First things first, you need an idea of what you’re going to sell, and it needs to be something that people want to buy.
When running your own business, whatever you’re selling is broken down into two categories – goods and/or services.
Goods are physical products that an entrepreneur either makes themselves then sells to customers, or buys from someone else before selling them on. Whatever happens, an entrepreneur needs to make a profit. It needs to be cheaper to manufacture the product than it is to buy it, or the entrepreneur should be buying goods from a supplier for less than they sell them for.
Services are pretty much anything else you can sell, that is not tangible goods. What you’re participating in right this very moment is an educational service. Other examples of services are healthcare, cleaning and plumbing. If an entrepreneur’s idea involves helping someone to do something, or doing it for them, that business can largely be defined as a service.
The most important factor in becoming an entrepreneur is coming up with an idea for goods or services that businesses or the general public will pay you money for. This is why it’s crucial for entrepreneurs to pursue ideas that they’re good at, before deciding to go into business for themselves.
Along with a profitable idea, the other key ingredient of a successful business is the person that is going to be buying it – the customer.
Entrepreneurs sell goods and services either to other businesses (called B2B, or ‘business to business’), or to the general public (called B2C, or ‘business to consumer’), and sometimes to both.
In order to maximise the amount that they’re going to sell, an entrepreneur needs to first understand the people that they’re going to sell it too – called a ‘target market’. What kind of products does their customer base buy? How much do they spend on them? How often do they buy them? What do they like or dislike about what they buy?
Entrepreneurs can either ask customers these questions themselves, or engage with specialised firms that conduct research on their behalf, called ‘market research’ companies. The research industry in the UK alone is huge, and was worth almost £7 billion in 2020, 40% more than the year before.
It is vital to know the answers to the above questions (and many more) before starting a business. Entrepreneurs sometimes make the mistake of assuming that they understand their target market perfectly, and fail to fully understand the buying habits of their customer base.
Another key consideration of any entrepreneur should be how their idea works in practice, and how useful it is. What everyday problems or challenges does it solve for whoever it is that they’re selling it to?
All too often, business owners fail to make the link between an idea or business objective both sounding good in theory AND being viable in the real world.
Not only does the problem that you’re trying to solve have to be common enough for a business to make a profit, but it also has to be something that people are willing to pay money to solve.
Let’s take the private vehicle hire firm Uber as an example. The company was started in 2008, after a group of friends got tired of calling taxi firms that were unreliable and overly-expensive, so one of them started Uber. The company offered the chance for consumers to cut out taxi companies completely and make a booking directly with the driver.
Uber took a very simple problem (unreliable taxi companies), realised that there was enormous demand for it to be solved across the world, and figured out how to turn the simple act of booking a taxi into a multi-billion dollar company by developing software that changed the industry forever.
We’ve already spoken about the importance of reaching out to your target market to understand buying behaviours, but you also need to communicate with potential customers in other ways too, and let them know what it is that you’re selling. This is called ‘marketing’.
Most entrepreneurs find that communicating the benefits of their products and services is second nature to them. Successful business owners are those who are able to convince people to buy their own product over that of a competitor – the essence of sales.
Entrepreneurs have to think about ways to differentiate themselves from their competition. This is mostly done via marketing concepts such as branding, and creating their own business identity with logos, colours, phrases and advertising that is distinct to them, and them only.
All of this leads to the most important function of any business – sales. How customers view an entrepreneur’s company, or even the entrepreneur themselves, has a direct impact on how much of a product or service that company can sell.
This is of increasing importance in the digital age, where there is quite often nowhere to hide if a customer has a bad opinion of a company, and wants to tell the world about it.
Businesses don’t need to employ multiple people to turn a profit. Entrepreneurs who operate on their own, without any other employees, are called ‘sole traders’. This is a perfectly viable way to make a living. The UK Government’s definition of a sole trader is someone who runs their business as an individual and is classed as self-employed.
Entrepreneurs specialise in selling ideas, and quite often need help with other elements of their operation. As firms grow, the need arises to take on more staff to carry out key business functions. Entrepreneurs turn their business into ‘limited companies’ by registering their company with Companies House – the UK Government organisation that administers the setting up and running of all businesses in the UK – and naming Directors that are responsible for the operation of the business.
Here’s some of the main departments you’ll find in most limited companies, and what they do:
Entrepreneurs don’t just possess a financial imperative to make money. There are moral considerations too, especially in an age where climate change and other societal issues are front and centre on the global political stage.
Many entrepreneurs and politicians talk about the need for modern economies to contain what are called ‘sustainable’ businesses, broadly defined as companies that make a profit without negatively impacting the environment, community, or society as a whole.
This can mean anything from businesses using recyclable materials in the manufacturing process, to paying employees a fair wage and making charitable donations to good causes in their area.
As an entrepreneur, none of what we’ve discussed in this module matters unless you possess one quality – self-belief.
Starting a business can be an arduous task. According to the Office of National Statistics, 80% of new businesses fail within their first year, and only 42% of businesses that started in 2013 were still trading 5 years later.
Entrepreneurs encounter many barriers early on, from financial hardship to long working hours and an unfavourable work/life balance. Believing in yourself and staying committed to what can often seem a distant set of goals is paramount.