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An entrepreneur is the driving force behind any business. This lesson explores what entrepreneurs do, the skills and characteristics they need, and the importance of entrepreneurship to the economy.
An entrepreneur is a person who takes the financial risk of starting, running, and managing a new business venture. Entrepreneurs identify opportunities, organise resources, and accept the risk of failure in the pursuit of profit.
| Term | Definition |
|---|---|
| Entrepreneur | A person who starts and runs a business, taking on financial risk in the hope of profit |
| Intrapreneur | An employee within a company who acts like an entrepreneur, developing new ideas internally |
| Enterprise | The ability and willingness to develop, organise, and manage a business venture along with its risks |
| Innovation | Turning a new idea into a product or service that customers want to buy |
| Invention | Creating something entirely new that has never existed before |
Exam Tip: Innovation and invention are different. Invention creates something brand new; innovation takes an existing idea and improves it or finds a new use for it. Most successful businesses are built on innovation, not invention.
Research into successful entrepreneurs has identified common characteristics:
| Characteristic | Description | Example |
|---|---|---|
| Risk-taking | Willingness to take calculated risks | Richard Branson started Virgin Atlantic despite no airline experience |
| Determination | Persistence in the face of setbacks | James Dyson made 5,127 failed prototypes |
| Creativity | Ability to come up with new ideas and solutions | Sara Blakely invented Spanx from a new idea |
| Confidence | Self-belief and the ability to persuade others | Elon Musk continued with Tesla despite near-bankruptcy |
| Hard-working | Willingness to put in long hours and effort | Most entrepreneurs work 60+ hours per week |
| Initiative | Ability to act without being told what to do | Entrepreneurs see problems as opportunities |
| Communication | Ability to explain ideas and motivate others | Steve Jobs was renowned for his presentations |
Entrepreneurs perform several key functions in a business:
graph TD
A[Entrepreneur's Role] --> B[Organising resources]
A --> C[Making business decisions]
A --> D[Taking risks]
A --> E[Innovation and creativity]
A --> F[Meeting customer needs]
B --> G[Combining land, labour, capital]
C --> H[Setting aims, strategy, direction]
D --> I[Investing money, time, reputation]
E --> J[Developing new products/services]
F --> K[Understanding the market]
Entrepreneurship benefits the wider economy in several ways:
| Benefit | Explanation |
|---|---|
| Job creation | New businesses create employment, reducing unemployment |
| Economic growth | Businesses generate wealth and contribute to GDP |
| Innovation | Entrepreneurs develop new products and technologies that improve quality of life |
| Competition | New businesses increase competition, leading to better products and lower prices for consumers |
| Tax revenue | Businesses pay taxes (corporation tax, VAT, employer NI), which fund public services |
| Social enterprise | Some entrepreneurs address social and environmental problems through business |
Small and medium-sized enterprises (SMEs) make up over 99% of all UK businesses and employ approximately 16 million people — nearly 60% of total UK employment. Entrepreneurship is therefore vital to the UK economy.
Entrepreneurs are motivated by different factors:
Exam Tip: When discussing entrepreneur motives, show that you understand that financial and non-financial motives often work together. For example, the founders of Innocent Drinks wanted to create a healthy product (ethical stance) AND make a profit (financial motive).
A social enterprise is a business that has social or environmental objectives as its primary purpose. It reinvests most of its profits back into achieving its mission rather than distributing them to shareholders.
| Feature | Traditional Business | Social Enterprise |
|---|---|---|
| Primary aim | Maximise profit for owners | Achieve social/environmental objectives |
| Profits | Distributed to owners/shareholders | Mainly reinvested into the social mission |
| Examples | Tesco, Apple, BMW | The Big Issue, TOMS Shoes, Divine Chocolate |
The Big Issue is a social enterprise that provides homeless and vulnerably housed people with the opportunity to earn an income by selling a magazine on the streets. The business addresses homelessness while operating commercially.
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