Editor’s note: Guest author Perry Kanvar is the director of albumlover.com, A 24 year old graduate of a degree in Entrepreneurship & Marketing BA (hons).
Introduction
This report will define what the differences between an entrepreneur and a small business owner are. It will then use these identified variations to distinguish whether the interviewed candidate, Miss Faiza Arbouche (see appendices) is an entrepreneur or in fact a small business owner. Eventually a conclusion will be constructed based on the findings in both the interview and from other secondary sources of information.
Methodology
The author has used both primary and secondary research with the investigation. This resultant report will be based upon an interview with a candidate; scrutiny of this interview will be aided from reviews of literatures selected from relevant up-to-date books, internet sites, internet journals and current newspapers.
Eventually a careful and thorough review will be carried out which will include a close comparison of the author’s ideas. Finally a compilation of the authors’ personal views would be placed in the conclusion.
Parks (2006, pg 3): an enterprising person is one who comes across a pile of scrap metal and sees the making of a wonderful sculpture. An enterprising person is one who drives through an old decrepit part of town and sees a new housing development. An enterprising person is one who sees opportunity in all areas of life.
Entrepreneur or small business owner
A question often asked is ‘What is an entrepreneur?’ Many theorists have answered this question in various ways, and although many use constant business jargon and different terminologies, their individual explanations; if simplified, all deliver the same meaning. This is that entrepreneurs are business people who like to make money and start businesses, but that is not the reason they are entrepreneurs. For entrepreneurs, ‘it’s about having a passion for doing something you love; that’s the entrepreneurial spirit’ (Allen 2001, pg 1).
Often when business people converse, the terms “small business owner and entrepreneur are used interchangeably as if they denote the same thing. However, many theorists discern two very different connotations (Allen 2001, pg 9). They argue that rather than this being a matter of semantics, there is actually an important distinction to be made.
Being an entrepreneur or more specifically an effective entrepreneur can be defined as having the abilities to be organised, being able to self-motivate, being creative and innovative, and being able to take risks (Lowe and Marriott 2006, pg 6). However it could be argued that starting up a small business and being a small business owner too requires these skills (Welsh 2007, pg 3). For example a person setting up a corner shop would need to organise their finances and time; have the drive to begin such a venture (self-motivation) and so on. Thus if being an entrepreneur and a small business owner require the same general skills, the differences between their ventures must sit within their perspective of their endeavours.
According to Parks (2006, pg 4), one of the tangible differences between small business owners and entrepreneurs is that the former are running around doing the every day work while entrepreneurs put their energy into building the business itself. In other words, he is suggesting that for a small business owner, each day is a new series of battles to keep up with the demands and problems of customers, the bank, investors, staff and suppliers. They never seem to find the time to develop the company itself, so that things become more stable and business can grow. Entrepreneurs on the other hand employ others to deal with this work, so that their job is t o build the teams and systems that make up the business, not to actually do whatever it is the company does.
Although many would agree that such an observation is correct, such an observation is too general as an argument to support the differentiation between the two. More specifically Pritchett (2005) suggests that the disparity between a small business owner and an entrepreneur lies in three personal and mental attributes – entrepreneurs are fuelled by inspiration rather than motivation; entrepreneurs work in inspired, smart and strategic ways; entrepreneurs have high levels of innovativeness and risk bearing.
The candidate janet explains that she is part of an up and coming company networking and collaborating talented artists from all genre’s of music. The company supplies studio time, showcases, and contacts for their artists and thus perform as an indirect agency or music label.
Evaluation of the interviewee reflects that the candidate is indeed inspired into continuing this venture rather than being motivated into commitment. Although both terms are often used interchangeably they both deliver varying definitions. According to the Oxford dictionary (2006), the term inspiration is described as having an “arousal of the mind to special unusual activity or creativity”. Motivation on the other hand is a result of the “reason that explains or partially explains a characters thoughts, feelings, actions or behaviour”.
Therefore motivation is often about getting pumped up by some external force, whilst inspiration is about being lit by a fire within that can burn forever. Inspired entrepreneurs do not need to be pumped up, but they know they need to regularly kindle and rekindle their flame of inspiration, by going to their own wells of inspiration and inspiring themselves Pritchett (2005). This is indeed evident with janet When asked how she got where she is currently at (in terms of her business), she stated that it has been a result of “pure dedication and determination with an enthusiastic attitude towards [her] work [which had been] essential”.
