The Ultimate Guide to Entrepreneurship

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February 17th, 2021.
The Ultimate Guide to Entrepreneurship

Entrepreneurship is the process of starting or improving upon a business with the ultimate goal of making a profit.

It often involves great risk and uncertainty, but it's also an opportunity to overcome those challenges and manage multiple aspects of a business operation. From marketing to accounting to logistics and beyond, entrepreneurs oversee the many facets of running a business.

Entrepreneurship isn't easy. We're all familiar with the metric that 90% of startups fail. Despite this, entrepreneurship remains an extremely enticing career path. Like many high-risk activities, it often draws people who see the risks as an exciting challenge rather than a disclaimer.

And while the risk might be great, so are the rewards — entrepreneurship is easily one of the most creative and rewarding forms of business. Some of the most well-known people across the world are and were famous entrepreneurs, including Oprah Winfrey, Bill Gates, Walt Disney, J.K. Rowling, and Steve Jobs.

If you aspire to be like these successful people, entrepreneurship might be the path for you. That's why we wrote this guide — to get you started on your journey.

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You may have also heard about social entrepreneurship. What is social entrepreneurship, and why is it unique?

Social Entrepreneurship

Social entrepreneurship follows the same process as entrepreneurship but — instead of creating just any type of unique offering for consumers — it focus on the creation of a solution to a community issue or problem.

Social entrepreneurs work to develop, fund, and implement solutions to a wide range of community issues related to social, cultural, and environmental challenges. They work to foster positive change in society through their initiatives and innovations.

Small businesses and entrepreneurial ventures are more similar than they are different, however. Both serve their communities (whether local or digital), deliver value for their audiences, and create new jobs. 

Entrepreneurship can feel like a tedious and intimidating process at times. However, these rewards of entrepreneurship are worth your hard work and time.

Entrepreneurship Statistics

Entrepreneurship has been on a steady incline for the past 19 years. After falling during the U.S. recession between 2008 and 2011, entrepreneurship as a career path has rebounded and (despite the 2020 COVID-19 pandemic) is now back to pre-recession growth rates.

Here are some other interesting entrepreneurship statistics:

Now, it's time to consider how you're going to start your business.

1. Determine the legal structure of your business.

From a legal perspective, what kind of business will yours be? This may change as you grow, and state laws vary. Let's take a look at the four major types of legal structures you might choose to implement when starting your business:

  • Sole proprietorship: In a sole proprietorship, you are the business as far as laws and taxes are concerned. You're personally liable for debts and losses. When the time comes time to raise funds, you'd be asking backers to invest in a person rather than a business.
  • LLC: With an limited liability company, you are not personally responsible for any financial or legal faults of the business. Although an LLC is more costly and complex to set up in comparison to some other legal structures, it comes with several tax advantages and protects owner(s).
  • Partnership: A partnership is a single business where at least two people share ownership. Each owner contributes to all aspects of the business as well as shares in its profits and losses.
  • Corporation: A corporation is a legal entity separate from its owners and has most of the rights and responsibilities an individual possesses (to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes).

2. Choose and register your business name.

Select and register your business name. While this process may start with a fun brainstorm, it's actually a paperwork-heavy legal process with implications for your business down the road.

If you're starting an LLC, your name will be registered automatically when you register your business with the state. Otherwise, you'll need to go through a separate registration process. Start with a trademark search and then see if your domain name is available. (Tip: You can trademark your name and logo for around $300.)

3. Secure licenses, permits, and more.

Make sure you have all of the right permits and licenses to ensure your business is legal. If you sell "tangible property" (i.e., physical items), you're going to need a seller's permit. This allows you to collect sales tax from customers. Some states require it for certain service-oriented businesses as well.

The IRS can point you to the right office in your state, and SBA.gov has tools to help you find out what kind of license you'll need to operate your business.

4. Build your mission and vision statements.

What does your business do? What do you stand for? What problem do you solve? How do you plan to make the world better? These are questions your mission and vision statements should answer.

This is a key component of your marketing strategy. Brands with a strong identity and mission statement have an easier time producing authentic and meaningful content that effectively communicates their core values.

Mission Statement vs. Vision Statement

A mission statement explains the purpose of your organization and how your business serves customers. It typically includes a general description of your organization, its function, and objectives. Your mission statement should clarify the "what," "who," and "why" behind your business.

A vision statement describes where your company aspires to be upon achieving its mission. It describes where your company wants the community, or the world, to be as a result of their products or services.

Learn how to define inspiring vision and mission statements for your business with a free template.

Your business should have strong and clear vision and mission statements. When you write vision and mission statements, define and explain the reasons why your business exists. Your statements should provide insight into who you are as a business and brand for both internal and external audiences including employees, partners, board members, audience members, customers, and shareholders.

(If you choose, you can combine your vision and mission statements into one, comprehensive statement for your business and brand to share and stand by.)

5. Write your marketing plan.

Once you have your license and your name, it's time to start building an online presence and telling your story — a.k.a., developing a marketing plan.

