Defining entrepreneurship, types of entrepreneurship and outlining skills you need to be a successfu Read More
The past few years have seen an increase in entrepreneurial opportunities available to women who are looking to lead and succeed in their own businesses. According to American Express’s “2019 State of Women-Owned Businesses” report, the number of women-owned businesses grew 21% between 2014 and 2019, compared to 9% growth in businesses overall. Another encouraging sign: businesses owned by women of color grew by 43% in the same time period.
While this does not necessarily suggest a level playing field, it does make clear that, within the world of entrepreneurship, there is more room than ever for women spanning all vocational backgrounds and educational levels. Women hoping to succeed in business can help their chances by understanding the four different types of entrepreneurship.
What Does It Mean to Be an Entrepreneur?
An entrepreneur is defined as anyone who founds or organizes a business, then continues to be an active participant in the operation of that business. In other words, an entrepreneur is anyone who launches and continues to run their own company.
Investopedia notes that entrepreneurs typically finance their ventures via loans from investors, their own savings, or money from their families. This highlights the importance of having a solid financial plan in place, as well as a thorough understanding of the risks inherent in the enterprise.
- Whitney Wolfe Herd, the founder of Bumble. Fast Company explains that the Bumble dating platform is distinct from competitors because it requires women to initiate interest. Wolfe Herd began her company not just to empower women in their social lives, but also in the technology industry and society in general. Her company is working to counter the “Brotopia” that dominates the internet, a goal that is evident in the company’s hiring policies: 82% of Bumble employees are women.
- Naomi Hirabayashi and Marah Lidey, two women of color who founded the tech company Shine. Women’s Health describes Shine as “a text-messaging service that sends subscribers counsel on everything from finding balance to dealing with a toxic friend.” The women were motivated to start the service by their reliance on each other as close coworkers, or “work wives,” who frequently confided in and sought personal and professional advice from each other. In less than two years the texting service attracted more than 2 million users in 189 countries.
Becoming an Entrepreneur
While there is no one “right” way to become an entrepreneur, the general career trajectory usually looks something like this:
- Develop an idea for a unique or in-demand business.
- Learn about and gain experience in a range of business roles, including finance and accounting, management, and marketing.
- Make a business plan and establish a source (or sources) of funding.
- Recruit talented workers and managers with the skills needed to develop, test, implement, support, and maintain the company’s products.
- Devise strategies for launching the product or service, and for attracting and retaining customers.
- Once the company is established, seek out ways to grow revenue by expanding into new areas and product lines.
As the company matures, the founder’s role is likely to include both long-term strategic planning and short-term tactical management and financial decisions. Pursuing a Master of Business Administration (MBA) or similar management-focused degree provides women entrepreneurs with the skills they’ll need to succeed at every step of the process as they realize their business goals.
Learn More About Entrepreneurship
- Forbes, “Seven Things to Know When Becoming an Entrepreneur.” Discover some of the core principles of entrepreneurial pursuit.
- Investopedia, Entrepreneur. Dig deeper into the specific definitions of entrepreneur and entrepreneurship
What Are the 4 Types of Entrepreneurship?
Anyone interested in starting and running their own business should consider which entrepreneurial model they prefer: small business, scalable startup, large company, or social entrepreneurship.
Small businesses represent the overwhelming majority of U.S. entrepreneurial ventures. A small business could be any company, restaurant, or retail store that’s launched by a founder, without any intention of growing the business into a chain, franchise, or conglomerate. For example, opening a single grocery store falls under the small business model; creating a nationwide chain of grocery stores doesn’t. Small business entrepreneurs usually invest their own money to get their companies off the ground, and they only make money if the business succeeds.
Scalable startups are less common than small businesses, though they tend to attract a lot of media attention. These businesses begin on a very small scale, often as just the seeds of an idea. This germ is then nurtured and scaled, typically through the involvement of outside investors, until it becomes something much larger. Many Silicon Valley tech companies fall under this model; they begin in an attic, garage, or home office before eventually scaling into large corporate headquarters.
Sometimes, entrepreneurs work within the context of a larger, established company. Imagine that you work at a large auto manufacturing company. Through careful market research, you realize there is a high demand for motorcycles, and that your company has many of the technologies and processes in place to branch into motorcycle production. You go to your boss and ask for the funding to launch a brand-new motorcycle division, and you are approved. This is an example of what the large company entrepreneurship model might look like in practice.
