7 types of entrepreneurs

Entrepreneurship isn’t a one-size-fits all model. There are different kinds of small businesses, and there are different kinds of entrepreneurs. Below is a list of the seven most common types of entrepreneurs. Which type – or combination of types – are you?

1) Home-based

Home-based entrepreneurs are self-employed. They run their business alone or with just a few employees, with headquarters being their own home or a home office. These business owners love the flexibility and autonomy of working from home, as well as the freedom to arrange their own schedules. These businesses usually don’t have a storefront, street advertising signs, or customer parking.

Examples: Bookkeepers, tutors, and graphic designers.

2) Internet-based

Internet-based entrepreneurs run their business online and use virtual technologies to support business activities. The business can provide a service or sell a product through a website. Some internet-based businesses can be home-based businesses too.

Examples: Virtual assistants, marketplace sites such as eBay and Etsy.

3) Lifestyle

Lifestyle entrepreneurs rank furthering their own personal goals second to making a large profit. Lifestyle entrepreneurs can pursue a cash-generating hobby during their spare time, or even start a business based on an interest. These businesses usually aren’t intended to be high growth, and usually have few employees.

Examples: A secondhand book store, or a small market stall selling homemade baked goods.

4) High potential

High potential entrepreneurs usually run companies employing between 20 and 500 people. These companies are often very fast-paced, with high growth rates, developing the latest technologies and innovations. Most start-up activity by high potential entrepreneurs is technology and internet related. They are often able to get funding easier than other sorts of businesses

Examples: Quickly-growing technology companies and large IT businesses.

5) Social

Social entrepreneurs are passionate about making a positive impact on the world around them. They create a business to provide solutions to social issues. They are also called non-profit or philanthropist entrepreneurs. Funding for social entrepreneurs typically comes from non-profit organizations, foundations, governments and non-governmental organizations.

Examples: KickStart International and the Grameen Bank.

6) Venture capital

Venture capitalists invest in businesses, through managerial and technical expertise, as well as with money. Venture capitalists are very picky about the companies they invest in, and as much as 98% of firms seeking funds are rejected. Aside from individual angels and venture capitalists, venture capital firms also exist.

Examples: Seen on CBC’s Dragons’ Den, as well as in large companies like those in Silicon Valley.

7) Franchise format

With direction and support of the franchisor, franchise format entrepreneurs open a franchise or chain in their local business area. These entrepreneurs follow the structures of their franchise and experience less freedom and autonomy than other types of entrepreneurs. However, they also enjoy the reduced risk of being part of an established franchise.

Examples: Century 21, Goodyear Tires, and Tim Hortons.

 

 

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The seven types of entrepreneurs

types_of_entrepreneursJust like there isn’t one type of business, there isn’t just one type of entrepreneur. Entrepreneurship can be experienced in a range of different ways. Here are seven of the most common types of entrepreneurs.

Home-based entrepreneurs

Home-based entrepreneurs are self-employed, working alone or with just a few employees. As you can probably guess, the business is based out of their own home or in a home office. Flexibility and autonomy are what these business owners crave. Also, the freedom to do things like arrange a child’s dentist appointment or run errands at lunchtime is a must. These businesses typically don’t have a storefront, street advertising signs or customer parking. Examples of home-based businesses include bookkeepers, photographers and graphic designers.

Internet-based entrepreneurs

Internet-based entrepreneurs run their business online and use information and communication technologies to support business activities. The business can provide a service or sell a product through a website. Some internet-based businesses can be home-based businesses too. Examples of internet-based businesses include Amazon.com, eBay and iTunes.

Lifestyle entrepreneurs

Lifestyle entrepreneurs create a business to further their own personal goals instead of make a lot of money. These entrepreneurs may pursue a cash-generating hobby during their spare time or create a business around one of their interests. These businesses usually aren’t intended to be high growth, and usually have few employees. Examples of lifestyle businesses include a secondhand book store, or a small market stall selling homemade baked goods.

High potential entrepreneurs

High potential entrepreneurs usually run large companies employing somewhere between 20 and 500 people. These companies are often very fast-paced and experience high growth rates. They often develop and produce the latest technologies and innovations. Most start-up activity involving high potential entrepreneurs is technology and internet related. Access to funding is often easier for these companies. Examples of high potential businesses include quickly-growing technology companies and large internet technology businesses.

Franchise format entrepreneurs

Franchise format entrepreneurs open a franchise or chain in the local business area, complete with support and direction from the franchisor. These entrepreneurs stay within the lines and structures of their franchise and appreciate the lower risk that follows. They are not concerned with the lack of freedom and autonomy that comes with owning a franchised business. There are a wide variety of franchises ranging from service franchising like Century 21 real estate, product franchising like Goodyear Tire Stores and business format franchising like Tim Hortons.

Venture capital entrepreneurs

Venture capitalists invest in ventures, through managerial and technical expertise as well as with actual money. Venture capitalists are very selective about which companies to invest in, and as much as 98% of firms seeking funds are rejected. Aside from individual angels and venture capitalists, venture capital firms also exist. Examples of venture capitalists can be seen on CBC’s Dragons’ Den, as well as in large companies like those in Silicon Valley.

