Being an Entrepreneur Unit 1
The entrepreneur
An entrepreneur is someone who starts or owns a business. Whether it’s in
farming, retail, manufacturing or in the service sector, entrepreneurs are
businesspeople who find their success by taking risks. In their pursuits, they often
become disruptors in established industries. Entrepreneurship is one of the
resources economists categorize as integral to production, the other three being
land/natural resources, labor, and capital. An entrepreneur combines the first
three of these to manufacture goods or provide services. They typically create a
business plan, hire labor, acquire resources and financing, and provide leadership
and management for the business.
Imp Points
➢ A person who undertakes the risk of starting a new business venture is called
an entrepreneur.
➢ An entrepreneur creates a firm to realize their idea, known as
entrepreneurship, which aggregates capital and labor in order to produce
goods or services for profit.
➢ Entrepreneurship is highly risky but also can be highly rewarding, as it serves
to generate economic wealth, growth, and innovation.
➢ Ensuring funding is key for entrepreneurs: Financing resources include Small
Business Administration loans and crowdfunding.
➢ The way entrepreneurs file and pay taxes will depend on how the business is
set up in terms of structure.
Profile analysis
Entrepreneurship represents an innovative and optimistic perspective for
economic and social development. By creating new businesses and jobs,
entrepreneurship contributes to the reduction of unemployment and it helps
increase the standard of living. Entrepreneurship can also be a source of inspiration
for young people and the opportunity to reach their potential and pursue their
passion.
Entrepreneurs—either as individuals or in teams—discover opportunities
throughout their personal and professional lives. They form hypotheses on ways to
deliver value to customers and perform structured tests to validate their ideas. This
often involves resource management through networking and investing funds to
determine how they’ll deliver a product or service at an acceptable cost.
Profile analysis of of a Successful Entrepreneur
Examining the commonly shared characteristics may help to explain the way
entrepreneurs work. Whether a person is born into it or develops these traits along
the way, there are similarities among those who have been successful in their
entrepreneurship.
Passion: Talk to successful entrepreneurs and you'll nearly always hear the word
passion when they describe what they do. Following your passion is one of the best
predictors of success.
Independent thinking: Entrepreneurs often think outside the box and aren't
swayed by others who might question their ideas.
Optimism: It's difficult to succeed at anything if you don't believe in a good
outcome. Entrepreneurs are dreamers and believe their ideas are possible, even
when they seem unattainable.
Confidence: This is not to say entrepreneurs never have self-doubt, but they're able
to overcome it, and they believe they can achieve their goals.
Resourceful and problem-solvers: Lack of assets, knowledge, and resources are
common, but entrepreneurs can get what they need or figure out how to use what
they've got to reach their business goals. They never let problems and challenges
get in the way, and instead, they find ways to achieve success despite hardships.
Tenacity and ability to overcome hardship: Entrepreneurs don't quit at the first,
second, or even hundredth obstacle. For them, failure is not an option, so they
continue to work toward success, even when things go wrong.
Vision: Some of the more stringent definitions of entrepreneurship include vision
as a necessary element. It helps to know your end goal when you start. Further,
vision is the fuel that propels you forward toward your goal.
Focus: It's easy to get distracted in this fast-paced world. Many start-ups get side-
tracked by the "shiny object syndrome" (products and services that promise fast
results), or they get bogged down in unimportant busy work. Successful
entrepreneurs avoid these distractions and stay focused on what will bring results.
Action-oriented: Entrepreneurs don't expect something to come from nothing, and
they don't wait for things to happen. They are doers. They overcome challenges
and avoid procrastination.
Entrepreneurial behavior and motivations
Entrepreneurs’ behaviour is a key construct in understanding how entrepreneurs
create new organisations. Entrepreneurial behaviour is the actions taken by the
entrepreneur to reach desired goals. Entrepreneurial behaviour is restricted to
tasks that are or can be under the control of the entrepreneur, such as the role of
the board, organisation, decision making, and goals and strategies. Entrepreneurial
behaviour is the actions taken by the entrepreneur to reach desired goals. The
Entrepreneurial behaviour is restricted to tasks that are or can be under the control
of the entrepreneur, such as the role of the board, organisation, decision making,
and goals and strategies
Nature of Entrepreneurial Behaviour
1. They Plan their Day in Advance:
2. They Get Proper Nutrition and Exercise:
4. They Set Clear Goals:
5. They Take Calculated Risks:
6. They Know their Strengths and Weaknesses:
7. They Hire A-Team Players:
8. They are Constantly Learning:
9. They are Always Looking for Opportunities:
10. They Evaluate their Actions and Priorities Each Day
Entrepreneurial Motivating Factors
The entrepreneurial motivation is the process that activates and motivates the
entrepreneur to exert higher level of efforts for the achievement of his/her
entrepreneurial goals. In other words, the entrepreneurial motivation refers to the
forces or drive within an entrepreneur that affect the direction, intensity, and
persistence of his / her voluntary behaviour as entrepreneur.