Additionally, Pratchett’s (2005) second attribute of the entrepreneur is that they work in inspired, smart and strategic ways. This is because entrepreneurs know that hard work alone is no guarantee of success. They do not confuse being busy with being strategic. They have shed the prevailing belief of the protestant work ethic (Sriram et al 2007) and know that success doesn’t come from pain, struggle and sacrifice, but instead know it comes from well implemented brilliant ideas. They know that time out to generate new ideas and think strategically is often more valuable than another hour at the desk.
One of the other distinctive features that reflect janet ’s entrepreneurial nature is this sense is her non existent business plan. A business plan is the formal written document that records the planning process at one point in time for a specific purpose (Seid and Thomas 2000, pg 14). It can be viewed as the document used to make money, a business bible as such (Frederick 2007). However without constant updates most plans would be out of date almost as soon as they have been completed, because of the constantly changing environment. Many entrepreneurs, therefore, have reservations about the benefit of the time that they might devote to planning what is likely to be fast-changing entity. Many believe that they plan continually and effectively – in their heads – and see little point in writing things down (Lowe and Marriott 2006, pg 340).
While some entrepreneurs claim that they can manage without writing down their plans, Chaston (2000, pg 40) points out that there are some limitations to this approach. Where the entrepreneur is not working alone and needs to convey ideas to staff (as in the case of janet and the other CEO’s of her company) and other stakeholders, such as investors, employees and banks.
Janetclearly pointed this out in the interview as she mentions that “funding [has been] hard to obtain [without] secure and thorough business plan”. Although this behaviour is typical of an entrepreneur, it evidently has made expansion harder and therefore can be perceived as a flaw of her general business practice.
Pritchett (2005) in addition states that entrepreneurs bare high levels of innovativeness and risk bearing. Furthermore according to Drucker (1993, pg 120), the general explanation of the difference between entrepreneurs and small business owners is that the former involves taking risks. While that is true, so does all human activity. The risk run in taking an entrepreneurial decision is no different from the non-entrepreneurial risk of, say, offering someone a job. The classical definition of an entrepreneur is somebody who ‘shifts economic resources out of an area of lower and into an area of higher productivity and yield’ (Curren & Blackburn 1991, pg 17). That is hardly a risky proposition: the risk lies in a different definition, offered by Drucker (1993, pg 122) – ‘entrepreneur always searches for a change, responds to it, and exploits an opportunity’.
From the interview is it apparent that janet is an entrepreneur as she claims. This is because although her innovativeness is not clear apart from the fact that she claims her company is; her ability to take risk is certainly portrayed. This is conveyed when she explains that she analysed her company’s position within the industry and admits that risk of failure is high. The interviewee explained that this was compensated for her passion to make the business successful. From janet’s answers it could be assumed that her company is in the ‘roll out’ stage in the entrepreneurial venture life cycle.
After much analysis of the candidate it is apparent that the individual can be classified as an entrepreneur as she fulfils Pratchett’s (2005) criteria. Furthermore, janet claims to be an entrepreneur herself. This is interesting as Thompson (1999) explains that an individual choosing the label entrepreneur is choosing growth. Initially it may be a small business, at least for a while, but entrepreneurs call it a “growing business”. If at anytime during the interview she had claimed that she was running a small business according to Thompson (1999), she would be practically guaranteeing it. However, it must me noted and is imperative that this is not totally assumed as the venture is at the “roll out” phase of the entrepreneurial venture life cycle and thus has the possibility of develop into a small business, even if the interviewee has this entrepreneurial edge.
Managers or more specifically in this case, small business owners are constantly pushed to behave like entrepreneurs. The other way round, entrepreneurs are often asked to behave like small business owners (Heller 2006). For survival, the small business owner is supposed to develop the drive and opportunism of the entrepreneur, and the entrepreneur is expected to learn the methodical disciplines of the manager. The pressures on both have indeed become more intense as the economy has become more competitive, more entrepreneurial, and more demanding (Thompson 1999).
