Understanding Business Models

A business model is a high-level plan for profitably operating a business in a specific

marketplace. A primary component of the business model is the value proposition. This
is a description of the goods or services that a company offers and why they are
desirable to customers or clients, ideally stated in a way that differentiates the product
or service from its competitors.

A new enterprise's business model should also cover projected startup costs and
financing sources, the target customer base for the business, marketing strategy, a
review of the competition, and projections of revenues and expenses. The plan may
also define opportunities in which the business can partner with other established
companies. For example, the business model for an advertising business may identify
benefits from an arrangement for referrals to and from a printing company.

A business model defines how a company will create, deliver, and capture value.

A business model answers questions that are crucial for strategic decision-making
and business operations. Creating a business model for your startup or product
means identifying the problem you are going to solve, the market that you will serve,
the level of investment required, what products you will offer, and how you will
generate revenue. Pricing and costs are the two levers that affect profitability within
a given business model.

A business model is part of your overall business strategy. Some business models
extend beyond economic context and include value exchange in social or cultural
terms — such as the intangible impact the company will have on a community or
industry. The process of constructing and changing a business model is often
referred to as “business model innovation.”

Business model components

There are three main areas of focus in a business model: value proposition, value
delivery, and value capture. The proposition outlines who your customers are and
what you will offer. The delivery details how you will organize the business to
deliver on the proposition. And the capture is a hypothesis for how the proposition
and delivery will align to return value back to the business.
The components of a business model include everything the organization needs to
document and internalize so that the team can implement all three value focuses.
This includes the market in which you operate, organizational strengths and
challenges, essential elements of your product or products, and how you will
generate revenue.

Below are some components to include when you create a business model:

• Vision and mission: Overview of what you want to achieve and how you
will do it.
• Objectives: High-level goals that will support your vision and mission,
along with how you will measure success.
• Customer targets and challenges: Description of target customers (written
as archetypes or personas) and their pain points.
• Solution: How your offering will solve customer pain points.
• Differentiators: Characteristics that differentiate your product or service.
• Pricing: What your solution will cost and how it will be sold.
• Positioning and messaging: How you will communicate the value of your
offering to customers.
• Go-to-market: Proposed approach for launching new offerings and services.
• Investment: Resources required to introduce your offering.
• Growth opportunity: Ways that you will grow the business over time.
Business A business model captures your hypothesis for how your business will generate
model revenue and reach profitability — charging a price for an offering you create at a
sustainable cost.

A business model will include a brief overview of what you offer and to whom.

Business A business plan drops down one level to show how you will implement the
plan business model.

It includes specifics such as operational practices, experience and structure of

the management team, milestones to be reached on a set timeline, and
comprehensive financial projections.

What is the benefit of building a business model?

Innovation is about more than the products or technologies that you build. The way
that you operate your business is a critical factor in how you stand apart in a crowded
marketplace. The benefit of building a business model is that you can use the
exercise to expose and exploit what makes your company unique — why choosing
your offering is better for customers than any alternatives and how you will grow
the business over time.

Many people associate business models with lengthy documents that describe a
company’s problem, opportunity, and solution in the context of a two-to-five-year
forecast. But business models do not need to be a long treatise.

A one-pager is just as effective for distilling and communicating the most important
elements of your business strategy. The concise format is useful for sharing with
broader teams so that everyone understands the high-level approach. Done right, a
business model can become a touchstone for the team by outlining core
differentiators to promote and defend in the market.