The final model to consider is social entrepreneurship, which seeks innovative solutions to community-based problems. According to Investopedia, social entrepreneurs “are willing to take on the risk and effort to create positive changes in society through their initiatives.” In other words, a social entrepreneur launches an organization that’s fundamentally about enacting positive social change, not merely generating profits. The social change in question may pertain to environmental conservation, racial justice, or philanthropic activity in an underserved community.
Small Business Entrepreneurship
According to the Small Business Administration (SBA), more than 99% of all U.S. businesses fall into the small business category.
Defining Characteristics of Small Business Entrepreneurship
What distinguishes small business entrepreneurs from other kinds of entrepreneurs? There are a few distinct characteristics:
- Small business entrepreneurs focus initially on a single product, market, or locality. While in their startup phase, the entrepreneurs probably don’t have plans to expand the company.
- The initial goal of small business entrepreneurs is to make a profit, although even in its early stages, the business may be motivated by the entrepreneur’s desire to effect social change.
- Most small businesses are either self-funded or funded through small business loans. Outside investors and venture capitalists are very rarely involved.
- These are among the greatest challenges small business entrepreneurs face:
- Ensuring a steady cash flow without relying on third-party investments
- Finding time for family and friends
- Staying abreast of technology and market changes that affect the business
- Devising a marketing strategy to attract the company’s target audience
- Maintaining a solid reputation for their brand
- Keeping an eye on the competition
What Industries Do Small Business Entrepreneurs Work In?
While small business entrepreneurs work across a range of different fields, many of them operate in the context of “mom and pop” brick-and-mortar shops: hairdressers, bakers, restaurateurs, and retail store owners.
Additionally, small business entrepreneurship can encompass consultants and creative professionals, such as copywriters, marketers, or graphic designers who go into business for themselves. Service trades, such as electricians and plumbers, also fall under this category.
Find Out More About Small Business Entrepreneurship
- Business Know-How, “16 Tips for Starting and Succeeding in Your Own Business.” Review some best practices for launching a small business.
- Business Insider, “11 Tips for Starting a Small Business with Little to No Money.” Find out how you might start a small business on a shoestring budget.
- , “5 Small-Business Ideas for the Beginner Entrepreneur.” Brainstorm some ideas for launching a small business.
Scalable Startup Entrepreneurship
The scalable startup entrepreneurship model at first resembles a small business, but differs in its intentions for long-term evolution.
Key Characteristics of Scalable Startup Entrepreneurship
There are a few traits that distinguish the scalable startup model from the small business model, as well as from other types of entrepreneurship.
- Like small business entrepreneurs, scalable startup entrepreneurs start their companies on a modest scale. But unlike small business entrepreneurs, scalable startup entrepreneurs have a vision for growth from the outset.
- Scalable startup entrepreneurs look not just to make profits but also to generate revenues they can invest back into the business, fueling growth.
- The most common way to fund a scalable startup is through the pursuit of venture capital.
- Scalable startup entrepreneurs face several unique challenges, as Startup Nation describes:
- Attracting investors and raising venture capital
- Recruiting talented managers and employees without impinging on cash flow or incurring debt
- Ensuring the business plan is flexible enough to accommodate shifting markets and new technologies
- Planning and implementing an infrastructure for the business that is inexpensive to launch yet capable of growing without disrupting the core business
- Realizing aggressive growth targets to meet investor expectations and attract future funding
The team the entrepreneur assembles to get the business off the ground and implement its growth strategy has to possess all requisite skills, but more importantly the members must share the founder’s vision for the company.
Melanie Perkins, Canva
In 2013, Perkins launched Canva with a simple premise, as CNBC explains: Make graphic design accessible to everyone. Today, the company is often mentioned in the same breath with massive tech giants, and it is valued at more than $3 billion. Perkins first envisioned the company while in college, where she helped other students learn to use design software. She knew there was an easier way to make designing accessible.
Working with Canva co-founder Cliff Obrecht, who is now Perkins’ fiance, she launched an online school yearbook design firm at the age of 19. The couple had very little business experience and few resources, yet they created a website that allowed students to collaborate and design personalized profile pages and articles for yearbooks that the pair would print and deliver to schools themselves. Seven years later, that business continues to thrive. Now, at the age of 26, Perkins has made her dream of a free, easy-to-use design platform a reality.