Motivational factors play an important role both in the decision to start a new
venture as well as in other strategic choices once the new business is operating. In
general motivation refers to the factors through which goal directed behavor is
initiated.
To say, a motivational entrepreneur will be willing to exert a particular level of
effort, for a certain period of time toward a particular goal.
Most of the researchers have classified all the factors motivating entrepreneurs
into internal and external factors as follows:
Internal Factors
These include the following factors:
➢ Desire to do something new.
➢ Become independent.
➢ Achieve what one wants to have in life.
➢ Be recognized for one’s contribution.
➢ One’s educational background.
➢ One’s occupational background and experience in the relevant field.
External Factors
These include:
✓ Government assistance and support.
✓ Availability of labour and raw material.
✓ Encouragement from big business houses.
✓ Promising demand for the product.
Lean Start –up
A lean startup is a method used to found a new company or introduce a new
product on behalf of an existing company. The lean startup method advocates
developing products that consumers have already demonstrated they desire so
that a market will already exist as soon as the product is launched. As opposed to
developing a product and then hoping that demand will emerge.
Lean startups are defined as those based on a scientific approach to management,
evidence-based learning, experimentation, iterative product releases,
performance metrics tracking, and customer feedback.
Lean startup is a methodology for developing businesses and products that aims to
shorten product development cycles and rapidly discover if a proposed business
model is viable; this is achieved by adopting a combination of business-hypothesis-
driven experimentation, iterative product releases, and validated learning. Lean
startup emphasizes customer feedback over intuition and flexibility over planning.
This methodology enables recovery from failures more often than traditional ways
of product development
The lean startup methodology is used to develop products and businesses in a short
period of time, which allows the creator of the product or business to quickly
determine if their business model is a viable one. When implementing the lean
startup methodology, the business that uses this methodology will focus on
developing a product while also gaining customer feedback, which usually involves
releasing a minimum viable product to the market or a small subset of the
customers.
Benefits of Lean Start up
➢ Faster Time to Market
➢ Reduced Risk
➢ Cost-effective Development
➢ Improved Agility
➢ Data-driven Decision-making
➢ Alignment of Business and Customer Need
The entrepreneurial ecosystem
An entrepreneurial ecosystem is its people and the culture of trust and
collaboration that allows them to interact successfully. An ecosystem that allows
for the fast flow of talent, information, and resources helps entrepreneurs quickly
find what they need at each stage of growth
The Entrepreneurship Ecosystem means various constituents like entrepreneurs,
organizational stakeholders, employees and other individuals, and organizations
etc., which facilitate or limit the development of entrepreneurs in a location /
region of interest. It is an interaction amongst the set of independent actors and
factors that lead to encourage, nurture and promote entrepreneurship in any area.
Entrepreneurial ecosystems represent the sum of factors in a place that stimulate
productive entrepreneurship. They involve the inter-related set of institutions
(both formal and informal), infrastructures, organisations, policies, regulations that
together define the conditions in which new businesses are created and grow. The
success of entrepreneurial ecosystems in stimulating productive entrepreneurship
activities is determined by a range of elements, such as a culture conducive to
entrepreneurship, strong business networks, availability of finance and
attractiveness to talent. Each entrepreneurial ecosystem differs, and the strengths
and weaknesses vary
The ecosystem comprises of the following:
➢ Infrastructure
➢ Entrepreneurs skills and qualities
➢ Mentors
➢ Social Culture
➢ Educational Programs
➢ Markets
➢ Policies (Government Policies)
➢ Government agencies
➢ Institutional Support
➢ Incubators and accelerators
➢ Co-founders
➢ Availability of Human and Non Human Resources
➢ Availability of wealth and capital
➢ Consultants/freelancers
➢ Events by industry association and chamber of commerce
Entrepreneurs and strategic decisions
Entrepreneurs often face a daunting task when it comes to making strategic
decisions. This process can be riddled with uncertainty and the pressure to get it
right can be overwhelming. However, by understanding common challenges and
employing effective strategies to overcome them, entrepreneurs can make more
informed and confident decisions that will propel the business forward. Strategic
decision making implies that there are alternative choices to be considered. These
alternatives are analyzed and the best one or the most satisfying one is selected
based on the amount of information available.
