The interest in entrepreneurship or enterprise emergency has grown in European countries due to a boom in the local development policies. These policies are based on the development of resources of the area in which they are applied. Therefore, there is now a special necessity to have enterprising people able to risk their own enterprise projects, and also capable of stirring into action the economic activity using all the resources.
What does “entrepreneur” mean?, Are they born to be entrepreneurs, or do they have to learn how to become one?, What are the personal characteristics of an entrepreneur? Which are the advantages and disadvantages of being self-employed? Would I be successful if I set up my own company?. Many people ask themselves these very questions when they think about starting up a company and being self-employed.
In this chapter we try to answer these questions by exploring the main characteristics around setting up companies, and their actors: the entrepreneurs.
Work is the conscious activity of the man in which he intelligently uses his physical and mental strength to reach his own interests, and those of his community. The person contributes to this process with resources (technical, energy, knowledge...) and gets some material, psychological, and/or social compensation. From this definition, you can deduce that there are some jobs without remuneration, like unpaid voluntary work, or the traditional work many women have carried out at home. Therefore, the way we distinguish the paid jobs from the others is calling the former employment.
Working population (Figure 1) is made up by the occupied ones plus those who want to work but are not able to (unemployed). The economically inactive population is made up of students, housewives, retirees, and those people who do not work simply because they do not want to or do not need to.
TOTAL POPULATION |
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| People over the age of 18 |
People under the age of 18 |
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| Economically active population |
Economically inactive population |
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| Occupied population |
Unemployed population |
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Diagram 1. Economic structure of the population.
Let us list the types of job people around you have:
Relative/acquaintances/friend |
Job |
The State in the developed economies has a regulating role. It is in charge of improving the collective goods (roads, hydroelectric power stations, parks, etc.), the public order and army resources, so as to improve social security and people’s standard of living. These services have been an important source of jobs during many years, although now, it is just playing a supporting role.
The European Union is a free-market economy. The economies based on this system present a high degree of decentralization. The market is free, and the competition that exists between the companies and the differences between consumers directly influence prices. That is to say that the law of supply and demand1 rules the economy. Although big companies have mass production, they are reducing at the same time the number of workers because of new technologies. In addition, big companies have problems to adapt to market changes. Small and medium-sized companies have greater flexibility.
For the moment, governments and big companies do not seem to be able to revitalize the economy alone. Therefore, we cannot believe that they will provide most of the new jobs that will have to be created. We, the individuals, will be mainly responsible for the economic development that will be transformed into social welfare.
On the other hand, many people have difficulties to find a job, but there is a great diversity of jobs. Work does not only means employment; it is much more than that.
You will find next, a description of different kinds of jobs:
Let us detail activities carried out in those four kinds of work:
Activities |
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| Dependent | Private | |
| Public | ||
| Independent | ||
| Voluntary | ||
| Housework | ||
On the other hand, it is interesting to compare the characteristics of the different employment sectors.
| State Sector |
Private Sector |
Self-employment |
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Chart 1. Comparison between the public, private and self-employed sectors
We have analysed the different types of jobs and working sectors. Next we are going to focus on one type of job: self-employment.
The metaphors are descriptors of behaviour games, more useful than literal expressions in that case to show us what people think about the entrepreneurial relationship and the entrepreneurs. In that way, Koiranen (1995) studied the expressions2 used by people to qualify an entrepreneur.
As a self-reflection exercise, read the following metaphors and if you agree with those words that identify an entrepreneur, tick the box. In addition, write down the reason why you chose it.
