At the 2014 World Conference on Entrepreneurship in Dublin last week, we heard a common question: “Do we need a new definition of entrepreneurship?”
The word “entrepreneur” has had different definitions since its inception. In 1734, it first appeared in the book Essay on the Nature of Trade in General by the Irish-French economist, Richard Cantillon. He used the term to define a “risk-taker,” or a person who buys a product at a known price and sells it at an unknown price.
Over the years, that narrow definition has been expanded and modified, evolving to include other aspects such as planner and innovator. Other hallmark characteristics entrepreneurs exhibit are resourcefulness, leadership and creativity. They take risks in an attempt to make a profit and commercialize their innovation.
Today the term has been extended and diluted to cover just about anyone who is in business and therein lays the confusion. “Entrepreneurship” has become an umbrella phrase covering any type of business from franchisee to merchant, from shop owner to restaurateur, from broker to independent agent, from professional service providers to multilevel marketers, and from start-ups to giant corporations. Certainly they all take risks. They all seize upon opportunities. They all commercialize.
So where do we make the distinction that sets certain types of businesses apart under a new and more refined definition of entrepreneurship? We think there are certain characteristics that can help put the definition of entrepreneur back on track.
We think the term “entrepreneur” should be reserved for brand builders. These folks endeavor to add value to a new branded product or service through marketing, sales and distribution. They work toward developing a positive reputation and brand image that results in a loyal clientele. They have the potential to monetize that brand equity through such capital events as mergers, public offerings, or acquisitions.
They differ from those whose interest is self-employment, creating an income, or pursuing a profession. They are more about creating brand value which requires constant reinvestment in growth at the expense of immediate profits. They have a tolerance not only for risk, but for deferred gratification because the real payback is the monetization of their brand equity.
The “brand builder” definition of entrepreneur introduces an over-riding strategic approach to business. They look ahead at the end game. They must start with an exit strategy that says, “Who’s going to buy this business and why?” Their planning must include the question, “How can I organize my business from day one to provide everything the acquirer wants to see when the big day comes?” They must quantify their goals and metrics to answer the questions, “How big do I have to be and how fast do have to grow, to become an acquisition target?” And, “How long will all that take?” The real risk of this type of entrepreneurship is not the launch, or even getting past the first few years of critical cash flow management. It is the risk that the financial, personnel, and distribution strategies they choose to grow their business will be the right ones.
Many business owners do not fall into this definition. They may be in a family business that they inherited and intend to pass onto another family member. Or they may be a franchisee and provided with a formula for running the business. A true entrepreneur will create a business where none existed before. This is where the original definition of risk taker is spot on. And this is why the new definition of entrepreneur should include the term brand builder.
Who We Are
Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.
Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.
They offer their Guiding Principles for Success (GPS) & Shelf Smarts courses to help consumer product brand builders achieve success. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.
Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular business site at www.thebarefootspirit.com.
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