Examples of Business Model

Type
Advertising Displays advertisements from other companies to a specific audience.
• Advertising business model examples: LinkedIn and YouTube
Affiliate Pays a small commission to others to promote goods.
 • Affiliate business model examples: Amazon, ClickBank,
• Share-a-Sale
Bundling Sells multiple products to a single customer for a fixed price.
• Bundling business model examples: AT&T, Allstate,
• Comcast
Fee-for-service Sells labor (intellectual or physical) for a set price (hourly or by
project).
• Fee-for-service business model examples: McKinsey &
• Company,
• MedExpress, Walmart
Franchise Builds on existing successful business and receives a percentage
of earnings from franchises who invest in, operate, and promote
new locations.
• Franchise business model examples: Ace Hardware Stores,
• McDonald’s, The UPS Store
Freemium Provides a limited free product with a more advanced option that
users can pay to access.
• Freemium business model examples: LinkedIn, Slack, Zoom
Manufacturer Sources raw materials to produce finished goods that are sold to
retailers or directly to customers.
• Manufacturing business model examples: Apple, IKEA,
• Mercedes-Benz
Pay-as-you-go Charges customers based on actual usage of a product.
• Pay-as-you-go business model examples: Apple, Amazon
• Web Services, Mint Mobile
Retailer Procures and sells products manufactured by others — the last
step of a supply chain.
• Retailer business model examples: Aldi, Amazon.com,
• Walmart
Subscription Offers a product that requires ongoing payment for a fixed time
period.
• Subscription business model examples: Apple, Amazon
• Prime, Netflix
Marketplace Hosts a platform for other companies to do business in exchange
for compensation
• Marketplace business model examples: Apple, Ebay, Etsy
How to determine if you have a good business idea
Sometimes inspiration isn’t the problem; the challenge is determining whether you have
a good idea. Critiquing your idea and requesting feedback from as many people as
possible is crucial.

To help you evaluate your business idea, we consulted several experts to create nine
essential questions to ask yourself to determine whether your business idea has a chance
for future success.

1. Does your business idea solve a problem?

“If there is a problem that affects you, your friends, family and co-workers, then the
chances are high that it affects people you don’t know as well,” McGee said.

2. Will people pay for it?

Whether you’re focused on a creative new business idea or have an idea for an easy-to-start
business, you’ll need customers. Paying customers validate an idea and determine which
ones have the greatest chance for success, said Wil Schroter, co-founder and CEO of
Fundable.

“An idea is just an idea until you have a paying customer attached to it,” Schroter added.
“Anyone can discredit a simple idea, but no one can discredit paying customers.”

3. What’s your price point?

Charlie Harary, co-founder and partner of investment firm H3 & Co., said great
business ideas solve problems in a way that is less expensive than what the market will
endure.

“Once you have determined that you are solving a legitimate problem in a scalable way,
you need to determine not only the value that it delivers to the world but what people
would pay for that value,” he said. “Once you determine the price, then you can assess
if your solution is business worthy or not.”

4. Is there a sizable niche market for your business idea?

Without a large enough market, your idea may never get off the ground. You must
determine if a niche market exists for your idea. You’re better poised for success if your
company improves upon what’s already out there – a novel response to a recognized
need.
5. Are you passionate enough about your business idea?

Your business will likely consume all your time, so ensure you’re passionate about it to
make it successful. Your idea must be something you genuinely care about, not just
something you’ve targeted because it seems like it could be lucrative.

“Since starting a business requires an inordinate amount of time, energy and patience,
ideally the idea will be one that you are passionate about as well as one that you have
skills or experience

6. Have you tested your business idea?

You won’t know if it’s viable until you test your business idea on strangers who match
the profile of your target customer.

“Test it – not just with friends who will be too polite to tell the truth but with honest
people who would make up your ideal target audience, and then listen to the feedback,”

7. Are you open to advice?

If you’re not open to changing or adapting your idea to fit what your customers want,
your business idea might not be worth pursuing.

“Most good ideas take some tweaking to get to market. Being closed-minded
is a business killer.”
8. How will you market your business?

Many entrepreneurs think about the problems their business will solve but not how they
intend to market their company to their target customers. Jesse Lipson, founder and
CEO of Real Magic, said that your small business marketing strategy can determine if your
business idea is good.