The entrepreneur’s personal goals, characteristics and strategic awareness have a
significant impact on the firms’ development, and especially for rapidly growing
small high tech firms’ strategy formulation is important, if not essential, for
successful long term development . This points out that in these high-tech firms,
the strategy formation and thus strategic decision making is important, and that in
these firms it is closely linked to the characteristics of the entrepreneur.
Following steps are important in strategic decision making process
✓ Gather Data
✓ Risk Analysis
✓ Bias Check
✓ Long-Term Vision
✓ Emotional Balance
✓ Continuous Learning
The largest contributors to failure for growth-stage businesses is slow decision
making. Waiting for more information can be costly, and with limited capital, can
prove crippling. To be clear, slow decision making isn’t to be confused with poor
decision making, which can also result in significant challenges. Mastering this
balance and dynamic can be the difference between success and failure. As such,
the ability as a leader to make tough decisions in the face of pressure and limited
information is a critical skill to develop.
Sustainability of Entrepreneurship
Sustainable entrepreneurship is about a practical approach that integrates eco-
friendly and socially responsible practices into the very fabric of business models.
It's about finding the perfect equilibrium where profitability and ethical
responsibility not only coexist but enhance each other. This synergy benefits the
company and contributes positively to the global community.
Sustainability in entrepreneurship refers to the integration of environmental and
social responsibility into the operations and goals of a business. It involves finding
ways to minimize the negative impact of business activities on the planet and its
communities, while also ensuring long-term viability and success. Sustainability has
become a crucial aspect of modern entrepreneurship, and it's more important than
ever for business leaders to understand its role and how they can make a positive
impact.
Consumers are improvingly conscious of the impact their purchases have on the
environment, and many are willing to pay more for products and services that are
environmentally and socially responsible.
The benefits of incorporating sustainability in business practices
Incorporating sustainability into business practices can bring numerous benefits to
entrepreneurs and their companies. Here are some of the key advantages:
➔ Increased efficiency and cost savings: By implementing sustainability
practices, such as reducing waste, conserving energy and resources,
and using more eco-friendly materials, companies can often improve
their bottom line by reducing costs and improving efficiency.
➔ Positive brand reputation: Being known as a responsible and
sustainable business can help to build brand reputation and increase
loyalty. Many consumers are looking for companies that align with
their values, and a commitment to sustainability can set your business
apart from competitors.
➔ Attracting top talent: Sustainability is an important consideration for
many employees, and incorporating it into your business practices can
help to attract top talent and retain employees who are passionate
about making a positive impact.
➔ Improved relationships with stakeholders: Stakeholders, such as
customers, suppliers, and community members, are becoming
improvingly aware of the impact of business activities on the
environment and communities. Incorporating sustainability into
business practices can improve relationships with these stakeholders
and demonstrate your commitment to their well-being.
➔ Long-term viability: By taking into account the long-term impact of
business activities on the environment and communities, companies
can ensure their own viability and success over the long term.
Dilemmas of an entrepreneur for success
A dilemma is a situation in which a difficult choice has to be made between two or
more alternatives, especially equally undesirable ones. Most entrepreneurs
struggle with decisions in building their business, and these key dilemmas are
probably the biggest source of pain and failure for the entrepreneur lifestyle.
People may jump into the lifestyle to be their own boss, achieve great wealth, start
a new trend, or all the above. The dilemma is that these goals are usually mutually
exclusive.
A common list of dilemmas is as follows
➢ The make money or serve humanity dilemma.
➢ The right time to start dilemma.
➢ The founding team size dilemma.
➢ The co-Founder relationship dilemma.
➢ The Founder’s title and role dilemma.
➢ The compensation model dilemma
➢ The right investors and right time dilemma.
➢ The right motivated employee’s dilemma.
➢ The Founder succession dilemma.
➢ The control and growth dilemma.
Handling doubts on survival of business
Entrepreneurs are often seen as confident, successful people who never have
doubts. They’re decisive about everything, always know what to do and never have
regrets.
Doubt is a natural part of being human — and entrepreneurs aren’t immune to it.
In our efforts to be better, create better products and deliver as much value as
possible to our customers, we feel there’s always something missing. Doubt is a
natural part of being human and entrepreneurs aren’t immune to it. In our efforts
to be better, create better products and deliver as much value as possible to our
customers, we feel there’s always something missing. We worry about the path not
taken or the what-if of every situation.
Self-doubt can become a severe problem for anyone, but especially entrepreneurs.
We’re juggling so many responsibilities and risks while we try to overcome multiple
obstacles every day.
