What It Means to Be One and How to Get Started

What Is an Entrepreneur?

An entrepreneur is a person who spots an opportunity and takes the initiative to build a new business or startup. Entrepreneurs bring together ideas, people, and resources to grow their business, but often start by putting their own time, money, and effort on the line to make it happen.

Entrepreneurship isn’t just about starting a company. While there are plenty of tales about rags-to-riches innovators, entrepreneurs focusing on solving problems, creating value, and building something that lasts have the most success. Understanding what entrepreneurs do, the challenges they face, and the types of businesses they create can help you see how they shape the economy and inspire future innovation.

Why Are Entrepreneurs Important?

Entrepreneurs are essential drivers of economic growth. They combine the resources of land, labor, and capital to create goods and services, often taking on significant personal and financial risk. When they succeed, they generate profits, create jobs, and boost productivity.

Entrepreneurs also spark innovation. By introducing new ideas, technologies, and business models, they push industries forward and challenge established players to adapt. This competition leads to better products and more choices for consumers.

Finally, successful entrepreneurs create ripple effects that extend far beyond their own four walls. New businesses bring demand for suppliers, contractors, and service providers, strengthen local economies, and contribute to tax revenue that funds public projects and services.

What Are Different Types of Entrepreneurs?

Not every entrepreneur is the same and not all have the same goals. Here are a few types of entrepreneurs:

Builder

Builders seek to create scalable businesses within a short time frame. Builders typically pass $5 million in revenue in the first two to four years and continue to build up until $100 million or beyond. These individuals seek to build out a strong infrastructure by hiring the best talent and seeking the best investors. Sometimes, they have temperamental personalities that are suited to the fast growth they desire but may make personal and business relationships difficult.

Opportunist

Opportunistic entrepreneurs are optimistic individuals with the ability to pick out financial opportunities, get in at the right time, stay on board during the time of growth, and exit when a business hits its peak.

These types of entrepreneurs are concerned with profits and the wealth they will build, so they are attracted to ideas where they can create residual or renewal income. Because they are looking to find well-timed opportunities, opportunistic entrepreneurs can be impulsive.

Innovator

Innovators are those rare individuals who come up with a great idea or product that no one has thought of before. Think of Thomas Edison, Steve Jobs, and Mark Zuckerberg. These individuals worked on what they loved and found business opportunities through their vision and ideas.

Rather than focusing on money, innovators tend to care more about the impact that their products and services have on society. These individuals are not the best at running a business, as they are idea-generating individuals, so they often leave the day-to-day operations to those more capable in that respect.

Specialist

These individuals are analytical and risk-averse. They have a strong skill set in a specific area obtained through education or apprenticeship. A specialist entrepreneur will build out their business through networking and referrals, sometimes resulting in slower growth than a builder entrepreneur.

4 Types of Entrepreneurship

As there are different types of entrepreneurs, there are also different types of businesses and business structures they create. Below are the main different types of entrepreneurship.

Small Business

Small business entrepreneurship refers to opening a business without turning it into a large conglomerate or opening many chains. A single-location restaurant, a grocery shop, or a retail shop to sell goods or services would all be examples of small business entrepreneurship.

These people usually invest their own money and succeed if their businesses turn a profit, which serves as their income. Sometimes, they don’t have outside investors and will only take a loan if it helps continue the business.

Scalable Startup

These are companies that start with a unique idea that can be built on a large scale—think Silicon Valley. The hopes are to innovate with a unique product or service and continue growing the company, continuously scaling up over time. These types of companies often require investors and large amounts of capital to grow their idea and expand into multiple markets.

Large Company

Large company entrepreneurship is a new business division created within an existing company. The existing company may be well placed to branch out into other sectors, or it may be positioned well to become involved in new technology.

CEOs of these companies either foresee a new market for the company or individuals within the company generate ideas that they bring to senior management to start the process and development.

Social Entrepreneurship

The goal of social entrepreneurship is to create a benefit to society and humankind. This form of business focuses on helping communities or the environment through its products and services. They are not driven by profits but rather by helping the world around them.