| 1. He/She is a creative worker: captain, self-made man, an artist, a leader, a sailor, and a moneymaker. |
| 2. He or she has a special characteristic: he or she is precocious, solitaire, defenceless, independent, manipulative, ambitious, oriented. |
| 3. He/ she is a machine: a human machine, a PC, a battery, a generator, a ferry, a motor, a locomotive . . . |
| 4. He/ she is a sportsman/ sportswoman: an acrobat, a pilot, a superman, and a long-distance runner… |
| 5. He/ she is of a special constitution: an eager beaver, a fox, a lion, a chameleon, a seven-lives cat, a squid, a cuckoo, a rolling stone, an eddy. |
| 6. He/she is an adventurer: a warrior or a fighter, a superman, Columbus, a tough guerrilla, … |
| 7. He/ she is a miscellaneous person: a monster, a mainstay of the society, a community support… |
| I have chosen number ....... because.............. ............................. ..................................... ........................ ........................ |
In the process of setting up companies, entrepreneurship is, according to Drucker (1986), something like being a doctor or an engineer. It demands knowledge, abilities, attitudes, aptitudes, attributes, etc., but specially work in order to manage the training and development required by the process. Nevertheless, like in any other field of human action there are several false clichés about the entrepreneur, which have become barriers to set up a new business. Ronstadt (1984), Lee-Gosselin and Grisé (1987), Gasse and D' Amours (1993), Ripollés (1994) and Nueno (1997), Varela (1998) and Colomer et al. (2000) have done research on this matter. These barriers can be: principal, psychological and cultural barriers:
Think about it: why don’t you have already set up your company? What were the impediments?
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Next, review what kind of barriers are restraining you, and write down solutions to overcome them. This activity can be made in small groups.
MAIN BARRIERS |
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| There is a lack of entrepreneurship | Reflection |
| False Cliché | |
| "All you need is luck" "Successful managers had the good fortune to find a great idea" "It is necessary to wait for a good opportunity". |
An analysis of factors process is essential in order to be in the right place at the right moment, and to take your chance. You have to make an appreciation of the events and tendencies, to prepare yourself to take action, so as to take advantage of the good periods and minimize the impact of bad ones. In a few words, it is necessary to have entrepreneurship, there is no place for luck. |
| A Lack of money | Reflection |
| False Cliché | |
| "All you need is money". "Without money you cannot set up a company". "You cannot get any money if you do not have personal fortune as a guarantee". |
Nowadays, one of the most important managerial ability is to identify and obtain resources. Researches all over the world have proved generally, most businessmen needed very little money when they started their business. The money came from their own savings, from friends, and from family resources. |
| Training | Reflection |
| False Cliché | |
| "Businessmen do not have qualifications" "Businessmen are failures" "To set up companies it is necessary to be an inventor or work in advanced technology" "It is necessary to study at the University to be able to understand how a company works " |
The future entrepreneur has to be a qualified businessman. Not in determined subjects but with a wide basic training. If they do not, they will have very little chances of success or growth. |
| Lack of knowledge of the sector | Reflection |
| False Cliché | |
| "Only people with experience can be businessmen ". " First, it is necessary to be an employee, and learn how the business works. Next, you can set up your own business with your knowledge on this area " |
In magazines that deal with business and entrepreneurship, we can find many examples of entrepreneurs without experience, even without having been employees. Some of them are very young: college or university students. There are certain advantages on starting a managerial process when you are young and very few people over fifty set up businesses. |
| Prejudices | Reflection |
| False Cliché | |
| "Being a businessman lower my professional status ". "An entrepreneur is a rebel " |
Many successful entrepreneurs before they set up their own business worked as employees for bigger companies. Therefore, shouldn’t have those companies held them back and taken advantage of their creative capacity? |
| Distrust of the close environment | Reflection |
| False Cliché | |
| "It is impossible to become a businessman unless you can rely on comprehension of the people that surround you” "The country situation does not allow new business creation". |
On the contrary, only if we set up companies, work and wealth will improve the environmental conditions to reinforce the entrepreneurial process. |
Write down solutions that may help you overcome the former barriers.
