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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Small business blog posts we liked this week

From family business to employee health, here are some of the small business blog posts that caught our attention this week:

Happy reading!

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Costs of opening a franchise

franchise_costsThis may come as no surprise, but opening a franchise probably isn’t going to be cheap. But forewarned is forearmed, so let’s take a look at some of the common costs associated with opening a franchise.

Franchisors often charge a franchise fee that needs be paid at the start of the agreement – either in full or as a percentage – in the form of a deposit. You’ll likely have to sign a deposit agreement,and the deposit may or may not be returned to you if you decide not to go through with 
the franchise.

In Alberta, for example, this refundable deposit can be up to 20% of the initial franchise fee. Once you’ve made the agreement, however, the initial franchise fee can vary from as little as $5,000 to as much as $75,000 — possibly more.

The average initial franchise fee 
in Canada is $23,000. This fee covers costs like support, training, franchisee recruitment, grand opening launch, franchise development and site identification. In general, the initial fee is higher the more recognized and established your franchisor company is.

Royalties

Aside from initial franchise fees, royalties are often due, either weekly or monthly, to give the franchisor a portion of your sales. These can vary from 0–20% of gross (total) sales, depending on the level of support and services provided to you. Some franchises don’t charge an ongoing royalty fee, but the cost is often built in through rebates or mark-ups on products or services.

Additional costs

Aside from the franchise fee and royalties, you may have to pay other costs, like advertising fees. Depending on your franchise, you 
might have to make contributions to an advertising fund for the franchise system as 
a whole. This means that fees from all locations can be pooled into a much larger budget, allowing for cost sharing of national or regional advertising.

You’ll also need an equity investment – money to help keep your franchise location afloat until you’re profitable. On average, this investment amounts to around $160,000 in Canada. Other costs that you may run into could include research 
and development funds, leasehold improvements, furniture, fixtures, equipment, supplies and costs of employee training. Insurance costs are often included within the franchise agreement, but be sure you’re adequately insured before you open your doors. Like we said, not cheap!

So how much do I need to pay to open a franchise?

Estimated overall costs to opening a franchise can range anywhere from $50,000 or less for service franchises to as much as $500,000 or more for more sophisticated franchises. For more information, visit the Canadian Franchise Association‘s website.

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The difference between a franchise and a chain

chain_or_franchiseOn the surface, chains and franchises can seem the same, but they are pretty different forms of small business ownership/operation. Here are the differences between a franchise and a chain

Characteristics of a franchise

Here, a franchisee (the entrepreneur), buys the right to market and sell certain products and services from a franchisor (the person who sells the franchise) through a legal agreement. Fees and royalties (a share of the income) are then paid to the franchisor over a specific period of time. The franchisee is in charge of operations, finances and HR for his or her specific location.

There are many different types of franchise agreements, all with different responsibilities, purchases, policies, procedures and rights. These are often outlined in the agreement and operation manual to ensure consistency across locations. Consistency is very important in franchising.

Although the fast food industry most often comes to mind when thinking about franchises, there are lots of industries that have them, including automotive, real estate, accommodations, business services and retail. If you’ve ever stopped in at a Boston Pizza, 7-Eleven or a UPS Store, you’re familiar with what a franchise basically is.

Check out our blog post about the perks and snags of franchising.

Characteristics of a chain

Chain stores open different locations of the business that’s usually under one main corporate ownership – like Mark’s Work Wearhouse, Hard Rock Cafe and Costco. This is the key difference. Franchise locations each have different owners, reporting to the main franchisor. But each chain location doesn’t have a different owner – each chain location is owned by the corporate office.

Here’s a bit of chain business trivia for you: Remember W H Smith bookstores, that eventually became part of the Chapters empire? Founded in 1792, it eventually became the world’s first chain!

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