What does it take to be a successful entrepreneur?

What does it take to be a successful entrepreneur? The answer is not always clear. One can take a course in it; read a book on it; learn from someone who has done it before or find the answer by trial and error. Each one of these approaches provides a piece of the puzzle. However, there is no guarantee that one can become a successful entrepreneur by taking these initiatives.

Who wouldn’t like to be their own boss, make a million bucks and have other people do what you tell them? Many people dream about becoming a successful entrepreneur but never take the first step. Some businesses succeed but many fail. There is no right or wrong way to be an entrepreneur but you can definitely learn a lot about the fundamentals from successful entrepreneurs.

Success of an entrepreneur is measured by the revenue and profit that generate from business activities. The higher the profit or potential profit, the venture is able to attract more investment and human resources. If the venture cannot generate an adequate cash flow to pay its expenses, services, suppliers or employees, eventually these ventures will go out of the business.

Who is an entrepreneur?

The term “entrepreneur” originated in French economics in early 17 centuries. Entrepreneur is “someone who undertakes significant project or activity to create economic value”. They find new and better ways to mix scare resources to create greater economic value.

What is the process of Entrepreneurship?

Entrepreneurship is defined as “a process that involves the discovery, evaluation and exploitation of opportunities to introduce new products, services, processes, ways of organising, markets or efforts that previously had not existed”. (Shane and Venkataraman, 2000)

There are no definite processes or rules that entrepreneurs must follow in creating new ventures. However, following basic guiding principles enable entrepreneurs to recognise and exploit new opportunities.

1. Opportunities:

A successful entrepreneur looks for new opportunities and takes actions and exploits these opportunities to create economic values. These are areas where the entrepreneurs believe they can use new processes, techniques and methods to mix resources to generate profit. Opportunities do not knock, so the entrepreneur needs to be innovative to find it.

Three former PayPal employees Chad Hurley, Steve Chen and Jawad Karim came up with an idea of a video sharing website in February 2005. They started its development in a garage in Menlo Park, California. After two months of development, in April 2005, they launched the site – YouTube. Since they didn’t have enough money to support YouTube’s growth they needed to seek out investors.

Investing in a high-tech start-up is always a risk, but they were able to convince a venture capital company, Sequoia Capital to provide them with US $11.5 million seed capital to further develop their site. YouTube grew rapidly and in October 2006, Google Inc. acquired YouTube for a staggering amount of US $1.65 billion.

All three parties – founders, Sequoia Capital and Google Inc. – envisioned opportunities in YouTube. Initially the three founders recognised the opportunity for a video sharing site: the venture capitalist realised the investment potential; and Google saw opportunity in YouTube for online advertising business.

2. Recognise the information about opportunities:

People think differently, feel differently and act differently based on the experiences they have gained throughout their lives. These differences are critical and central to the process of identifying opportunities.

In the absence of variation, everyone would recognise the same opportunities and act upon them, causing many people to compete for the same opportunities. The task of the entrepreneur is to find a real pain point and come up with an innovative and situation. Entrepreneurs analyse information at hand to find opportunities where others did not see any.

Why didn’t other hi-tech companies see the opportunity for a video sharing site? Or why did Google pay US$ 1.65 billion to acquire YouTube? In fact, Google could have developed a similar video site with a fraction of the money they paid for the YouTube. But they all identified different opportunities with the information they had at the time.

3. Risk bearing

Entrepreneurs are risk takers! There is no guarantee that exploitation of opportunity will generate profit. You can do a market research, analyse existing ventures and industry statistics to make a guess about the future of a venture however, for destructive technology ventures, this information comes into existence only when entrepreneurs pursue the opportunity.

The exploitation of opportunities is uncertain. There is no way that YouTube founders could have predicted that their invention would change the way we use the internet in a few years. They identified an opportunity for a video sharing site and acted on it. Google then paid huge sum of money for an unproven fresh start-up. The decision that seemed foolish at the time turned out to be a successful investment for Google. In 2012, YouTube revealed that four billion videos view daily.

4. Organising

Organising scare resources in unique ways is another characteristic of entrepreneurship. It could be the product, distribution channel, quality, service or price. There are many similar video websites created following YouTube’s business model. However, only few of them are popular.

By far YouTube is the most popular video content site in the world. But why is YouTube so popular? YouTube provides better entertainment experience – free, easy to use, high quality with relatively low bandwidth, and they share advertising revenue with video publishers.

5. Innovation

The entrepreneurial process requires some form of innovation. Innovation means finding new ways to exploit opportunities that did not previously exist – new processes that spur creative destruction.

Dr. Victor Hettigoda received an ancient herbal medicine recipe from his farther. He created the wonder-balm – Siddhalepha – and started a venture with a seed capital of Rs. 2,500. It wasn’t an easy task to compete with other imported balms at the time.

He walked from shop to shop selling his product. He developed a remarkable and memorable marketing slogan – “Siddhalepa is the Vedamahatmaya (physician) that should be in every home”. Eventually Siddhalepa has become a must-have product in every household.

Dr. Hettigoda explains his success story: “I am a thinker. That is one of my favourite pastimes. I think and whatever that comes into my mind, I note it down in a small book. When I found out that selling my product was a problem, I spent several days doing nothing but smoking and thinking. Thinking and thinking about new ways of marketing my precious product.” His innovative marketing strategies led to increase sales and profit.

In conclusion, entrepreneurs look for new opportunities, they analyse and envision about the opportunities differently. There is no guarantee that the process of exploiting opportunities will lead to success but entrepreneurs are risk takers and they take action on opportunities, and find innovative ways to solve problems to generate economic values.

(The writer is currently working on a technology start-up in Toronto and has over 10 years of experience in Enterprise Resource Planning (ERP) systems. He holds a Master of Business, Entrepreneurship and Technology from the University of Waterloo and a B.Sc. in Accounting from the University of Sri Jayewardenepura. He can be reached at [email protected].)