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PSYCHOLOGICAL BARRIERS |
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| Lack of firmness | Reflection |
| False Cliché | |
| "Businessmen are born, you cannot learn how to become a businessman ". "True businessmen are special people. They are born to be so.” |
Being a businessman implies a few attributes and some knowledge, which you have to learn; you do not inherit them. Therefore, there are different state, regional, municipal plans aimed at helping the creation of new companies. |
| The first stepd are hard | Reflection |
| False Cliché | |
| " During the first months of a new business, there are only losses ". " Nearly all business fail rapidly ". |
The fact is that any investment includes some risks, and certainty does not exist in the business world. |
| Woman, youth, unemployed people | Reflection |
| False Cliché | |
| " The creation of a company is a men's matter.” | A businesswoman has the same problems as if she was an employee. The positive motivations to set her own business are: to have a job suited to her abilities or qualifications, to make her dream come true, and to improve her self-esteem. |
CULTURAL BARRIERS |
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| Risks | |
| Falsos tópicos | Reflection |
| “Businessmen do not analyse, they only act” . "The creation of a company is like playing the lottery, you do not know what is going to happen until you run the business". "A job is safer than a business” "The creation of a company is riskier than being an employee". |
The truth is quite different. Businessmen, being successful during a relatively long period, analyse very well their opportunities evaluating them. They compare the planned results to their objectives, and assess their movements carefully before acting, |
| Capitalism / Anti-capitalism. | |
| Falsos tópicos | Reflection |
| " I will be rich with my first business ". | Ronstadt (1984) calls it "the Beginning of the Runner ". Some veteran businessmen impress us so much that we ask ourselves: how can they do it?, where do they get so many ideas?. The answer is that any business generates multiple options and facilitates the entrepreneur’s expansion. |
| "A businessman is not an ethical person ". | |
| Complexity Reflection | |
| Falsos tópicos | Reflection |
| "I cannot set up a company with my profession.” "A company is something very complicated ". |
The notion of dependence has led us to believe that professions aims at occupying job positions or employments. Any professional can identify many ways of action and choose among them the one that is more suitable for him or her. You can set up a company of any kind. |
Write down solutions that may help you overcome the former barriers.
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Now it would be advisable to decide what are the goals you would like to reach in your company. Once you find them, you will be able to start seeking them to get them.
Each person has a different view on life and different expectations of what the company is going to provide them after its creation.
You may answer the following questions so as to identify the objectives you are looking for and understand better the reasons why you want be the owner of a company.
Write a brief story, taking into account the previous aspects or others you would like to add, on the problems and advantages you foresee could happen when you become a businessperson.
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If you do not already know the managerial world enough and cannot answer the previous exercise, ask some businessmen questions like: what problems did you have? What problems do you have now? How did you manage to set up your business? What do you like and dislike about being a manager? In what way did the setting-up affect you and your family?. With these questions, you can know the advantages and disadvantages related to the creation of a new business. With them as well, you can decide if you have enough will to set up the company and to keep it operating.
Interview an entrepreneur classifying his commentaries about his managerial career and divide them into advantages and disadvantages.
Entrepreneur |
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| Advantages |
Disadvantages |
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Angel Andrés member of the SECOT3 summarizes the advantages and disadvantages of being a businessman as follows:
Entrepreneur |
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| Advantages |
Disadvantages |
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In a group, think about the aspects in which you agree with businessmen and the SECOT. A Phillips 6:6 group dynamics could be useful.
Lambing & Kuehl (1997) think that every self-employed person must be aware of the future advantages and disadvantages before initiating a business. (Figure 2).
Self-employment is one of the most difficult careers that exist. This is one of the great disadvantages, but there are others:
On the other hand, whereas the staff are specialized in a few certain areas, for example in trade, in finances, in personnel..., the self-employed people must handle all the functions until the business really works.
There are reasons to set up our own business but also barriers, but if we decide to start up one, it is essential to be entrepreneurial to look for opportunities and have will to face the problems. You can start up an individual business or a partnership. We can classify the different types self-employment into: freelance, teleworking, associated work, autonomous work and franchises.