9. Are you being realistic about your goals?

As excited as you may be about a new business idea, staying grounded and realistic is
essential. While you may have an idea that is original, revolutionary or ahead of its
time, there should be a real, solid market opportunity to ensure it is successful. Any new
business case or new endeavor has to have a viable market that you believe you can sell
now – not theoretically or on the premise that there is a future for this market.”
What is Product Selection ?
Goods and services are necessary for satisfying the needs of society. Such
goods/services or goods along with services or simply an idea can be called as a
product. In simple terms, product is anything that is offered for sale into the
marketplace. This makes product an important constituent of marketing and an
important consideration in managerial decision-making.
In past, it was relatively easier for entrepreneurs to choose a particular product. He
had complete freedom to choose any product which according to him can satisfy the
needs of the market and is money-making in nature. Before launching the product,
entrepreneur use to consider different criteria like technological requirement, needed
financial resources, an approximate idea about the product's demand, etc. However,
in this age, the selection of a product has become a very complex task as the market
conditions have become very complicated. Nowadays, when an entrepreneur wants
to select a product, he needs to consider complex parameters like satisfaction level
of the customers, attitudes of the customers, competitors' strengths, support of the
dealers, existing infrastructural facilities, prevalent macro conditions of the
economy, etc.
Criteria to Select a Product
An entrepreneur makes use of several criteria before selecting a product. These are
as follows :

1) Technical Know-how :
Technical know-how is an important guiding factor for an entrepreneur while
selecting a product. An entrepreneur can easily decide what product should be
manufactured if he belongs to the product-related field. Similarly, knowledge in
manufacturing or marketing field enables the entrepreneur in selection of an
appropriate product.
2) Availability of Market :
The availability of a large market for a particular product also helps in its selection.
If the demand for a product is huge, then the market risk of launching it becomes
less. Thus, it is very essential that the entrepreneur have a good knowledge about the
product's market in terms of how and where the product can be sold.
3) Financial Strength :
Relative financial of the entrepreneur also serves as guiding force in selection of a
product. Manufacturing a product generally requires heavy investment in research
and development, capacity creation, plant and machinery, etc., which is generally
beyond the expenditure capacity of a small-sized firm. Thus, it is advisable for an
entrepreneur to analyse its financial strength prior to product selection
4) Competitive Rivalry :
The returns from a product are greatly influenced by the degree of competition
prevailing in the market. Factors like market dominance by the competitors,
availability of substitutes, any barrier to entry, etc., play significant role in
determining the viability of the product.
5) Product Category :
In many cases, certain products fall in the priority sector category while some others
may be reserved for small scale. sectors. The level and extent of competition for
these product categories among small sectors is lesser than that seen in other sectors
of the economy. There are also certain products which the Government has
earmarked as exclusively to be purchased from the small scale sector. In the case of
such products, the entrepreneur will definitely give a greater importance to a product
which falls in this category.
6) Consistency in Demand :
When there are not many fluctuations in the demand of a product then the market
for such products can be considered to be stable. Seasonal products are contrary in
the sense that their demand fluctuates a lot. The seasonality of a product also plays
a large part in its selection or non-selection as this is directly linked to the stability
in the demand for the same. The entrepreneur should definitely prefer a product
which has a consistent and stable demand.
7) Restriction on Imports :
The foreign trade policy of the government may restrict the import of some products.
In such cases, those products. gain attraction from general public and consequently
an entrepreneur should prefer those products that are part of such restricted category.
8) Availability of Raw Materials :
Availability of raw material is a very important factor for selecting a particular
product. An entrepreneur should ensure that supplies required for smooth conduct
of business operations are mostly available in desired quantity around the year.
Moreover, the source of procurement of raw material is also important. Where
supplies are to be procured from external sources, the entrepreneur will have to
maintain a sufficient quantity of inventory compared to local sources.
9) Government Incentives and Subsidies :
Government often provide a number of subsidies and incentives for the promotion
of certain businesses. These incentives and subsidies are generally in the form of tax
holidays, exemptions from customs, concessions, etc. An entrepreneur must
consider the availability of such governmental schemes as they greatly support an
entrepreneur in setting up a new business.
10) Ancillary Products :
When the product is in the nature of an ancillary product (a product required for
manufacturing another product), then its increases the attraction for the entrepreneur.
This is because the product will have a ready market in the parent industry. For
example, an ancillary unit of Maruti.
11) Location of Business :
Business location is also important for selecting a particular product as certain
products are earmarked for production in special zones like free trade zones, export
promotion zones, etc. Government also provides incentives and tax breaks for such
products. Moreover, the location of big consumer markets near the production
centers also increases the attractiveness of certain products. Such products will also
be selected by the entrepreneur because of the locational advantage.
12) Licensing System :
There are overtime changes in the governmental licensing policies. For some
products, it is mandatory for the entrepreneur to have the required license issued by
the concerned authority. Under particular conditions, capital addition is also
monitored. Moreover, the process of obtaining license is burdensome for certain
products. Thus, products which require a lot of licensing approvals will not be very
attractive to entrepreneurs.
13) Government Policy :
The selection of product also has to be done keeping in mind the government policies
and their likely impact. The entrepreneur should choose a product which falls in a
sector with favorable Governmental policies. For example, products which are not
socially beneficial like tobacco and alcohol do not receive government support.
Precautions Regarding Product Selection
An entrepreneur has to be careful while selecting a product. There are certain
precautions that he should take while selecting a product, which are outlined below:
1) The production process should not be very long or time-taking.
2) The employed production process should be smooth and straightforward.
3) There should be adequate and consistent demand for the selected product.
4) The product industry must have potentials for growth and development.
5) The product should be accepted by consumers and a healthy competition should
exist for the same.
6) There should be easy availability of plant and machinery and other equipment
required for the production of the product.
7) There should be availability of adequate raw materials. In case local raw
materials are not available, then suppliers from non-local regions should be able to
provide the raw materials in the shortest possible time.
8) Personnel required for technical, artistic and manual work/labour should be
easily available at reasonable costs.
9) The product should be capable of introducing in overseas markets.
What is Product Adoption?
The design process has an objective. It's not to create usable and useful products (though
these are both important considerations when designing products), but rather to create
products people use. Adoption is the process by which people become users of a
product, and it is adoption which will enable users to discover that a product is usable
and useful and enable them to become long-term users of a product.