How to Become an Entrepreneur

Unlike traditional professions, where there is often a defined path to follow, the road to entrepreneurship is mystifying to most. What works for one entrepreneur might not work for the next, and vice versa. That said, there are seven general steps that many successful entrepreneurs have followed:

Build a Financial Foundation

Starting a business takes time and money. Entrepreneurs have built successful businesses without being independently wealthy or having a line of clamoring investors to give them money. However, having a savings or stable income gives you breathing room to develop your idea without rushing to make a profit or taking on debt. 

Develop a Diverse Skill Set

Entrepreneurs must wear many hats: salesperson, marketer, accountant, negotiator, and human resources specialist, among others. The more skills a person learns or acquires through hands-on experience, the bigger their toolkit will be when it’s time to put on all of their entrepreneurial hats. 

College completion is not necessary to become a successful entrepreneur. In fact, many of the most well-known founders are college dropouts, such as Steve Jobs, Mark Zuckerberg, and Larry Ellison. However, a formal college education can broaden skills and perspectives. College may not be for everyone, and the choice is personal, but it is something to consider, especially given the high price tag of a college education in the U.S.

Stay Curious and Keep Learning

As important as developing a diverse skill set is, the need to consume a diverse array of information and knowledge-building materials is equally so. This content can be in the form of podcasts, books, articles, or lectures. The important thing is that the content, no matter the channel, should be varied in what it covers. Aspiring entrepreneurs should always familiarize themselves with the world around them so they can look at industries with a fresh perspective, giving them the ability to build a business around a specific sector.

Identify a Problem to Solve

While staying informed about your industry, look for market pain points. The most successful entrepreneurs find a problem and build a business around creating a solution. The key is to address a real need, whether that’s saving people time, money, or creating a better customer experience. 

Create a Solution and Test It

Once you’ve identified a market pain point, develop a product and service that addresses it. Next, validate your solution with real customers. Get feedback, refine, and improve your solution until it’s ready to launch. 

Network, Network, Network

Most entrepreneurs can’t do it alone. Relationships open doors to mentors, suppliers, investors, and first customers. Attending conferences, emailing and calling people in the industry, speaking to your cousin’s friend’s brother who is in a similar business, will help you get out into the world and discover people who can guide you. Networking early and often makes growth easier later.

Lead With Purpose

Once you launch, your leadership sets the tone for the business. As the originator of the solution, it’s your job to inspire your team, stay focused on your mission, and adapt as challenges come your way. 

Entrepreneurs can learn leadership lessons from mentors, business books and podcasts, industry workshops, and by observing how successful founders manage their teams.

Financing and Resources

Raising money for a new business venture is often one of the biggest challenges. Many entrepreneurs rely on bootstrapping, using personal savings, sweat equity, and early sales to get started. Bootstrapping offers complete control but also carries the highest risk, since failure can wipe out an owner’s savings. Bootstrapping is challenging, yet many entrepreneurs have still created successful business empires by bootstrapping.

Others seek outside support through small business loans, such as those offered by the Small Business Administration (SBA), which provide affordable financing options. Equity funding is another route: angel investors and venture capitalists exchange capital for ownership stakes, often bringing mentorship and connections along with money. In recent years, crowdfunding platforms such as Kickstarter and Indiegogo have gained popularity, enabling entrepreneurs to raise funds directly from supporters in exchange for products or experiences.

How Entrepreneurs Make Money

Entrepreneurs seek to generate revenues that are greater than costs. Increasing revenues is the goal, and that can be achieved through marketing, word-of-mouth, and networking. Keeping costs low is also critical as it results in higher profit margins. This can be achieved through efficient operations and eventually economies of scale.

How Do Taxes Work for Entrepreneurs?

The taxes you will pay as an entrepreneur will depend on how you structure your business.

Sole proprietorship: A business set up this way is an extension of the individual. Business income and expenses are filed on Schedule C on your U.S. personal tax return and you are taxed at your individual tax rate.

