I had a look at my previous posts on the subject (here and here) and as more than 3 years have passed since the last one, I think I should update with more insights. Just to get you into the subject quickly I’m talking about the difference between being let’s say a good programmer starting a programming business and an entrepreneur starting a business that is not necessarily based on their profession.
Through my series of entrepreneurship interviews and my own experience I found out that both can be successful so there isn’t a good one or a bad one. Different, yes. Let me define the type of entrepreneurs (or at least the ones I got the chance to get in touch with so far):
- Programmer starting a business (you can put anything you want instead of programmer, but as I’m mostly involved with software businesses it’s easier for me to use it as an example). Has an excellent product idea and wants to turn it into a business.
- Entrepreneurs looking for opportunities to make money out of a market need and that get involved into running the business.
- Entrepreneurs spotting opportunities and hiring a CEO to make it work.
- Necessity entrepreneurs that don’t necessarily follow opportunities but are more or less forced into entrepreneurship to make a living.
Let’s get down to business and see what are the characteristics of each type of entrepreneur.
Necessity entrepreneurs
Necessity entrepreneurs are more likely to be found in emerging economies – they need to make a living and they open a shop or a small production factory to provide income for their family. They usually run only one business. Even if their business grows, the necessity entrepreneurs don’t really evolve towards spotting opportunities; they fall more into the self-employed category than in a real entrepreneur category. Running the business is done mostly on real life management skills. They do good on a local scale because they get to know very well what they are doing and usually fill in a niche that is not interesting for the other type of entrepreneurs. As an example I would name the small grocery on my street corner – they do provide an useful service, are likely to survive times and will always be run in family because but it’s unlikely to be purchased by a bigger business. Necessity entrepreneurs are focused on running the business. They fail if local market environment changes (for example if a bigger shop appears in the area and gets the customers).
Entrepreneurs getting involved in running the business
They are different from the necessity entrepreneurs because they start a business because they spot an opportunity, not because they need income to provide for their families. As they base their decisions on spotting opportunities they are likely to start more businesses, but either they want to be in control, either they don’t do well enough to hire a CEO. They will apply advanced management techniques because getting things organized at their best will offer them time to think about other opportunities. Their businesses are for sale – they could start another one at any time. They get involved in the well being of the people they are hiring and nurture the business as their own child. Most start-up entrepreneurs fall into this category, start without big outside investment, make the business run up to their best abilities. Entrepreneurs running the business are focused on the business and spotting new opportunities. They fail if they don’t outsource their tasks to employees or don’t see the forest because of the trees.
Entrepreneurs hiring CEOs to run the businesses
This type is probably the purist entrepreneur. Spots an opportunity then invest money into starting and running it, while hiring a CEO to actually run it. They can have many businesses because they can focus exclusively onto finding ideas, seeking investment, selling the business. As a downside, they get less involved and sometimes don’t really know all the details. Usually they come from accomplished business running entrepreneurs that got successful to the point where they don’t need to get involved into running the (new) business. They are most focused in getting the best return for their investment, but most of the things that happen in the business itself depends on the CEO. They fail if they hire the wrong CEOs.
Programmers starting a business
Again, programmers is just a template name for any professional. They think about opportunities in terms of getting new products done and not about different businesses areas. They do apply management techniques and invest a great deal of efforts into making the business run. They make it big if their product is truly innovative and there is a market for it. Mostly focused on a product and not into finding more business opportunities. They fail if they don’t understand a business is more than the development of the product.