Ayah Bdeir, LittleBits Electronics
You’re never too young to start exploring the worlds of electronics and engineering. That’s the premise behind LittleBits, which provides STEM-centric (that is, science, technology, engineering, and math) building blocks aimed at empowering kids and introducing them to electronics careers. Bdeir has found great success; after starting small, she now sells her products in more than 100 countries. She got the idea for the company while a student at the Massachusetts Institute of Technology Media Lab, where she earned her master’s degree and participated in the Media Lab’s Lifelong Kindergarten project, as the Observer describes.
LittleBits is based on the concept of learning through play: Bdeir started by taking prototypes to Maker Faires, where tinkerers and do-it-yourselfers share their innovations. After lines of kids began forming at her booth, she realized children were engaged by the devices they created and would ask question after question about how they worked. Bdeir was able to convert this “lightbulb moment” into a successful business enterprise with an important social message: Women belong in STEM fields as much as men do.
Learn More About Scalable Startup Entrepreneurship
- Houston Chronicle, “Examples of a Scalable Business Model.” Gain further insight into what a scalable startup model can look like.
- , “Why It’s a Huge Mistake to Grow Fast Without a Scalable Business Model.” Learn how to build a business with scalability in mind.
Large Company Entrepreneurship
Fewer than 1% of all U.S. businesses qualify as large businesses, but due to their scope and influence, these companies are often well-known to the public.
Defining Large Company Entrepreneurship
The primary thing that distinguishes this model is that rather than building a new business entity from scratch, it is the creation of a new business entity within an existing company.
- Large company entrepreneurs address the needs and opportunities of an existing business through innovation. This may include a new product line or division.
- Large company entrepreneurs look to branch into new customer markets, broadening the reach of an established business.
- Large company entrepreneurship may entail the acquisition of new companies and resources, or investment into research and development.
- The key to success for large company entrepreneurs is sustaining growth in the long term, so the major challenge to their success is to anticipate and avoid obstacles to growth:
- Ensuring that the firm’s new and innovative products are first to market
- Protecting and growing the market share of existing products while promoting the new offerings
- Building a cohesive corporate culture that is easy for newly acquired organizations to adopt
- Overcoming the inertia that can prevent large firms from acting on and responding to changing markets and innovative technologies faster than the competition
- Failing to scale sustainably (growing too much, too soon)
The tech company has used acquisitions such as YouTube to amass a vast tech portfolio beyond search, which remains tremendously profitable but lacks the steep growth projection of other technologies. This strategy allows the firm to be active in many different markets, including real-time traffic (Waze), smartphones (Motorola Mobility and HTC’s Pixel Smartphone Division), and health wearables (Fitbit), as CB Insight describes. Two recent Google acquisitions are the customer service software suite Onward, which the company acquired to gain a share of the growing market for automated customer service, and Tenor’s GIF search engine, which broadens the firm’s search portfolio and attracts a much-desired tech audience: professional web developers.
CVS is another company that has used acquisitions to expand its reach into new consumer markets. One significant example is CVS’s acquisition of the Target pharmacy chain, including more than 1,600 pharmacies and clinics. However, the company’s strategy goes beyond growth to encompass a reinvention of the healthcare industry, as noted by its 2018 acquisition of insurance firm Aetna. A key to its strategy is the conversion of CVS pharmacies into “HealthHUBs,” as the Hartford Courant explains. CVS envisions the acquisition as a way for it to capitalize on fundamental changes in how people receive healthcare: a broader role for pharmacists in the provision of primary healthcare services.
While Netflix is generally an acquisition-light company, it has broadened its reach through various creative ventures. One example is its acquisition of StoryBots, which proved instrumental in Netflix building out its children’s programming lineup.
- S. Small Business Administration, Merge and Acquire Businesses. Discover how mergers and acquisitions can help an existing business grow and expand.
- Entrepreneur, “4 Models for Building Value Through Acquisitions.” Learn some ways to scale a company through acquisitions.
Social entrepreneurship has emerged as businesspeople consider the effect their company has on the world, beyond mere profits and losses.
What Is Social Entrepreneurship?
The primary factor that distinguishes social entrepreneurs from the other types of entrepreneurs is their mission. These entrepreneurs are focused on solving a problem in their community or furthering some kind of social change. Their objective goes beyond the bottom line.
Some additional factors to consider:
- Most examples of social entrepreneurship take a nonprofit structure. Money that’s generated is put toward advancing the company’s mission and maintaining necessary overhead but not necessarily toward corporate growth or expansion.