Product adoption is one of the most important business goals. If your product is adopted,
you create a customer base and gain a position within the market. Product adoption
marks the transition between the product being unknown and foreign to becoming used
and welcomed by the users.

Product adoption depends on the particular user. There are different types of adopters
within your potential customer base, and each has different values.

The basic types of adopters can be divided into 5 groups: innovators, early adopters,
early majority, late majority and laggards.

The innovators and the early adopters are the first groups to show interest in adopting
the new product. The laggards are the most resistant to change and are the last to
welcome any new innovation or change into their lives.

6 stages to get users to adopt your product

There are six product adoption stages—awareness, interest, evaluation, trial, activation,
and adoption. Product adoption isn’t always a linear process—users can jump between
stages.

There are also five adopter profiles—innovators, early adopters, early majority, late
majority, and laggards. You need to understand these profiles as they have different
needs and move through product adoption stages at different rates.

For example, a tech-savvy early adopter might be quick to download a software product
trial after minimal research. A more risk-averse late adopter, however, might move back
and forth between different stages as they learn about your product and how it can solve
their problems.

So you need to optimize your content, support, onboarding, and product adoption
strategies accordingly.
First, focus on really understanding your users and their pain points. Implement a
solid user research process, develop ideal customer profiles, and map the customer
journey using product experience (PX) insights tools like Hotjar. All this lets you align
your product with user needs and create customer delight.

Then, use the strategies below to guide your users through each step in the product
adoption process.

1. Awareness
Users become aware of your product and its potential benefits during the
awareness stage. They may not yet know how it can solve their problems—or even
that they have a problem.

Key factors that influence users at this stage include:

• Their pain points, or dissatisfaction with their current way of doing things, which
drives them to search for a solution to their problem
• Brand credibility: if your users already trust you, they’ll be more open to trying
your product
• The novelty of your solution, which works in your favor with innovators and
early adopters, but means others take more convincing
2. Interest
During the interest stage, potential customers develop a more active interest in your
product. They start gathering information and digging deeper into how it can help
them achieve their goals.