Therefore rather than categorising people as entrepreneurial or not, it may be more useful to think in terms of a continuum of enterprise. Wherever they sit in this range, there is a role to be played (Parks 2006, pg 141). But if that economic and social prosperity depends on more individuals becoming more enterprising, people need to be encouraged to consider whether they might be able to improve their chances of realising their personal or professional aspirations in life by developing certain skills or attributes, or by actively seeking out opportunities to practice and develop enterprise skills.
Furthermore, in an increasingly competitive and over supplied world, organisations must differentiate their offerings from those of the competitors and become more enterprising if they are to survive and grow. To do this they must become more innovative, they have to be able to harness the potential for individuals to be more enterprising on their behalf (Lowe and Marriott 2006, pg 18). Therefore it may be that for small businesses to survive in the future and for those currently operating now, they have or may need to develop the entrepreneurial spirit to operate. Hypothetically speaking, stemming from this argument it could be fair to assume that perhaps small business owners and entrepreneurs are the same in fact the same.
Bibliography
Books
Ageev, A. (1991) Entrepreneurship: problems of ownership and culture Nauka. Moscow: pg 2-9, 31-41
Allen K. (2001) Entrepreneurship for Dummies Wiley. Indiana: pg 1, 7-9, 187-93
Bannatyne, D. (2006) Anyone Can Do It (Autobiography) Orion. London: 1 - 304
Beaver, G (2002) Small Business Entrepreneurship and Enterprise Development Prentice Hall. New Jersey: pg 1 – 225
Carter S., Cromie S. & O’Neill K (1998) Women & Business Ownership Small Business Service. London pg 7-15, 92-95.
Curren J. & Blackburn R. (1991) Paths of Enterprise Routledge. New York: pg 17-24, 114-20
Gillespie, A. (2001) Business Studies Oxford University Press. Oxford: pg 33, 39 – 43
Lowe R. & Marriot S. (2001) Enterprise, Entrepreneurship & Innovation Elsevier Ltd. Oxford: pg 12-14, 262-9
Seid M. & Thomas D. (2000) Franchising for Dummies IDG Books. Calefornia: 9-14
Parks S. (2006) How to be an Entrepreneur Pearson. Harlow: pg 1-3, 7
Wickman, P. (2006) Strategic Entrepreneurship Pearson. Harlow 1 – 648
Woods, C. (2003) From Acorns... How to Build Your Brilliant Business From Scratch Prentice Hall. New Jersey pg 1-172
Journals
Davis. H (2006) Making a difference after hours Guardian (5)
Heller, R. (2006) Entrepreneurial Management: What’s the difference between management and entrepreneurship? Financial Times (3)
Hoffman K. (2005) Only job-creating businesses can really make poverty history Guardian (6)
Hisrich, R. & Grachev, M. (1995) The Russian entrepreneur: characteristics and prescriptions for success Journal of Managerial Psychology (2) - Emerald
Pritchett, B. (2005) Small Business vs. Entrepreneurship vs. Lifestyle Business MCB University Press – Lexis Nexis
Lucas, E. (2004) Breaking the mould Professional Manager (1)
Sriram, V., Mersha, T. & Herron, L. (2007) Drivers of urban entrepreneurship: an intergrative model International Journal of Entrepreneurial Behaviour and Research (4) Emerald
Thompson J. (1999) The world of the entrepreneur – a new perspective MCB University Press – Emerald
Walsh, J. (2007) Entrepreneurs vs Business Owners Hitting on the Game of Entrepreneurship – StartupNatio34`n
References
Books
Allen K. (2001) Entrepreneurship for Dummies Wiley. Indiana: pg 1, 7-9, 187-93
Lowe R. & Marriot S. (2001) Enterprise, Entrepreneurship & Innovation Elsevier Ltd. Oxford: pg 12-14, 262-9
Parks S. (2006) How to be an Entrepreneur Pearson. Harlow: pg 1-3, 7
Curren J. & Blackburn R. (1991) Paths of Enterprise Routledge. New York: pg 17-24, 114-20
Journals
Davis. H (2006) Making a difference after hours Guardian (5)
Heller, R. (2006) Entrepreneurial Management: What’s the difference between management and entrepreneurship? Financial Times (3)
Hoffman K. (2005) Only job-creating businesses can really make poverty history Guardian (6)
Pritchett, B. (2005) Small Business vs. Entrepreneurship vs. Lifestyle Business MCB University Press – Lexis Nexis
Sriram, V., Mersha, T. & Herron, L. (2007) Drivers of urban entrepreneurship: an intergrative model International Journal of Entrepreneurial Behaviour and Research (4) Emerald
Thompson J. (1999) The world of the entrepreneur – a new perspective MCB University Press – Emerald
Walsh, J. (2007) Entrepreneurs vs Business Owners Hitting on the Game of Entrepreneurship – StartupNatio34`n
Appendix (Interview)
Interviewee: Miss
Age: 26
Gender: Female
Education: Events and Business Management (BA)
What does your organisation do?
