hill Education, 2013 pp. 273. Karlsson T. Judging a business by its cover: An institutional perspective on new ventures and the business plan. Journal of Business Venturing. Vol 24, Iss 1, 2009, Pages 27–45 Key S. One Simple Idea for Startups and Entrepreneurs: Live Your Dreams and Create. New York City. McGraw Hill Professional, 2012 p 1-48. Malin , E and Brännback. M Entrepreneurship. Santa Barbara: Greenwood Publishing Group, 2007.Pp 8 Rourke, J and Karlson, C .Writing and Presenting a Business Plan. Boston :Cengage Learning, 2008 pp 17. Rhonda , A . The Successful Business Plan: Secrets & Strategies. Redwood City :The Planning Shop, , 2003, pp 55. Sviatoslav, S. Dynamic Strategies for Small Businesses. Houston: Business Expert Press, 2010 pp 18   Timmon"s Model of the Entrepreneurial Process. The Roles of the Entrepreneur. 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