Key influencing factors include:

• Whether your product can solve users' jobs to be done (JTBD) and fits their use
cases
• Whether your users find the right information at the right time for their adopter
profile, role, and needs. For example, an early adopter in marketing might sign
up for a webinar about AI writing assistants if they see it in a professional peer
group—before reading about it in the news.
3. Evaluation
At the evaluation stage, users assess whether your product meets their needs. They’ll
also weigh it up against the competition and decide whether to sign up for a demo,
trial, or freemium account.
Key factors that influence users during the evaluation stage of product adoption
include:

• How your product stacks up against the competition

• Other people’s opinion of it (particularly important for later adopters)
• Pricing and incentives

4. Trial
During the trial stage, users test out your product to see if it fits their needs and
processes.

Key influencing factors include:

• If your product fits user needs (i.e. you’ve achieved product market fit) and the
skill level of end-users, and that it integrates with their tech stack
• If your marketing convinces users to try it out
• If it helps users achieve their objectives and delivers on its value proposition
• If it’s easy to use and intuitive, so users are convinced that the effort of
onboarding and learning will be outweighed by the perceived value
5. Activation
During activation, users realize value for the first time—usually when they perform a
key action or complete a task. This convinces them it’s worth investing in your product.

You usually have a short window to convince users to adopt your product, so it’s
important they realize value quickly.

Key influencing factors include:

• Whether they can quickly find and learn the most useful features to achieve their
role-based goals

For example, a rep onboarding with a sales platform might prioritize customizable email
templates and one-click meeting booking. By contrast, an admin needs to know how to
configure access permissions and connect to the company’s database.
6. Adoption
Last comes adoption, when, convinced of your solution's value, customers convert
from occasional to regular users and make your product part of their daily life
and work.

Remember when you switched from email to WhatsApp to keep in touch with people?
That’s when you adopted it.

Key influencing factors include:

• Users realizing your product has applications beyond solving their original pain
point
• The effort of fully onboarding, learning more features, or switching from your
competitor is outweighed by the perceived value
• Pricing—it’s worth upgrading from a free or starter version to access more
functionality
Difference between entrepreneurship and wage employment
1. Self-employment:
Sel-employment is an arrangement in which an employee or worker earns a living using
his own resources. Therefore, a worker who owns and operates an enterprise to earn
their livelihood is known as self-employed. Around 52.2% of the total workforce of India
are self-employed.
Self-employment is a major source of livelihood for people and includes use of an
individual’s own land, capital, labour, and entrepreneurship. For example, traders,
businessmen, shopkeepers, vendors, etc.
Self-employment is a significant source of income in India because :
• A low literacy rate means a poor acquisition of skills for wage/hired jobs.
• Due to the diversified social environment, there is a lack of mobility.
• In India, wage employment is declining.
2. Wage Employment:
Wage Employment is an arrangement in which a worker earns wages by selling his
labour. Under this form of employment, a worker is known as an employee or hired
worker and the buyer of labour is known as an employer. Unlike self-employment, the
workers have their own labour as a resource, instead of land, labour, capital, etc.
Therefore, these workers offer their labour services to others and get wages in
return. For example, if a tutor runs his own tuition centre then it is known as self-
employment; however, if the same tutor teaches at a school, then it is known as wage
employment.
Wage employment is divided into two parts; viz., Regular Workers and Casual Workers.
Functions of an Entrepreneur
The responsibility of an entrepreneur spans the entire organization. To become a
successful business owner, he must perform his functions effectively.

These functions are discussed in brief below:

Entrepreneurial Functions

1. Innovation: An entrepreneur constantly innovates new and existing products.

They continuously update their organization by upgrading technology and trends. It
includes activities like:
 ● Introducing new production methods.
● Finding new sources of raw materials.
● Upgrading the distribution system.
● Exploring new products and markets.

Example: E-bikes and E-cars are great examples of innovation in the

transportation sector.

2. Risk-taking: Risk is choosing one among various alternatives, the result of which
is unpredictable. Risk bearing is the pre-requisite function of an entrepreneur.
However, he tries to mitigate the risk to become successful. This is because they can
only earn huge profits by bearing greater risk.

Example: Drew Houston, who owns Dropbox, took a massive risk by not selling his
business to Apple. However, things turned out in his favour, and Dropbox became a
billionaire company.

3. Decision-making: Another function of an entrepreneur is taking decisions for the

organization. The major ones include:

● Formulating organizational aims and objectives.

