Karl Montevirgen is a professional freelance writer who specializes in the fields of finance, cryptomarkets, content strategy, and the arts. Karl works with several organizations in the equities, futures, physical metals, and blockchain industries. He holds FINRA Series 3 and Series 34 licenses in addition to a dual MFA in critical studies/writing and music composition from the California Institute of the Arts.
Doug is a Chartered Alternative Investment Analyst who spent more than 20 years as a derivatives market maker and asset manager before “reincarnating” as a financial media professional a decade ago.
Before joining Britannica, Doug spent nearly six years managing content marketing projects for a dozen clients, including The Ticker Tape, TD Ameritrade’s market news and financial education site for retail investors. He has been a CAIA charter holder since 2006, and also held a Series 3 license during his years as a derivatives specialist.
Doug previously served as Regional Director for the Chicago region of PRMIA, the Professional Risk Managers’ International Association, and he also served as editor of Intelligent Risk, PRMIA’s quarterly member newsletter. He holds a BS from the University of Illinois at Urbana-Champaign and an MBA from Illinois Institute of Technology, Stuart School of Business.
Whatâs the difference between an entrepreneur and a small business owner?
Entrepreneurs and small business owners both assume business risk, but they often pursue different goals. An entrepreneur typically starts a business to introduce a new product, service, or business model, seeking opportunities to innovate and create new forms of economic value. A small business owner may share many entrepreneurial traits, but often builds a business around an established model rather than trying to disrupt an industry or create something entirely new.
What makes someone an entrepreneur?
An entrepreneur is a person who takes on the financial risks and uncertainties of starting and running a business in pursuit of profit and economic value. Entrepreneurs are typically innovators, visionaries, and problem-solvers who identify gaps between what customers need and what the market currently offers. They anticipate changing business conditions and develop new or improved ways to produce goods and services that create value.
How do entrepreneurs contribute to the economy?
Entrepreneurs contribute to the economy by creating businesses, introducing new products and services, and improving existing ones. They identify opportunities where customer demand is not fully met and work to close those gaps through innovation or more efficient production. By taking risks, responding quickly to changing market conditions, generating jobs, and increasing competition, entrepreneurs help drive economic growth and expand the range of goods and services available to consumers.
For many people, the word âentrepreneurâ conjures up the archetypal image of a Silicon Valley start-up founder, shopping around the ânext big ideaâ to deep-pocketed venture capitalistsâsort of like what youâd see in an episode of Shark Tank. This type certainly exists, but itâs only a fraction of the picture.
The scale of entrepreneurial ventures is much wider and more diverse than you might think at first. Take your local baker, shop owner, self-employed dog walker, plumber, or social media influencer. These are all small business owners, and there are many more of them in the entrepreneurialâsometimes âside hustleââcrowd than there are aspiring âbig businessâ types.
Key Points
Entrepreneurship occupies an increasingly wide and diverse space of economic activity.
The engagement of risk is a major factor that typically distinguishes entrepreneurs from other positions of business leadership.
Entrepreneurs are agents of change and innovation who operate the gap between market demand and newly created or improved forms of supply.
Although all entrepreneurs must think innovatively to thrive, not all are innovators with a capital âI.â And although most entrepreneurs seek to grow their businesses, not all aim to scale to colossal proportions. Most just want to grow enough capacity to serve more customers, generate more cash, and/or get the bills paid while doing what they love.
Entrepreneurs occupy a wide and diverse field across the economic spectrum. Hereâs a closer look at entrepreneurship and how entrepreneurs differ from corporate executives and small business owners. Weâll also explore the different entrepreneurial types and the important roles they play in the broader economy.
What is an entrepreneur?
An entrepreneur is a person who bears the economic uncertainties and risks of starting and running a new business to generate profit and economic value.
This kernel of a definition implies a myriad of business characteristics, capabilities, and conditions:
Innovators. Entrepreneurs are agents of change with a bent for innovation, often disrupting conventional business practices with more cutting-edge ways to use labor, resources, and capital.
Visionaries. Entrepreneurs have to be incredibly quick at forecasting business conditions to adjust their production ahead of the market.
Disruptors. Entrepreneurs are often adept at exploiting discrepancies in production processes and costs in order to produce quality goods more efficiently and, sometimes, at a more competitive price.
Number crunchers. Entrepreneurs are always on the lookout for supply and demand imbalancesâgaps that provide opportunities for creating value and generating profit.
These are just a few of the qualities nested within the short definition above. Itâs clear that entrepreneurs take a leading role in economic activity. But how are they different from other business leaders, like executives and managers?
How do entrepreneurs differ from business owners and executives?
Entrepreneurs, small business owners, and corporate executives share one thing in common: A position of leadership. But although they also differ on many grounds, perhaps the biggest distinction boils down to risk, and whether the entityâs operations require the four entrepreneurial qualities above.
Entrepreneurs and business owners typically take on the largest share of business risk. In return, they often stand to earn the largest share of business profit. If the proverbial ship begins to sink, an entrepreneur and a business owner go down with it, whereas a company executive can either leave the ship (quit) or get escorted off (lose their job).
