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entrepreneurSimply put, an entrepreneur is someone who starts a business. But in the age of Bill Gates, Jeff Bezos and Elon Musk, entrepreneurs hold a revered place in the public imagination. They have become identified with special intelligence, visionary powers —and self-made billions. Now an entrepreneurial spirit is more than having lots of energy and ideas. It’s also about problem-solving, risk-taking, disrupting the status quo and raising lots of venture capital. Business schools have separate programs for entrepreneurs while TV shows have turned entrepreneurship into a competition. Here’s more about what an entrepreneur is and what one does.

Entrepreneur, Defined

Entrepreneur has become synonymous with startup founder. But technically, shopkeepers, restaurateurs and other brick-and-mortar small business owners are also entrepreneurs. Anyone who founds a business is considered an entrepreneur, including the neighbor’s kid who offers dog-walking or lawn-mowing services.

Of course, many business leaders are entrepreneurs. But those who did not start their company are not seen as entrepreneurs. For example, Jack Welch increased General Electric’s revenues by $100 billion, but the former CEO is not considered an entrepreneur. Same goes for Apple CEO Tim Cook, on whose watch the company reached a $2 trillion valuation. The entrepreneur behind Apple, of course, is – and will always be – Steve Jobs.

In fact, known for his drive and passion, Jobs is the archetype entrepreneur. It’s partly because of him, that today’s entrepreneurs are thought of as more than business founders. Following his example, they aspire to innovate, change the status quo – and yes, make gobs of money.

Some entrepreneurs have made improving the status quo their priority and call themselves social entrepreneurs. Others who are less interested in running a business or who prefer to work within a company are known as intrepreneurs.

Entrepreneurial Traits

Many definitions of entrepreneur incorporate some combination of these characteristics:

  • Innovation and creativity
  • Propensity for risk-taking
  • Organizational skill
  • Ability to find funding
  • Leadership ability
  • Ownership interest

Of course, you don’t have to have all these traits to be an entrepreneur. But to be successful, you’ll need to know what you are missing so you can hire a team that fills your gaps.

Innovation

Entrepreneurs are known for creatively envisioning solutions to problems and building successful companies around those solutions. For example, Steve Jobs and Steve Wozniak created the first Apple computer and made it the foundation of one of the world’s most valuable businesses. Other examples of entrepreneurial innovation include Henry Ford with mass-produced automobiles, Walt Disney with animated films and Jeff Bezos with Internet e-commerce.

Risk-taking

Willingness to accept risk defines the entrepreneurial mindset. Without tolerance for the possibility of failure, significant innovation of the sort associated with entrepreneurs is unlikely. Sir Richard Branson is one of the most storied entrepreneurs ever, with dozens of start-ups in industries from music to transportation to his credit. Branson is known for embracing risk. However, he exemplifies the successful entrepreneur’s approach to risk. For example, entrepreneurs should accept and even seek risk while avoiding anything that could bring down the whole enterprise.

Organizational Skill

entrepreneurEven risk-tolerant and innovative individuals can be dreamers rather than entrepreneurs if they are unable to turn their ideas into reality. Entrepreneurs have to be able to plan and bring to life enterprises to be worthy of the name. Philo Farnsworth, for example, almost single-handedly invented television as we know it today. But he was never able turn his pioneering creation into a lasting business. He was more innovator than entrepreneur.

Fundraising

In the tech era, you often hear about entrepreneurs who raised huge sums of money from venture capital investors. It’s not essential, though, for entrepreneurs to have massive financial backing before beginning new ventures. Sweat equity uses personal labor instead of outside money to create business value. Meanwhile, bootstrapping funds expansion with retained profits rather than money borrowed or acquired by selling ownership shares. But starting a business always takes some money, even if only from accumulated personal savings or loans from family and friends.

Leadership

Entrepreneurs often possess considerable personal charisma along with an ability to convince others to assist them in their enterprise. Elon Musk, founder or co-founder of PayPal and Tesla among others, is a prime example of someone whose vision and energy inspires people to invest, take jobs and purchase products of the ventures he begins.

Ownership

A business leader who lacks significant ownership in the enterprise is more employee than entrepreneur. Sometimes entrepreneurs eventually surrender controlling or majority ownership in their companies to investors. However, ownership and the consequent exposure to great reward and great risk, is considered part of the entrepreneurial profile.

This is neither an exhaustive nor essential list. For example, entrepreneurs often display extraordinary energy and devotion while working the typically long hours needed to start a business. And revolutionary innovation may not always be present. An entrepreneur can create a successful chain of auto repair shops without doing anything much differently from others before him, for instance.

Entrepreneurial Motivations

While great wealth often accrues to successful entrepreneurship, people who start and run businesses may have other significant motivations. For instance, business owners often cite independence and autonomy as primary reasons for starting enterprises.

Flexible schedules, doing certain types of work such as work with animals and providing jobs for family members are also reasons for becoming entrepreneurs. Social entrepreneurs, as mentioned earlier, are special types who start enterprises to improve social conditions or relieve human suffering more than to benefit themselves.

The Bottom Line

entrepreneur
Entrepreneurs start businesses, especially those based on innovative concepts. They may create significant wealth but money is often not their main motivation. They generally exhibit an affinity for risk-taking as well as creativity, charisma, skill at organization, fundraising talent and desire to control their own destinies.

Entrepreneur Tips

  • When managing your own finances while running a business becomes too much, you may want to hire a financial advisor. SmartAsset’s free tool can help you find the right advisor for you in 5 minutes. If you’re an entrepreneur looking for local advisors who will help you achieve your financial goals, start now.
  • Are you unsure about those first entrepreneurial steps? Well, SmartAsset has some tips on how to start a small business. Or if you want to get experience running a business first, here’s how to buy a business.

Photo credit: ©iStock.com/shironosov, ©iStock.com/M_a_y_a, ©iStock.com/PeopleImages

Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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