● Make strategies to make the organization profitable.
● Optimum distribution of work across enterprises.
● Arranging and managing the finance resources.
● Crucial decisions about the production to distribution of products.

Example: Decisions regarding Mergers, Acquisitions, Expansion and Contraction

of the business.

Promotional Functions

1. Investigation of an Idea: An entrepreneur investigates the market needs and

wants and then discovers a unique business idea. He not only finds one such idea but
a number of ideas.

Example: Ola and Uber are amazing examples of this entrepreneurial function.

2. Detailed Investigation: After finding a bunch of business ideas, entrepreneurs

critically analyze each one of them. Also, they forecast the business idea’s future
potential and growth possibilities. On completing the detailed investigation, he
proceeds with the most suitable one.

Example: Before launching any product, the board conduct a detailed market
survey.

3. Assembling Resources: Next function is to assemble the required resources to

implement the selected idea. Entrepreneur arranges everything from facility location
to installation of machinery and manpower.

Example: Recruitment and Material sourcing are prevalent examples of this

function.

4. Financing the proposition: An entrepreneur ensures short- and long-term finance

sufficiency. He defines the capital structure of the organization. Also, it identifies
the sources from where the funds are to be raised and utilized.

Example: The decision of the entrepreneur to raise funds by diluting ownership

(Shares) or borrowing funds (Debentures).

Managerial Functions

1. Planning: On the managerial front, the entrepreneur sets the organizational goals.
And to accomplish these goals, they formulate short and long-term plans.

Example: Recently, Reliance separated its financial segment. Ambani did so to

achieve the aim of becoming India’s largest NBFC.

2. Organizing: The next function is the organization of resources to implement the

formulated plan. It includes all the resources like Manpower, Funds and Physical
Facilities. It effectively coordinates all the factors of production.

Example: NIKE has a unique organizational structure. It operates in a flat

organizational structure. The departments have the liberty to work independently
while maintaining quality and consistency.

3. Directing: An entrepreneur is a leader who leads their enterprise towards success.

He directs his team and guides them to achieve the preset organizational goals. Also,
he communicates his vision, mission and long-term goals with his team. Besides, he
allocates the duties and responsibilities with a clearly defined reporting relationship.
Example: Assigning roles and responsibilities considering the employee’s skills.

4. Staffing: Next managerial function is Staffing. Besides recruitment, the

entrepreneurs perform the following activities:

● Manpower Planning
● Recruitment
● Selection
● Training
● Promotion
● Transfer
● Rewards and Appraisal

Example: Layoffs in the corporate world are making headlines lately. It is a part of
human resource planning in enterprises.

5. Controlling: Here, entrepreneurs practice control over the organization. He

ensures that the implementation of plans is as per the plan or not. In case of
deviations, the entrepreneur identifies and fixes them. It involves activities like:

● Establishing Standards
● Measuring Performance
● Comparing Performance
● Finding Variations
● Taking Corrective Actions

Example: Comparing the quantity produced with the targets set in the production
plan.

Commercial Functions

1. Production: Entrepreneurs carry out production to produce goods. For this, they
make use of the factors of production. The type and size of the business will
determine its scale.

Example: Entrepreneurs operating on a small-scale offering handcraft produce

products on their own. Whereas, similar types of products are manufactured in the
plants at a large scale.
2. Marketing: Here, the entrepreneur tries to build a unique image of his products.
He uses various tools and strategies to differentiate the products in the market.

Example: Apple has positioned itself as a range of premium phones and accessories
in the electronics market.

3. Personnel: Yet another crucial function of an entrepreneur is managing the vital

resource in the organization, i.e., Human Resources. It involves activities like:

● Giving suitable work conditions.

● Ensure the employee’s job satisfaction.
● Giving justified monetary compensation.

Example: Entrepreneurs conduct Employee Development Programs for the

betterment of employees.

4. Accounting: Entrepreneurs are keen to know their financial positions while

conducting a business. For this purpose, they maintain accounts of all the
transactions.

Example: The financial statements prepared at the year’s end reflect the current
financial position.