Social entrepreneurs

A social entrepreneur measures success by the impact that he or she has on society. Highly passionate, the greater good of the community is their primary interest and they create a business to provide solutions to social issues. These entrepreneurs are also called non-profit or philanthropist entrepreneurs. Funding for social entrepreneurs typically comes from non-profit organizations, foundations, governments and non-governmental organizations. Examples include KickStart international and the Grameen Bank.

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Analyzing investors and venture capitalists

The first time you get “the nod” from a venture capitalist is a real confidence booster. After all, someone else sees value in what you’re doing – so much that they want to give you their money to help you succeed.

But hold the phone. Do your homework before you accept. Assess your investors or venture capitalists for the following:

  • Attitude – Are they going to pass you off to someone else, or do they have a real interest in helping you craft a successful company?
  • Their time commitment – How busy are they? If they’re already sitting on ten boards, you might want to look elsewhere
  • Reputation – Investigate. Ask around. What are they like, who have they helped, and how much grief did they cause along the way, if any?
  • Experience and education – Can they back up their advice with real experience or a strong education in business?

Once potential investors have had a look at your business model or company, be prepared to ask a few questions of your own, like:

  • What do you think of our business model? What have we missed? What are we doing well?
  • Have we missed any competitors in our analysis that you think may be a problem for us?
  • What would you change about the way we’re doing things? Why?
  • How strong is our team? Who or what are we missing?
  • How much do you think our company is worth? How much would you be prepared to invest?
Don’t shy away from asking these questions. They’ll give you valuable insight into your small business from objective third parties – and ones that can make a real difference in your business’ future, for that matter.

Take your time and carefully review the background and track record of all those who wish to invest in your company. What footprints have they left behind? You don’t have to like your investors, but there should be good chemistry between you. If there isn’t, keep looking.

Once you’ve determined that your intended investor or venture capitalist will make a good fit for your business – and vice versa – it’s time to think about your pitch. Have a look at our tips for making a venture capital pitch – and good luck!

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How to make a venture capital pitch

Making a venture capital – or “VC” – pitch presentation is good practice for any entrepreneur. But before you start, you need a good elevator pitch presentation.

What is an elevator pitch?

Basically, it’s a a well-rehearsed and super compelling statement about your company, what it does, and why it’s so great – in under one minute. Think about a scenario in which you’re in an elevator with a potential investor. A few seconds isn’t a lot of time to make a good impression and generate interest, so writing and rehearsing your elevator pitch is a great exercise. You just never know when you might use it. You should have at the ready anytime, anyplace anywhere.

Building your venture capital pitch

Now you’ll need to build an effective presentation to give to investors. If you’ve never done a presentation, or would rather do jump out of a plane than speak in front of an audience, now’s the time to develop this critical skill. If you’re like many entrepreneurs, you are the company, at least at start-up. You’re the face of the company, everywhere you go. Get comfortable with meeting new people and telling them about your new venture. Join a networking group or a local speakers’ bureau to get you “time on your feet.” From there, you’ll have the confidence to speak to a group of people who could potentially make or break your company with their investment. Don’t let nerves get in the way of your success.

Break a leg!

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Developing a financial resource plan for your small business

“Where do I get the money to start my business?” is perhaps the most common question entrepreneurs ask. Of course, this question assumes that they know how much money they need to start their business in the first place.

Develop a plan that outlines funding sources for your small business

Where you go for funding can be different for every small business. Several factors influence the type, cost and suitability of financing for your small business, including:

  • Stage of the venture process. Are you in the start-up phase? Are you growing your small business? Is your business well-established?
  • Your small business’ achievements and financial performance to date
  • The state of the industry your business is in
  • The type of technology your business is based on (if any)
  • Potential growth of your venture
  • Number of years before an exit strategy is available for investors
  • Investors’ required rate of return on their money
  • Amount of money you need
  • What your company is worth
  • Your goals for your company
  • Investors’ terms and conditions

There are many other factors that will come into play when it comes to choosing the most appropriate sources of funding for your business.

Generally, a new small business can be funded in one of two ways: equity (ownership) or debt (loan). With equity financing, you exchange a piece of ownership of your business for the investment capital – you’re giving up part of your company to receive money to start or grow. The amount of your company you give up is negotiable, but it’s related to the size of the investment and the value of your company. If you fail, investors lose their money – you’re under no obligation to repay the investment. With debt financing, you borrow money and repay it over time to the lender. If you fail, you’re still obligated to repay the loan in full.

Money is just one factor of a successful small business

Most new entrepreneurs believe that if they have enough money, they can make any business model into a successful business. Sadly, there is nothing further from the truth. A bad idea is a bad idea is a bad idea, no matter how much money you throw at it.

The reality is sufficient start-up capital is only one element of a successful new business. Research shows that the small business owner’s reputation and depth of their social network are important to securing financial help. Not all businesses need start-up capital – but for most, the need for money comes at some point in their business’ life. So, develop a solid financial strategy, but remember that money is but one pillar of a strong small business.

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