- Social entrepreneurship often involves alternative forms of fundraising, which may include grants, sponsorships, or small-donor fundraising within the community.
- The World Economic Forum identifies social entrepreneurship as a powerful way to apply market-driven approaches to address social problems. However, despite their success at finding innovative and practical solutions, social entrepreneurs face serious challenges:
- Innovation requires experimentation, but funding for social entrepreneur projects focuses on results, so there’s little incentive to pay for unproven approaches.
- All enterprises require a steady flow of capital, but social entrepreneur projects tend to provide investors with lower returns than other opportunities.
- Relations between social entrepreneurs and investors can become strained by conflicting goals and a lack of financial transparency.
Shiza Shahid, founder of the Malala Fund
Shahid is a Pakistani entrepreneur who launched the Malala Fund to promote educational opportunities for girls, in particular those from disadvantaged communities. The New York Times reports that after co-founding the Malala Fund with Nobel laureate Malala Yousafzai, Shahid started an investment fund for mission-driven startups. Most recently, Shahid and two partners launched a line of cookware for the “modern multi-ethnic American kitchen.”
Audrey Cheng, founder of Moringa School
Cheng’s Moringa School in Nairobi, Kenya, provides local girls with opportunities to learn coding and other foundational computer programming skills. Cheng was motivated to create the school by the high unemployment rate in Africa, especially among college graduates. Moringa prepares students with the skills they will need for their professions, but also readies them to thrive in the modern workplace.
Jessica Schreiber, founder of FABSCRAP
Schreiber was still in her 20s when she founded FABSCRAP, a fashion recycling company based in New York City. According to a Forbes profile, the organization “works with 135 labels across the city, collecting and recycling their textile waste, reusing discarded materials to create new clothing or simply selling them at a discounted rate.”
- HubSpot, “Social Entrepreneurship: What It Is and Why Everyone’s Talking About It.” Take a closer look at this model of entrepreneurship.
- S. Chamber of Commerce, “7 Steps to Becoming a Successful Social Entrepreneur.” Get practical steps for launching a socially oriented venture.
Tips for Women Entrepreneurs
With each passing year, more and more women are finding success in their entrepreneurial ventures. In fact, according to the American Express “2019 State of Women-Owned Businesses Report,” women-owned businesses grew from 4.6% to 42% of U.S. businesses between 1972 and 2019.
Challenges for Women Entrepreneurs
Such progress is encouraging, but there are still many challenges for women in business. Some of the most common roadblocks that women entrepreneurs face include:
- Defying social expectations. Too often, entrepreneurship is still considered a predominantly male undertaking.
- Accessing needed funds. There remain significant funding gaps for women entrepreneurs as compared to male entrepreneurs. Women of color are at the greatest disadvantage of all.
- Building support networks in fields that are still dominated by men can be difficult for women.
- Balancing business and family remains a challenge for women, particularly for working moms.
Guidelines for Women Entrepreneurs
For women who wish to embark on the road to entrepreneurship, some basic tips and best practices include:
- Don’t be afraid to fail; failure is a natural part of the entrepreneurial journey. As long as you learn from your failure, it doesn’t have to define you.
- Seek feedback and data wherever possible, including research into key competitors. See what works and what doesn’t work for other ventures in your field.
- Become an avid learner. Continually read books, immerse yourself in new skills, and commit to being curious.
- Don’t neglect your personal brand. Build a reputation for thought leadership. Use public speaking opportunities, blogging, guest blogging, social media, or video.
- Don’t surround yourself with flatterers, but also don’t entertain too many doubters in your orbit. Seek counsel from those who can encourage but also offer constructive criticism.
- Continue to network and build relationships across your industry. Conferences and professional events can be invaluable.
Resources for Women Entrepreneurs
- Bustle, “7 Things a CEO Wants All Aspiring Female Entrepreneurs to Know.” Review these tips and suggestions, which are specific to women pursuing entrepreneurship.
- Forbes, “Five Women Entrepreneurs Share the Best Advice They’ve Ever Received.” Get some advice directly from other women in business.
Which Type of Entrepreneur Are You?
For women interested in owning and operating their own company, opportunity awaits. One of the first questions to address is which of the four basic models you’ll embrace. Consider the merits of each, and how they might help you get your own entrepreneurial dream off the ground.