5 Principles of EntrepreneurshipJun 14, 2023
Have you ever dreamed of being your own boss and starting your own business? While entrepreneurship can be exciting and rewarding, it also requires a lot of hard work and dedication. So, what does it take to be a successful entrepreneur?
Entrepreneurship has become a popular career choice in recent years, with many people seeking to turn their passions into profitable businesses. However, not all entrepreneurs are successful, and many fail due to a lack of knowledge and understanding of the principles of entrepreneurship.
If you are considering starting your own business, it's important to understand the principles of entrepreneurship. These principles can help guide you through the process of starting and growing a successful business. In this article, we will discuss the five key principles of entrepreneurship that every aspiring entrepreneur should know before diving in head first.
Reasons why entrepreneurs fail
Before we delve into the principles associated with entrepreneurship, it's important to make a quick side stop about why entrepreneurship is so hard. Many of the points about to be brought up are countered in the principles and while you certainly don't have to have all of the principles to be a successful entrepreneur, it will most likely be tougher to adapt to.
Many entrepreneurs fail because they don't have the necessary skills or experience to run a successful business. It's important to be honest with yourself about your strengths and weaknesses, and to seek out help and guidance when needed. Having a good self awareness is crucial in order for you to be honest with what you lack in order to know what you need to compensate and compliment the skills and experience that you do bring to the table. This can be in the form of a co-founder, a trusted board of advisors, trusted mentors and building an organization chart that reflects what outsources skills you need to bring in.
A lack of adaptability can also lead to failure. In today's fast-paced business world, entrepreneurs need to be able to pivot and make changes quickly in response to market changes and customer feedback. Adaptability is one of the most important skills, one of the key benefits to operating a smaller business competing again larger companies with hundreds of employees, is the ability to move quickly. Decisions are made quicker. Things can be implemented overnight. Speed, and the element of surprise can go a long way when you're just starting out.
Poor financial management is also a common cause of failure. Entrepreneurs need to carefully track expenses and revenue, and have a plan in place for managing cash flow. Now you don't have to like numbers, but you do need to be comfortable with understanding financial statements. They are an important tool to understand the financial position of the company, you can break down the costs associated with acquiring a customer (what are ways to optimize and bring this down?), having a solid understanding of your monthly burn rate, the number of customers needed to breakeven etc. Can help you establish goals for the business.
Another reason for failure is a lack of market research. Entrepreneurs need to understand their target audience and the competition in order to create a product or service that stands out. While you might not start out as an expert in your space, you should be obsessed with having a thorough understanding of the players (competitors), the upcoming trends in the industry, what the customers want/need. Having a pulse on the market is important to develop and to maintain so that the business can continue to learn, adapt, and pivot if necessary.
The caveat here is calculated risks. There's a common stereotype that entrepreneurs are crazy, and make decisions off the cuff with little foresight. That's completely untrue. There's always pros and cons that are being weighed and the 'let's take a shot' attitude is coming from a place of limited information available, and facing the fear of the unknown.
Entrepreneurs are commonly weighing up their affordable loss. The affordable loss principle is a way to make calculated risks, it suggests that an individual (or organization) should only take risks that can be affordably lost. The affordable loss principle is often used by startups in deciding whether or not to pursue a particular opportunity. It's important to understand the risks associated with any decision and to not over commit time, money and resources.
Taking risks also means being comfortable with failure. Not every risk will pay off, but successful entrepreneurs view failure as an opportunity to learn and grow. They use their failures as a stepping stone to future success.
To take risks effectively, entrepreneurs must also be willing to embrace uncertainty. Starting a new business or pursuing an innovative idea can be unpredictable and full of unknowns. Successful entrepreneurs are comfortable with uncertainty and are able to adapt and pivot when necessary.
Finally, taking risks requires a strong sense of self-belief. Entrepreneurs who believe in themselves and their ideas are more likely to take risks and pursue their dreams with passion and determination.
Having the attitude of being a knowledge sponge is a healthy way to constantly improve business. Having an open mind, and having the ability to constantly learn new things can help future-proof your business to potential blind spots.
It can also help make forming a solid business plan a lot easier. Understanding the nuts and bolts of your business, and the path to profitability is important and can help establish critical goals that need to take place in order for the business to reach a point of success that you, the founder, are happy with (what's the bare minimum you're wanting to accept?) and anything above that can be viewed as growth.