5. Finance: It is the blood of an enterprise. Thus, raising and arranging finance

becomes one of the important functions of an entrepreneur. It involves the following
activities:

● Designing the capital structure.

● Arranging the long and short-term finance.
● Determining the sources of finance.

Example: Tracking the performance by calculating various ratios like PR Ratio,

Operating Efficiency Ratio etc.

Meaning of Entrepreneur
Entrepreneurs establish a new organisation by assembling inputs, i.e., labour,
land and capital, for production purposes. They assume risk and business
uncertainty to achieve growth and profit of the business venture by combining
resources and identifying new opportunities to capitalise on them. They
innovate new business processes and ideas. They are persons responsible for
building an organisation and taking business risks for profits.

Example: An entrepreneur is the company’s CEO who establishes the company

and takes business risks to gain profits.

Meaning of Manager
Managers are responsible for the administration and management of a group
of people or a department of the company. Their day-to-day job is to manage
employees and ensure the smooth running of the organisation. They must
possess similar qualities of an entrepreneur, like accountability, leadership,
decisiveness, etc. They must also have qualities such as empathy and warmth.
They may direct supervisors who will command workers or directly command
workers. They are responsible for supervising subordinates, who report to and
work under them.

Example: A manager is the head of a department in a company, such as a

director or a team leader, who administers the group of people under him/her
and ensures the company runs smoothly.

Difference between Entrepreneur

and Manager
The difference between an entrepreneur and a manager are as follows:

Particulars Entrepreneur Manager

 They are individuals
It refers to persons who
responsible for administering
establish a company or
Meaning and controlling a group of
enterprise and takes a
people in the company or
financial risk to get profits.
enterprise.

They are visionaries who

Position in the convert an idea into a They are the employees of the
company business. They are the company.
owners of the company.

They focus on business They focus on ongoing

Focus
startups. operations.

They bear all financial and

Risk They do not bear any risks.
other risks.

They focus on starting the

They focus on the daily smooth
Focus business and expanding the
functioning of the company.
company.

Their key motivation is the Their motivation comes from

Motivation achievements of the the power that comes with the
company. position.

Their reward is the profit they Their reward is the salary they
Reward
earn from the company. draw from the company.
 They can be casual in their Their approach to every
Approach role and have an informal problem is formal, and they
approach. take a scientific approach.

They are risk-takers. They They are risk-averse. Their job

Nature of
take calculated risks to drive is to maintain the status quo of
decisions
the company. the company.

Decision The decisions tend to be

The decisions are calculative.
making intuitive.

They do not need to be They are trained to perform

Specialisation specialised in any particular tasks and are specialists in
trade. their domain.

An entrepreneur and a manager are two different persons in a

company/organisation. While managers are concerned with managing the
available resources, entrepreneurs focus on capitalising on opportunities.

