What Is Entrepreneurship and Why Is It Crucial to the Economy?
Delwin Graham & Eric Brown - Oct 29, 2020
Unfortunately, people throw the term 'entrepreneur' around without actually understanding what it is. But this term carries a large amount of weight, and it happens to be a role and lifestyle that is essential to a prosperous economy.
It's no secret that many people aspire to own their own business and drastically increase their net worth. Unfortunately, people throw the term 'entrepreneur' around without actually understanding what it is. But this term carries a large amount of weight, and it happens to be a role and lifestyle that is essential to a prosperous economy.
So, what is entrepreneurship? Don't worry, we’ve got you covered. Let's take a look at everything you need to know.
So, What Is Entrepreneurship?
Put simply, entrepreneurship is the process of creating a business with the intention to make a profit and eventually scale as large as possible.
On its largest scale, entrepreneurship seeks to solve global issues by leveraging the opportunities that come with having access to a large amount of capital and resources. For example, this is part of the reason why some of the top businesses in the country aim to raise awareness of social issues and encourage others to get involved. At this point, an entrepreneur is more of an innovator and thought leader as opposed to a traditional business owner.
It's important to note, though, that not every entrepreneur has to reach that stage. There's nothing wrong with starting an online business within your home office as a way of establishing additional revenue streams.
It's also worth noting that entrepreneurs who make it to a level that gives them access to a high amount of capital aren't inherently obligated to go down a specific path. To elaborate, someone who starts a business from scratch and ends up a multi-millionaire can still live their life exactly how they choose to. They don't need to make financial contributions to certain charities, raise awareness of particular social issues, etc.
At its very core, entrepreneurship is about following your own path at your own pace with the intention of eventually making a profit through your business ideas.
Why Is It Important for the Economy?
As previously mentioned, many entrepreneurs strive to become as innovative as possible. Over time, this level of innovation eventually influences the ways that similar businesses operate. For example, it's not uncommon for someone to start their own business and shake up an entire industry by implementing ideas that haven't been seen before in that space.
As time goes on, other companies within that industry begin to adapt to those practices and incorporate them on their own. An end result is a large number of companies that now provide a more efficient level service.
This allows them to better cater to their customers' needs. During this scenario, more people are willing to spend money (and even pay more than they normally would) if the conditions are right.
Additionally, entrepreneurs also contribute to the economy through their taxable income. For example, there's an objective difference between someone paying taxes on $50,000 worth of income versus $500,000 worth of income. Now, consider these numbers over a ten-year period— It's not difficult to see the long-term impact entrepreneurs can have.
Is There an 'Ideal' Entrepreneur?
Yes, there is. In order to facilitate the best chance of overall success as an entrepreneur, you'll need to have a handful of attributes. These typically include the capability to come up with creative solutions for problems, a willingness to take significant risks, and a natural curiosity for the industry that you're involved in.
To elaborate on this last point, someone who is interested enough in a particular industry, solution, etc. will often research it on their own time and learn as much as they can about it. Establishing this foundation of knowledge will allow them to see opportunities they normally wouldn't and also prevent complications before they occur.
But an entrepreneur must also exercise strong control over their finances. Let's explore what they need to keep in mind in this regard.
How Important Is Financial Planning?
It's absolutely crucial for the long-term success of a business. Without proper financial planning, you're essentially embarking on a journey without a map.
Although you may have the tools to get moving and make progress going forward, you won't have the necessary structure to maintain constant growth, safeguard against contingencies, etc.
The overall level of financial planning that you'll need to incorporate is highly dependent on your industry and the size of your company. But there are a few practices that are consistent among businesses of different sizes.
For instance, establishing a proper budget to avoid overspending is something that every company should incorporate. Similarly, it's also essential to be aware of any financial liabilities that are associated with your business. This is particularly true for companies that require a large amount of financing in order to get up and running. Even a company that performs exceedingly well can find that it doesn't generate nearly as much revenue as it should due to improper financial management.
To avoid getting into the situation in the first place, it's highly recommended to consult with a professional to determine the best way to allocate your funding. Not only will this allow you to avoid pitfalls that you may encounter, but you'll also lay the foundation for the best chance of reaching optimal growth and performance.
Understanding Entrepreneurship Can Seem Difficult
But it doesn't have to be. With the above information about the answer to 'what is entrepreneurship' in mind, you'll be well on your way toward making the decision that's best for you and your financial health.
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