The most important thing today's businesses can do is expose their organizations
to critical self-analysis. Entrepreneurs survive not by competing head-on with
global corporations, but by pursuing the market niches larger operators ignore.
Such a strategy requires constant attention to detail, necessitating self-analysis well
beyond the operational level; it is crucial that everything from the basic business
model down to the operation of the mailroom is subject to rigorous study. This
means determining what, precisely, the business is aiming to offer its customers,
how this differentiates it from its competitors, and how well it is delivering on these
core products and services.
Points for Entrepreneurial Survival
➢ Set Short-Term Goals
➢ Ignore What Others Think
➢ Remind Yourself of Past Success
➢ Take Feedback
➢ Remember That You’re Not Always in Control
➢ Have resilience and discipline
Struggles-Causes of failure–Product/ market
The initial years of a new business are often the hardest. New business owners
must struggle to find capital, suppliers, and customers, all while trying to find
enough income to pay their bills. In order to be successful, it is essential for new
business owners to prepare for these risks.
Entrepreneurs face various obstacles, from turning an idea into a successful
business to dealing with competition. Many fund the business through their
personal savings initially or struggle to get external funding due to lack of operating
history and collateral. Even once revenue begins flowing in, it can fluctuate wildly
month-to-month, making it difficult to predict cash flow. Some struggles are as
follows:
➢ Finding the Right Idea
➢ Lack of Funds
➢ Hiring and Managing Employees
➢ Market Competition
➢ Adapting to Change
➢ Scaling Challenges
➢ Marketing and Sales
➢ Regulatory Challenges
➢ Time Management
➢ Lack of Mentorship
➢ Inadequate Infrastructure
Causes of failure
Many aspire to start and grow their business. In the journey they struggle to get
financing, execute a business plan, overtake competitors, arrange sales training and
learn the tricks of a particular niche, many entrepreneurs fail. Even though failure
is likely, it is not inevitable.
➔ Improper Inventory Control
➔ Lack of Experienced Management
➔ Incorrect Pricing
➔ Short-term Outlook
➔ Few Trained or Experienced Manpower
➔ Poor Financial Management
➔ Rapid Growth
➔ Lack of Information
➔ Lack of Business Linkages
➔ Weak Marketing Efforts
Legal Fundamentals - When, how and where to incorporate.
Setting up a startup is not easy and to keep it afloat requires a lot of hard work. It
has to comply with various laws and regulations which we will discuss later, but
first, let us discuss what actually is a startup.
Below are mentioned the legal compliances and regulations one must be aware of
for starting a startup:
Type of Business:
Before setting up a business, it is very important to choose what type of business
entrepreneur want to pursue whether it is partnership, LLP, private company or
proprietorship. However, a sole proprietorship is not recognized as a startup under
Startup India initiative. Each business type has its own merit and demerits and
comes with its own set of legal requirements and regulations, so one should be very
cautious while choosing a business type. Although there are also provisions
regarding conversion from one business type to another
Registration/Incorporation of Startup:
After deciding the business type the founder wants to proceed the startup with,
the next and one of the most important step is to register the startup. With the
ease in startup registration process, many aspiring entrepreneurs wish to bring
their startup into reality.
This process involves 2 steps:
Incorporating the startup:
It involves incorporating the business as a partnership or limited liability
partnership or a private company. In case of partnership, it has to be registered
with the registrar of firms of the state in which the firm is situated, in case of LLP
and private company, all designated partners/directors have to obtain Director
Identification Number (DIN) and Digital Signature Certificate (DSC) and then
incorporate it with the registrar.
Registering with Startup India Initiative:
This has to be done after incorporating the business. The entire step is simple and
online. After uploading required documents and fulfilling certain conditions, the
startup will get the recognition of Department for Promotion of Industries and
Internal Trade (DPIIT). This recognition will help in availing a number of benefits
like tax exemption for 3 consecutive years, access to high quality Intellectual
Property services and resources, relaxation in public procurement norms, self-
certification under labour and environment laws, easy winding up process etc.
Founder's Agreement:
If there are multiple partners, it is advisable to draft a founder's agreement.
Although it is not necessary, but having a founder's agreement will come in handy
in the long run. Founder's agreement is a document which specifies all the
necessary details about founders and business such as roles and responsibilities of
the founders, operational details, executive compensation, conflict resolution
clause and exit clauses among others. Founders' agreements also help in tackling
uncertain occurrences like the death of the co-founder, resignation, which directly
affects the sustained growth and smooth running of the business or firm.
Applying for Business License:
Licenses are important to run any kind of business. Depending on nature and size
of business, several licenses are applicable in India. Business licenses are the legal
documents that allow a business to operate while business registration is the
official process of listing a business with the official registrar.