Freelance |
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| This worker provides his or her services to a company without being part of its staff. We could say he or she makes up a micro company. | |
Advantages |
Disadvantages |
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Teleworking |
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| The worker does not carry out his or her work in the company’s premises. | |
Advantages |
Disadvantages |
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Autonomous work |
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| A self-employed who, obviously, does not work for a company. | |
Advantages |
Disadvantages |
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Associate work |
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| You decide to start a business with partners. | |
Advantages |
Disadvantages |
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Franchise 4 |
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| It is the least risky type of self-employment. It consists on a collaboration system between a company, which is the parent company (franchiser) and many other future companies (franchisee), by means of which the franchiser yields the mark, product or service to the franchisee. | |
Advantages |
Disadvantages |
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Look for information in magazines, at fairs … for entrepreneurs. Make a list with the forms of self-employment you would direct your enterprising career to.
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One of the basic questions, although difficult to answer, is what is an entrepreneur? In the literature on this term, it seems to be no agreement on its definition. Thus, Palmer (1971), Drucker (1991), Ginsberg and Buchholtz, (1989), and Chell, Haworth and Brearley (1991) only agree on one aspect: from the moment someone decides to become an entrepreneur, he or she has to put his or her imagination in motion, make an effort to discover any opportunity and transform it into his or her business.
Kilby (1971,18) establishes a comparison between the search of the definition of “entrepreneur” and the hunting of a fictitious animal, named Heffalump. In this children’s story of Winnie Puh of A.A. Milne the heffalump is said to be “quite a big animal. Many hunters who had previously used traps chase this animal, but none succeeds in capturing it. Those who have seen it say it is enormous, but they differ on its particular features. Some hunters, although they have not explored its habitat sufficiently, try to convince people that they have caught it with their better baits. Nevertheless, very few hunters are convinced that it was a Heffalump and the search continues”.
The definition of “entrepreneur” resents the same problem as that of the story. The entrepreneur’s characteristics are many-sided. For its classification, we will use the structure of Sánchez Almagro (2003) (Chart 3).
| 1. MOTIVATING FACTORS |
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| 2. PERSONAL CHARACTERISTICS |
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| 3. PHYSICAL CHARACTERISTICS |
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| 4. INTELLECTUAL CHARACTERISTICS |
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| 5. ABILITIES |
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People decide to become self-employed for several reasons: to make or sell a certain product or service, because their family members are entrepreneurs, to be independent, to be his or her own boss, to earn more money than being an employee, to try something new, to set up their own business, and get out of unemployment.
What are your reasons to set up your own company?
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According to Moriano & Palací (2003) it is possible to classify the entrepreneurs into two groups depending on the motivations that lead them to set up their own business or to work independently:
Generally, both his or her personal characteristics and his or her environment determine the characteristics of the entrepreneur. Among the social aspects related to self-employment, the role played by both the family and friends stands out since they provide the support needed by the entrepreneur. Besides, if some members of the family or friends have their own business or have set up their own company, the entrepreneur can imitate these models. The characteristics of the entrepreneur, at a personal level, are that they are convinced they have control on their own destiny (locus of internal control), that they are able to take risks, and that they can recognize opportunities.
At the beginning of any new managerial adventure, the entrepreneur needs to make quick decisions, to have a suitable level of self-control and self-confidence. However, in order that his or her company prospers and grows, he or she has to be enthusiastic about what she or he is doing, invest more energy, and improve constantly his or her abilities.
Entrepreneurs usually admit that training is essential for the success of a new company. Nevertheless, the advisers of the SECOT recommend the new entrepreneurs to have training and “get experience as an employee before starting a business".
Taking into account your characteristics as an entrepreneur, write down the advantages and disadvantages (personal, professional and economic) to carry out the chosen activity.
Definitively, it is important to analyse all these aspects to establish the necessary strategies in order to adapt our personal profile to the activity of our managerial career.
According to Gerber (1997), comparing entrepreneurs with managers and technicians working for a company, he appreciates the following basic differences (Chart 4):
PROFESSIONAL ROLE |
ORIENTATION |
NEED |
WISH |
| Managerial | Past |
Order |
Stability |
| Technician | Present |
Work |
To control the flow of their own work |
| Entrepreneur | Future |
Control |
Change |
Entrepreneurs orientate their thoughts towards the future, since they are capable of imagining whether a certain opportunity or idea will turn into a successful business. The need of control stems from the same orientation towards the future, since they need to control the resources to make their dreams come true.