Having the mindset of wanting to constantly learn also helps keep a firm pulse on the wants and needs of your potential customers. You'll better be able to craft messaging that resonates with potential customers, and how to phrase your product/service in the form of being a solution (pain-reliever) for your target market.
Entrepreneurs need to be able to take constructive feedback and use it to their advantage. Being open and responsive to customer feedback can help you learn what works, as well as what doesn't. This can also help you pivot your product or service offering if needed. Additionally, a positive attitude is essential for every entrepreneur; maintaining a clear vision for the business will help you stay focused on your goals and not be distracted by potential roadblocks.
Respect your customers
One of the core principles of entrepreneurship is to always respect your customers. This means that you should treat them with kindness, empathy, and honesty at all times.
When you respect your customers, you are showing them that you value their business and that you are committed to providing them with the best possible products or services.
One way to demonstrate your respect for customers is to actively listen to their feedback and respond to their concerns in a timely and effective manner.
Another important aspect of respecting your customers is to be transparent and honest in all of your business dealings. This means being upfront about pricing, delivery times, and any other important details that may impact their experience with your company.
Ultimately, respecting your customers is not only the right thing to do, it's also good for business. When customers feel valued and respected, they are more likely to become loyal advocates for your brand and recommend your products or services to others.
Respect your people
Your the one that sets the tone when it comes to company culture. The right kind of culture can keep people motivated, creative and constantly being innovative with new ideas and solutions. We often use the phrase 'hard on the ideas, but soft on the people,' the meaning to be 'the best idea wins' no matter who comes up with it.
When you respect your people, you create a positive work environment that fosters loyalty and productivity. Your employees will feel valued and motivated to work hard and achieve their goals.
Respecting your people also involves listening to their feedback and addressing their concerns. When you take the time to understand their perspectives, you can make informed decisions that benefit everyone.
It's important to recognize that your employees are not just a means to an end, but individuals with their own unique talents and aspirations. By respecting their individuality, you can create a diverse and inclusive workplace that promotes creativity and innovation.
Everyone has a seat at the table, every team members is trying to do what's best for the company, to keep it moving. Business success isn't solely dependent on one person alone, it's usually a combination of contributions from various people on the team. Setting up a healthy and innovative company culture can set the venture up for long-term success.
Persistent, steady mindset
There's actually a great book called Effectual Entrepreneurship by Stuart Read, Saras Sarasvathy, Nick Drew, Robert Wiltbank & Anne-Valérie Ohlsson, and the effectuation principles they share is to define effectuation as a way of thinking and decision-making that is based on the idea that entrepreneurs create their future by taking action and making things happen.
An overnight success is defined as 5-10 years in the making. Too often we think success comes instantly, but that couldn't be further from the truth. Most entrepreneurs who have achieved success started with a vision, had an idea and then slowly worked their way towards realizing it. The ability to persistently and steadily work on their idea regardless of the obstacles they faced is one of the key principles of entrepreneurship. Many entrepreneurs fail because they reach they reach a point where they say 'it's not worth it anymore, I'm not seeing any progress, and it can truly feel like an endless slog without any end in sight.'
What can be even more difficult to continue persevering, is not having a strong support system. Starting a business is not without it's risks, and therefore it can cause contention with friends, family and other close acquaintances. If people you love, respect and value their opinion aren't supportive of your venture or are experiencing doubts, it can start to feel lonely and you being the sole person that sees that potential in a successful business opportunity in your midst.
Being persistent when starting your own venture is not just about having a successful outcome, but also to be able to have the courage to continue believing in yourself. Being persistent and steady mindset should always be present, even when the market turns or when things don't go as planned. The ability to stay focused on the long-term vision and not get distracted by short-term outcomes can make all the difference between success or failure.
So there you have it. I'm sure if you follow many expert entrepreneurs, or those that have experiences entrepreneurial success... you'll come to notice that there's no 'one-size fits all blueprint' to set you up for success. Launching your own venture is a personal journey, one that's dependent on your own set of circumstances, your resources, your strengths and weaknesses, and what you're trying to accomplish. Hopefully these principles aren't completely foreign or act as a hard-sell by any means. People of all ages, stages, and personality-types have become successful entrepreneurs. If you're ready to take that first step, we've also got a blog post about coming up with a business idea.
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