What is Entrepreneurship?
Entrepreneurship is the ability and willingness to create, organise, and manage a business
enterprise, including all of its uncertainties, in order to earn profit. The most visible
example of entrepreneurship is the establishment of new businesses. Entrepreneurship
involving land, labour, natural resources, and capital can yield a profit. The entrepreneurial
vision is defined by exploration and risk-taking, and it is an essential component of a
nation’s ability to succeed in an ever-changing and more competitive global marketplace.
What is Entrepreneurship?
Entrepreneurship is defined as the process of establishing one’s own business as opposed
to engaging in any other economic activity, such as employment or practising a profession.
An entrepreneur is someone who establishes his own business. The process’s output is the
business unit which is referred to as an Enterprise.
Entrepreneurship is also responsible for the creation and expansion of opportunities for the
other two economic activities, that is, Employment and Profession. Every country, whether
it’s developed or developing, requires entrepreneurs, whereas a developing country
requires entrepreneurs to kickstart the development process, and a developed country
requires entrepreneurship to sustain it.
Characteristics of Entrepreneurship
The characteristics of entrepreneurship are as follows:
1. Adaptability:
The business environment is constantly changing, making it difficult for entrepreneurs to
adapt. Every day brings new challenges, but also new opportunities. However, it is
extremely difficult for an entrepreneur to prepare for every scenario, evaluate it, and adapt
it so that the business is not impacted by these unexpected changes. However, in order to
be successful in the market, they must closely analyse the environment and adapt to any
potential changes.
2. Systematic Activity:
Entrepreneurship is not a mysterious gift or charm that occurs by chance! It is a systematic,
step-by-step, and deliberate activity. Certain temperament, skills, knowledge and
competency requirements can be acquired, learned, and developed through formal
educational and vocational training as well as observation and work experience. Such an
understanding of the entrepreneurial process is critical for dispelling the myth that
entrepreneurs are born rather than made.
3. Lawful and Purposeful Activity:
The goal of entrepreneurship is to conduct legal business. It is important to remember this
because one may attempt to justify illegal activities as entrepreneurship on the grounds
that, just as entrepreneurship involves risk, so do illegal businesses. The goal of
entrepreneurship is to create value for personal and social gain.
4. Innovation:
It entails coming up with new ideas and implementing them in business. The entrepreneur
is constantly evaluating current business models and identifying new methods and
techniques for running the business more efficiently and effectively. From the perspective
of the company, innovation can either save money or increase revenue. It is more than
welcome if it does both. Even if it accomplishes nothing, it is still welcomed because
innovation must become a habit. Entrepreneurship is creative because it involves the
creation of value.
Entrepreneurs produce goods and services that meet the needs and desires of society by
combining various factors of production. Every entrepreneurial act generates income and
wealth. Entrepreneurship is also creative in the sense that it involves product innovation,
discovery of new markets and sources of input supply, technological breakthroughs, and
introduction of newer organisational forms for doing things better, cheaper, faster, and, in
the current context, in the least harmful way to the ecology/environment.
5. Organisation of Production:
Production, which entails the creation of form, place, time, and personal utility, generally
requires the combined use of various production factors such as land, labour, capital, and
technology. In response to a perceived business opportunity, the entrepreneur mobilises
these resources into a productive enterprise or firm. It should be noted that the entrepreneur
may not have any of these resources as he might only have the ‘idea’ that he promotes
among the resource providers. In a well-developed financial system, he only needs to
persuade the funding institutions, and with the capital arranged, he can enter into contracts
for the supply of equipment, materials, utilities (such as water and electricity), and
technology.
The knowledge about the availability and location of resources, as well as the best way to
combine them, is at the core of production organisation. To raise these in the best interests
of the business, an entrepreneur must have negotiation skills.
6. Risk Taker:
The essence of entrepreneurship is “willingness to assume risk,” without which one
cannot succeed. It happens as a result of the generation and implementation of new ideas.
Although such ideas are frequently speculative, the outcome may or may not be positive
and immediate.
It is widely assumed that Entrepreneurs take high risks. Yes, individuals who choose a
career in entrepreneurship take a greater risk than those who choose a career in employment
or the practice of a profession because there is no “guaranteed” payoff. For example, when
a person quits a job to start his business, he tries to calculate whether he will be able to earn
the same income level or not. To an outsider, the risk of leaving a well-established and
promising career appears to be “high,” but for an entrepreneur, it is a calculated risk. They
are so confident in their abilities that they can convert 50% of their chances into 100%
success.

What are the 4 types of entrepreneurship?

There are many different ways to define entrepreneurship, but your business will likely fit into one
of these four main categories.

1. Small business
A small business is when the owner is also in charge of operations, including hiring
employees. Their goal is usually to make a profit, and many small business owners
fund their own businesses or rely on small business grants, loans, or crowdfunding.

2. Scalable startup
A scalable startup is specifically designed to attract high-value investments with a
vision that could change the world. They aim to create a business model that can be
easily duplicated and scaled, given the right funding.

3. Large company
Large companies that are entrepreneurial often introduce innovative products that
complement their main offering while staying up-to-date with new technologies and
competition in their niche. Large companies may attempt to reach new markets by
acquiring smaller companies with existing customers.
4. Social entrepreneurship
What makes social entrepreneurship unique is its focus on making the world a better
place by solving social issues. A social entrepreneurship business can be a nonprofit,
for profit, or a hybrid of the two.