Partnership: For tax purposes, a partnership functions the same way as a sole proprietorship in the U.S., with the only difference being that income and expenses are split amongst the partners.

C-corporation: A C-corporation is a separate legal entity and has separate taxes filed with the IRS from the entrepreneur. The business income will be taxed at the corporate tax rate rather than the personal income tax rate.

S-corporation: An S-corporation is a corporation that is not taxed like a typical corporation. All the income passes through to the individual owner or owners and is reported and taxed on their personal returns.

Limited liability company (LLC): An LLC can be taxed as a corporation, a partnership, or on the individual’s return. This will depend on the number of members and how they elect to be taxed.

7 Characteristics of Entrepreneurs

1. Versatility – Handle different roles, especially early on, from sales to customer service, and adapt to new tools like digital platforms.
2. Flexibility – Pivot when ideas don’t work out; adjust strategies and products based on feedback and trial and error.
3. Money Savviness – Manage cash flow carefully, separate personal and business expenses, and make sacrifices when needed.
4. Resiliency – Push through setbacks and failures, staying committed even when progress is slow or uncertain.
5. Focus – Tune out distractions and keep your long-term goals front and center.
6. Business Smarts – Understand finances, markets, and competition while implementing sound strategies for growth.
7. Communication Skills – Share ideas clearly with investors, employees, and partners, and negotiate effectively.

Economic Impact of Entrepreneurship

In economist-speak, an entrepreneur acts as a coordinating agent in a capitalist economy. This coordination takes the form of resources being diverted toward new potential profit opportunities. The entrepreneur moves various resources, both tangible and intangible, promoting capital formation.

In doing so, entrepreneurs have a positive impact on the economy by creating new uses for existing resources, assuming risk, and driving innovation to increase market competition. They invent goods and services, resulting in employment, and often create a ripple effect, resulting in more and more development.

The impact of entrepreneurs extends beyond their individual businesses. Job creation and market expansion are just two of the many positive effects that entrepreneurs have on their communities. Their innovations reshape industries, and many entrepreneurs also fuel social change by investing in their communities through initiatives and philanthropic projects. 

Fostering entrepreneurship is an important part of the economic growth strategies of many local and national governments around the world. To this end, governments commonly assist in the development of entrepreneurial ecosystems, which may include entrepreneurs themselves, government-sponsored assistance programs, and venture capitalists. They may also include non-government organizations, such as entrepreneurs’ associations, business incubators, and education programs.

Questions for Entrepreneurs

Embarking on the entrepreneurial career path to “being your own boss” is exciting. But along with all your research, make sure to do your homework about yourself and your situation.

A Few Questions to Ask Yourself:

Am I personally ready? Do I have the mindset, temperament, and resources to devote myself entirely to this venture?

What’s my plan? Have I created a realistic roadmap with clear timelines, contingencies, and an exit strategy in place if things don’t work out?

Who can support me? Do I have a strong network of advisors, mentors, or partners to guide and connect me?

Is my idea viable in the market? Have I assessed demand, my target customers, scalability, and how competitors may react?

How will I protect and deliver my offering? Do I need legal protections, such as patents, and have I identified clear sales and distribution channels?

Questions That Delve Into External Factors:

Does my venture meet local laws and licensing requirements, and if not, should I consider

Do I have a plan in place to secure the people, skills, and infrastructure necessary to operate efficiently?

Who are my primary customers, and what is my timeline for getting a prototype or service to them?

Where will I get financing—loans, investors, or other backers—and is my idea strong enough to attract them?

Once established, can my business grow sustainably, and how will I handle competitors who may try to copy my model?

The Bottom Line

An entrepreneur is an individual who takes an idea or product and creates a business, a process known as entrepreneurship. Creating a business requires a lot of work and dedication, which not everyone is cut out for. Entrepreneurs are often young, highly motivated risk-takers who have a vision and often sacrifice a lot to achieve that vision.

Entrepreneurs enter the market because they love what they do, believe their product will have a positive impact, and hope to make profits from their efforts. The steps entrepreneurs take fuel the economy; they create businesses that employ people and make products and services that consumers buy today.