Many business owners display some entrepreneurial qualities. For example, opening the fourth pizza joint or craft brewery on Main Street might be financially risky. However, itâs not exactly disruptive or visionary.
Also, entrepreneurs often concentrate on the strategic elements of a business, which are particularly important in the early stages. Later on, the entrepreneurial spirit may cede control to a more tactical-minded executive leader.
What role does entrepreneurship play in the economy?
Besides creating jobs and putting goods or services onto the market, entrepreneurs play other vital roles in the economy.
Entrepreneurs bridge the gap between âwhatâs thereâ and âwhat isnât there but could be.â Maybe itâs about bringing an existing product into a market that didnât have it. Or maybe itâs about inventing and producing a new product that hasnât yet been imagined. Such gaps provide entrepreneurs with a field of opportunity for producing value and reaping economic rewards.
Entrepreneurs have the advantage of iterating products rapidly on a trial-and-error basis. Mature companies, on the other hand, donât always have this capacity due to their size and slower speed.
In short, entrepreneurs are essentially agents of change. Theyâre visionaries who drive the economy forward by developing new ways to produce value, whether itâs in the quality of the bread you eat or the futuristic functionalities of your latest AI software.
B-Money Smart video: Starting a business? Start here.
A solid financial plan can help you prepare for start-up costs, taxes, and periods of uneven income.
EncyclopĂŠdia Britannica, Inc.
What are the different types of entrepreneurs?
The diverse range of entrepreneurial enterprise is, to some degree, a function of the far-reaching creativity of the entrepreneurial mind. These categoriesâwhich donât necessarily cover the entire spectrumâare dynamic, meaning they can easily blend into one another. Plus, you might notice overlap between some entrepreneurship and business ownership, as described above.
In other words, as you read this list, just know thereâs plenty of subjectivity involved:
Small-business entrepreneur. Entrepreneurs in this category own and operate small businesses. They may be interested in expanding the size of their company to a relative degree, but theyâre not necessarily aiming to build a huge business.
Scalable start-up entrepreneur. This type builds a business based on a concept, product, or technology that can be scaled into a much larger enterprise. Not surprisingly, venture capitalists tend to favor scalable start-ups, where business growth can often lead to outsize returns.
E-commerce entrepreneur. E-commerce entrepreneurs specialize in selling products on their own websites or on other online sales platforms. Although most are probably selling their own products, some may be arbitrageurs who source products at a lower cost and sell at a higher price.
Solopreneur. A solopreneur, short for âsolo entrepreneur,â operates a one-person business. Solopreneurs operate independently, occasionally outsourcing tasks to third-party contractors (versus hiring employees) when needed.
Innovator entrepreneur. Most entrepreneurs have to be innovative at some level, but innovator entrepreneurs focus on developing proprietary products, services, or technologies that are groundbreaking and unique. The emerging Web 3.0 universe and the more recent rise in generative AI platforms are areas where innovator entrepreneurs seek use cases (and then raise money) to disrupt the status quo.
Imitator entrepreneur. This form of entrepreneurship takes an existing product or service and finds ways to add value by enhancing or adding to its features, making it more efficient or increasing the quality of its materials or functions.
Social entrepreneur. This style of entrepreneurship focuses on creating value and positive change for society and/or the environment. Some social entrepreneurs operate in the nonprofit space, helping underserved communities meet lifeâs challenges. Others work in the private sector, developing products or services that might help establish more equitable or favorable conditions for society.
Franchise entrepreneur. Why reinvent a model thatâs already working? Franchise entrepreneurs take an existing business and shoulder the risk of introducing it into a new geographical market. They anticipate demand for certain products in places that currently lack them, and they acquire a license to introduce an existing business in a new location. Restaurants tend to dominate the franchise space, but this form of entrepreneurship also covers plenty of other industries, from cleaning to consulting.
Buyer entrepreneur. Not all entrepreneurs have that âone big ideaâ thatâll take an industry by storm. Some may not have any ideas at all. But if you have enough capital and business know-how, you might consider buying an existing businessâemerging or establishedâand help it grow. Itâs almost like being an investor, but the difference is that you have to roll up your sleeves, get your hands dirty, and work at the helm.
There are plenty of other entrepreneurship categories, and more will likely develop. For instance, lifestyle entrepreneurs seek opportunities not only to generate economic value, but also to make radical changes to their own personal lifestyle. Large company entrepreneurship is another category that applies to mature corporations that continually reinvent themselves by entering new industries through buying smaller and emerging businesses.
The bottom line
Simply put, entrepreneurship is about taking on the risks of starting a new business. If you choose an entrepreneurial path, you become an agent of change, creating economic and consumer value by bridging supply/demand gaps, improving upon product or production inefficiencies, or creating products or services that are needed but donât yet exist. This is how entrepreneurs make the economy more competitive and, in the process, help the economy advance at every scale and in every industry.