Our company is a music and events promotions Company based in London.
We aim to supply and build a strong network for the UK Music Industry and eventually internationally. By opening up various channels of communication, we connect new & unsigned artists and producers, to DJ's, radio, recording studios, record labels, distributors, music retailers, digital service providers and online/mobile Service's. We do this by providing a consistent platform for music to be created, listened to, performed and purchased - both through our own projects and events and by collaborating with other like minded business. At Music Is Life PR we are dedicated to supporting talent to achieve success here in the UK and also to breakthrough internationally. We want to discover, to inspire, to create and capture quality music!
Our company consists of four Services
Artist and event presentation
Management: Artist Management
Studios: Recording Studio and Record Label
Beat: DJ Agency
How did you get to where you are at?
Pure dedication and determination with an enthusiastic attitude towards [our] work [has been] essential. Networking and talking to everyone in any business is key!
Did you have a business plan?
We are working on a business plan as we speak. If you do not have a business plan, [it] can slow you down as a business, in terms of progress. Business plans can prevent help any 'holes' within your company and can determine whether your company is a success. For any future goals to be achieved, careful planning; hence a business plan, is necessary.
Is this a part time or full time role?
At the moment this is part-time as there are still realistic bills to pay and unless the essential funds are there to work on the business full time, this must remain part-time, until we can make this full time.
What is the current organisational structure?
Artist and event presentation
Artist Management
Recording Studio and Record Label
DJ Agency
Who does what within this organisation?
As above, but we ALL cover the administrative side of the company for now.
Is there a management team?
As above.
Did you identify the competition?
We have done market research within our sector. The music industry is very competitive and it is essential to know who and what your competition is doing, in order for you to keep afloat within your business. You also need to know what the competition is providing therefore if you are providing a similar service, why consumers would choose yours over theirs.
What was your start up activities?
Start up at the moment is non-existent, but with careful planning sponsorship and investment, (note with a business plan!) you can acquire the necessary funds for your business. At the moment, we are looking at making funds from events.
How did you require funding?
Sponsorship or investment as mentioned [previously]. Funding is hard to obtain unless you have a secure and thorough business plan.
Is there a risk analysis?
There is always a huge risk when it comes to business, but that comes with how much passion you have within making sacrifices, towards having the dream job you have always wished for, or for the business you have always set out to achieve.
We have totally analysed our position, the industry we’re in and the way we’ve grown our business and it is indeed risky as we are relatively a small company and have invested a lot of our own capital. Failure is high as we are not fully established.
The only way we can risk anything with our business, is keeping record of anything we do, e.g. receipts for costs, any licenses within the music industry (copyright, PRS, MCPS money etc) and registering anything which could cause you any problems in the future. A logo, for example needs to be registered and checked it is not being used for anything else.
Do you have any other ventures?
We have too many ventures to explain, but all 4 parts of the company are complex enough for us to develop each, in the near future. We have not restricted ourselves so that we can venture out within different parts of the different industries. Music, fashion, art, they are all connected in some way.
Where are you headed?
Headed in the right direction, to take over the world! (LOL) We are headed to present and cater for all types of talents within the UK and eventually internationally. Watch this space!
Do you think you are an entrepreneur or a business man/woman?
An entrepreneur has a business 'mind', [but also is] someone who goes out and gets things done! I try and do things differently. [Therefore] I am and entrepreneur.