On the other hand, entrepreneurs do not worry about changes. On the contrary, they are catalysts for change. As Schumpeter (1951) indicates, the entrepreneur acts to distort a situation of existing balance. He is located as an initiator of the change and a generator of new opportunities. The entrepreneur appears on the market as a force that breaks the balance, though every entrepreneurial activity generates a new situation of balance.
The executive, agent or manager is characterized by his pragmatism. His managerial conduct focuses on planning, order and predictability. His temporary orientation is located in the past, because the work of the executive is aimed to support the stability of the company. The executive tends to be more reactive than proactive. He does not want to change things, but to manage the company effectively in order to achieve the biggest benefit. Therefore, innovation would not exist without entrepreneurs, whereas business would not exist without executives.
Technicians focus on performing any specific task. For this reason, their temporary orientation is the present. Technicians consider great ideas must be reduced to methodology in order to have a real value. Technicians desire is to focus on their own work and to be able to have control on how to do it. Their favourite motto would be " if you want something done, do it yourself ". Moriano, Palací & Trejo (2001) gather (Chart 5) the main differences between the entrepreneur and the technician, following the directives of Gerber (1997).
ENTREPRENEUR |
TECHNICIAN |
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| Question | How does a company have to work?. | What task must be performed? |
| Business concept | A system to produce relevant results that will become one day benefits. | A place where people work to produce internal results as income. |
| Starting point. | An image of the future, to return afterwards to the present with the intention of changing it and then to adapt it to their vision. The current world is modelled depending on their vision. | They focus on the present. When they look to an uncertain future, they hope to maintain it as similar to the present as possible. The future is modelled according to the present world. |
| Vision | Integrated. | Fragmented. |
| Scale | Wide and expansive. | Reduced scale, inhibited and confined to the work that has to be done. |
| Model | The form of the business. | What is done in the business. |
| Product | The business. | What is submitted to the buyer. |
| Client | Opportunity. | Problem.. |
According to Gerber (1997), every businessperson has something of an entrepreneur, of an executive, and of a technician. If these parts are perfectly balanced, we would have a competent person who would take his or her company to the highest possible position. Nevertheless, this author affirms that the "common owner of a small business has only 10 % of entrepreneur, 20 % of executive and 70 % of technician". (Gerber, 1997, 38).
Read the following statements carefully and tick those that match with the way you would like to organize your own company and with your motivations. I am a person:
Miner (1996a, b) thinks that the entrepreneur must combine several of the dimensions of his or her capacity of organization (executive, strategic, leadership and innovation) with the motivations that lead him to creation (achievement, power, affiliation). This combination will be the cause of his or her success or failure when he or she set up his or her own company.
Look for the type of businessperson you want to be.
Capacity of organization. |
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M |
Executive |
Strategic |
Leadership |
Innovation |
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| Achievement | A Personal Achiever (energetic, flexible, they set goals) |
D Expert Idea Generator (They avoid taking risks) |
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| Power | C Real ManagerType (They want to stand out, to compete) |
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| Affiliation | B Empathic Supersales PersonType (Empathy, relationship) |
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There are as many reasons to consider seriously the alternative of setting up a company, as to consider the contrary situation. Everything depends on the person’s will and motivation. In any case, being your own boss allow you to have a job in the activity that you really want, to work with the people you need, and it can also be a way of earning your living and be successful. Actually, you have more responsibilities and your office hours do not have any limit, but you are also more satisfied. The essential thing is to have initiative to look for opportunities and face the problems.
Therefore, any person can set up a new company or start a business. What is difficult is to keep this company operating and obtain profit. Therefore, it is important not to be afraid of being your own boss nor consider it an easy task.
We think that the key steps are to have a good business idea, to plan your business, and to carry it out. It is important that every person chooses the form of self-employment that better matches his or her personal and professional interests. You will need some of the abilities given along this chapter to succeed. For example, aptitude to take risks, recognition of opportunities, resilience to adversity and self-confidence.
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