Adhering to Labour Laws:
Every business when it grows require more and more employs. Founders have to
keep in mind their responsibilities as an employer and ensuring compliance with all
requisite labour regulations which includes laws on payment of wages, provident
fund and gratuity, workplace sexual harassment, maternity benefits, etc.
If the startup is registered with the Startup India initiative, for the first one year
from the date of incorporation or registration of partnership, founders can sign a
self-declaration and be exempted from inspection under the following laws:
• The Industrial Disputes Act, 1947
• The Contract Labour (Regulation and Abolition) Act, 1970
• The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
• The Employees' State Insurance Act, 1948.
• The Industrial Employment (Standing Orders) Act, 1946
• The Inter-State Migrant Workmen (Regulation of Employment and
Conditions of Service) Act, 1979
• The Payment of Gratuity Act, 1972
• The Trade Union Act, 1926
• Building and Other Constructions Workers' (Regulation of Employment and
Conditions of Service) Act, 1996
Employees Contract:
It is also necessary to sign a contract with the employees to make sure the role and
responsibilities along with the respective jurisdiction of the work done by the
employee for the startup. An employment agreement should include:
• term of employment,
• intellectual-property safeguard,
• probation period if any,
• no-poaching
• non-solicitation
• Terms of termination (standard and immediate termination)
• Contract of service or for service clause
Non-Disclosure Agreement:
A non-disclosure agreement is must for a new startup which is just beginning to
establish its presence in the competing world by providing unique products or
services or both. A non-disclosure agreement is a written contract between two
parties that prohibits the sharing of confidential information shared between the
contracting parties. It ensures that the privacy of the company, as well as that of
the other party, remains protected. Many-a-times, ideas and business information
shared in goodwill may be misused. Hence, to avoid such situations, startups must
use the drafted NDA while discussing critical business information with people
outside the organisation.
There are generally 3 types of non-Disclosure agreements:
Unilateral NDA- it is between 2 parties but only one party discloses the confidential
information and expects other party not to disclose that information.
Bilateral NDA- it is also between 2 parties and both of the discloses confidential
information to each other with an intention protect that information from external
parties.
Multilateral NDA- here more than 2 parties are involved where only 1 party shares
the confidential information with others while others are obliged not to disclose
that information.
Safeguarding Intellectual Property:
Intellectual property is the secret ingredient for most businesses today, especially
for tech centric businesses. Codes, algorithms and research findings among others
are some of the most common intellectual properties owned by organizations. It
covers copyrights, patents and trademark laws which are crucial for every startup.
IP rights are important because they can:
• set a startup apart from competitors
• be sold or licensed, providing an important revenue stream which is crucial
for startups
• offer customers something new and different
• form an essential part of marketing or branding
• be used as security for loans
Startups can make use of the 'Scheme for Startups Intellectual Property
Protection'(SIPP) under the Startup India initiative. The objective of this scheme is
to reduce the cost and time taken to acquire a patent by the startup, making it
financially viable for startups to protect their innovation and encouraging them to
innovate further.
Taxation:
Taxes are part and parcel of every business. There are a broad variety of taxes, such
as, central tax, state tax and even local taxes that may be applicable for certain
businesses. GST also forms part of this regime. Different business and operating
sectors attract different taxes and knowing this beforehand can prove to be useful.
There are several tax benefits under the Startup India initiative to startups with aim
to promote the startup culture in the country. These benefits include income tax
exemption for 3 years as well as tax exemptions from capital gains and investments
above the Fair Market Value. Having a good knowledge of taxation laws can save
the startup handsome amounts of capital.
Having a Prudent Winding Up process
Having a clear and prudent winding up process is also crucial for a startup. Although
taking a decision of winding up is most difficult, it also requires a lot of compliances.
When a startup decides to shut down, all the stakeholders from vendors to
employees to customers and investors need to informed in advance and the whole
process must be properly planned and executed in order to make the exit easy on
everyone.
Courts or Tribunal:
It is the traditional mode and can lead to prolonged court proceedings and is
generally not suited for a startup. Startup India initiative also provides for
mechanism to wind up operations with ease. Its objective is to allow entrepreneurs
to reallocate resources and capital to new avenues faster. As per Insolvency and
Bankruptcy code, 2016, startups with simple debt structures, or those meeting
certain income specified criteria can be wound up within 90 days of filing an
application for insolvency. It will encourage entrepreneurs to experiment with new
and innovative ideas, without having to face complex and long-drawn exit
processes where their capital becomes interminably stuck in the event of business
failure.