Ask yourself the following questions:

  • Who wants what I'm selling?
  • Which people have a need for what I'm selling?
  • Which people would become promoters of the product I'm selling?

To simplify this process, consider your buyer personas (in-depth, semi-fictional profiles designed to help you better understand the needs of your target customers).

Dig into who your buyer personas are and what messaging would likely resonate best with them. Consider their backgrounds, interests, goals, and challenges as well as their age, what they do, which social platforms they use, and so on.

Before you embark on entrepreneurship, determine your goals. As you'll see below, the most successful entrepreneurs get into business-building for the right reasons. Without a genuine goal, it's unlikely you'll have the determination and motivation to push through the difficult times.

Whether your goal is to create career freedom, make a difference in your community, or simply have fun (or all the above), take some time to determine it before you start building.

How to Become a Successful Entrepreneur

Entrepreneurship is about blazing your own trail and doing something that's never been done before, so there isn't a one-size-fits-all recipe for success.

With that said, there are various key traits and best practices most successful entrepreneurs share.

1. Start a business for the right reasons.

Start your life as an entrepreneur by identifying a need or a problem and looking for a way to solve it.

Focus on the process, not the potential outcome. Future success and riches alone won't help you through the difficult times and late nights that pave the road of entrepreneurship.

2. Leverage prior knowledge and experience.

Prior experience — whether from your day job or past startup ventures — is often critical to your success as an entrepreneur. In fact, 98% of founders surveyed said their prior work experience was "extremely important" to their success. Many, many startup ideas come from experience gained in previous employment.

That being said, if you're currently in a full-time role or less-than-desirable job, don't wish away your current experiences in favor of entrepreneurship. Learn from where you are today to inspire where you want to be tomorrow.

3. Remember, it's all about execution.

Guy Kawasaki said it well: "Ideas are easy. Implementation is hard."

By executing and being first to the market, you can seize the "first-mover advantage." So, if you're the first to market a good idea, your competition will have to play catch up. Factors such as brand recognition and switching costs work in your favor and make it harder for others to replicate your success.

The classic example is Amazon. By the time their success prompted competitors to start their own online bookstores, Amazon had already taken a big enough market share to make competition nearly impossible. Their execution (not their bright idea) is what changed the way the world shops.

Execution is a habit; it's something you can hardwire into the DNA of your business. Make it a priority to develop a culture of action and execution.

4. Embrace uncertainty and risk.

Starting your own business is a journey into the unknown; to succeed, you need to embrace uncertainty.

Risk is not only an essential element of entrepreneurship, but it also tends to be directly related to success: The bigger the risks, the bigger the potential payoff.

5. Don't fear failure; learn from it.

Studies have shown that one of the clearest indicators of future success for an entrepreneur is whether they've experienced failure in the past. This may sound counterintuitive, but not when you think of failure as a teaching tool.

In fact, many of today's tech startups live by the mantra: "Fail forward," and several businesses that are now household names — like Airbnb and Uber — took multiple launches to succeed.

In the long run, it's better to focus on developing a minimum viable product, launching, and optimizing based on feedback, rather than trying to get it right the first time with an untested idea of a "perfect" product.

How much risk you take depends on you, your business, and specific circumstances. For example, buying a domain name doesn't require the same level of commitment as building a prototype. What matters most is that you grow from your setbacks and maintain a willingness to try new things.

Speaking of risk and failure in entrepreneurship, let's look at some commonly made mistakes and risks for entrepreneurs. 

Demand Risk

Are consumers interested in your product or service offering? Demand risk is the prospective customers' willingness to purchase or adopt the offering.

Technology Risk

An entrepreneur assumes technology risk when engineering or scientific research and development are necessary to create the product. For example, if you plan to create a ground-breaking cure for a disease, you'd assume the risk if the scientific development wasn't successful.

Execution Risk

To be a successful entrepreneur, you also need to be a strong leader. Execution risk is used to describe the entrepreneur's ability to build a strong team of employees and partners to carry out plans.

Financial Risk

Every entrepreneur assumes financial risk, and oftentimes use personal funds to grow their business. They must operate under the assumption that they'll be able to access external capital from other funding sources (e.g., investors, venture capitalists, crowdfunding).

How to Get Funding for a Business

Anyone who's built a business or multiple businesses will say there's no scarcity of money available for entrepreneurial ventures. If you have valuable ideas, strong execution, and clearly communicate your vision, you'll have no trouble raising funds.

Focus on determining which funding strategy best suits your needs and think about how you can offer value to potential backers. 

Bootstrapping

Bootstrapping is self-funding and has many advantages. It doesn't incur interest and allows you to maintain control over your business and its equity (to name a few). I bootstrapped my college business and was able to reinvest many funds back into my marketing.

By self-funding, you don't take any outside funds to grow your business. Bootstrapped businesses keep costs low and scale at a sustainable pace. We all know the stories of multi-billion dollar companies like Apple that started in a garage or a basement. According to SBE Council, 51.6% of new businesses do likewise.

The internet is your friend: Domain names are cheap. Social media offers free marketing. Online retail has a fraction of the overhead of a brick-and-mortar location. When it comes to generating cash early in the game, look at your business model. Consider pricing in a way that generates revenue in a recurring fashion (i.e., subscriptions over one-off sales).

Small Business Loans and Venture Capital

Traditional small business loans and venture capital funding offer big money … but often with big strings attached.

Small business loans provide an established source of financing that favors more traditional business models. If you go this route, expect to present a meticulous and clear business plan and account for every penny of it.

Venture capital is on the opposite end of the spectrum. VC backers look to put serious cash behind ideas that promise quick and massive growth. Very few have what they're looking for. The ones that do can expect to trade some of their control of the business and a share of its profits in exchange for VC backing.

It's essential to find a backer who shares your vision and offers more than just money. With that said, there are some less obvious benefits of equity financing. The process of honing your pitch will reveal areas for improvement in your business model that you might not have been otherwise discovered.

Funding is also validating. It means someone is willing to put a dollar amount on how much they believe in what you're doing. And an influx of cash when you're starting out makes all the difference when you need to quickly solidify your first-mover advantage.

Silent Partner

Another option is to work with a silent partner. Similar to a VC backer, this is someone who puts significant funds into your project and expects significant returns. But unlike a VC, a silent partner doesn't want any part in your business decisions. Because silent partners don't have a say in your business, they're considered investors by the SEC.

Crowdfunding

Crowdfunding sites, like Kickstarter and Indiegogo, are a new source of funding that have many upsides for entrepreneurs. Crowdfunding provides money without taking equity or autonomy. These platforms allow you to go straight to your fans and potential users. This promotes future growth and raises capital at the same time.

kickstarter indiegogo crowdfunding

Source

Crowdfunding sites also serve as marketing platforms. Your content, branding, and mission statement will attract people to your campaign and hopefully motivate them to back it.

Since you're not giving crowdfunding backers an equity stake or seats on the board, you have to give them something. Campaigns on these platforms tend to offer backers prizes in exchange for their contribution: this can be early access to your product, tickets to a live event, etc. Here you have another learning opportunity. Designing a crowdfunding campaign forces you to consider the value you're offering your customer.

They say that the best marketing technique is to design an outstanding product. If what your offering is really of value, your backers will let you know by paying you for it.

Friends and Family

Mom and dad might not have as much money as a venture capital firm or a big bank, but they tend to have much better terms. Family and friends can be a great source of seed money, particularly when you're young and inexperienced. They're more likely to invest in your potential and your work ethic than a backer who might want to see proof of concept you've yet to produce.

Special Programs

There are entire industries out there — from co-working spaces to CRM software to government grants — dedicated to helping entrepreneurs succeed.

The recent boom in entrepreneurship has sparked competition between governments at local, state, and national levels to attract and foster business development. Business incubators provide essential infrastructure and tools that might otherwise be out of reach for small businesses.

Seed accelerators are highly competitive programs that put startups in head-to-head competition for seed funding. Winners often receive mentorship and educational resources along with financing. (Here's a ranking of seed accelerators.)

And here at HubSpot, we have a few special programs of our own:

Entrepreneurship Books

Looking for books to inspire and guide your entrepreneurial efforts? Here are some of the most popular reads:

1. "Tools of Titans" by Tim Ferris

From the #1 business podcast on iTunes: learn the tools, tactics, and morning routines of 200 of the world's top performers in areas ranging from tech to powerlifting to special operations and the music industry.

2. "Influence" by Robert Cialdini

Based on 35 years of research, "Influence" breaks down the psychology of persuasion into six key principles. This is a must-read for anyone interested in hearing the word "yes" more often.

3. "The Lean Startup" by Eric Ries

A blueprint for the modern startup and a survival manual for a business environment where failure is the rule and not the exception. Learn how to innovate rapidly, put ideas to the test, and operate in the "extreme uncertainty" that is the startup ecosystem.

4. "Idea to Execution" by Ari Meisel and Nick Sonnenberg

"How to optimize, automate, outsource everything in your business… ." The authors used the process outlined in this book to take a business from an idea on a cocktail napkin to a 24-hour launch.

5. "Pivot" by Jenny Blake

"Pivoting" is the act of taking your existing strengths in a new direction. It's about maximizing the opportunity presented by the question, "What's next?" Blake explores the value of pivoting in business and in one's own career.

6. "Built to Last: Successful Habits of Visionary Companies" by Jim Collins

Case studies of business that have stood the test of time. "Built to Last" breaks down the structural secrets to organizational longevity. This is inspiration for anyone hoping to leave a legacy in business.

7. "Smarter, Faster, Cheaper" by David Siteman Garland

A guide to marketing for entrepreneurs in the digital age. Garland includes practical advice to make the most of online marketing tools and platforms.

Over to You

Entrepreneurship is a learning process and a journey of discovery. You don't need to know everything to take the first small step, and when starting your own business, the best way to learn is by doing.

You have the tools and information you need to start — all that's left to do is to get to work.

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