Enterprise and the entrepreneur
Definition
Enterprise: the skills involved in identifying a business opportunity and taking the risk of organising resources to pursue it.
Entrepreneur: the person who sets up and owns a business, taking the risk of doing so.
- Enterprise is one of the four factors of production, so it is a resource the business uses in the same way it uses labour or capital.
- An entrepreneur is the person who provides it, so enterprise is the activity and the entrepreneur is the person doing it.
- Enterprise is not the same as labour, because an employee sells their time for an agreed wage and is paid whatever happens to the profit, while the entrepreneur's own money is in the business.
- That is why a paid manager who runs a Tesco store is supplying labour, not enterprise, however many decisions they make in a day.
What an entrepreneur does
- Sets up the business: they start it, open it and own it, either outright or by holding shares in it.
- Spots the opportunity: they identify a gap in the market and bring a new idea to it.
- Organises the other factors of production: they find the premises, raise the money for equipment, and hire the staff.
- Nobody else does this at the start, so a new entrepreneur is usually doing the buying, the selling and the bookkeeping in the same week.
- Makes the decisions: what to sell, what to charge and who to hire are all their call, with no manager above them.
- Takes the risk: they put their own money in, keep the profit if customers buy, and absorb the loss if they do not.
Example
- Ben Francis was 19 and working shifts at Pizza Hut when he started Gymshark in 2012.
- He spotted the opportunity, because young gym-goers could not buy fitted training kit that looked how they wanted.
- He supplied the enterprise, screen-printing vests in his parents' garage and reinvesting every sale in the next batch of stock.
- He took the risk, because unsold stock would have been his loss and nobody was paying him a wage to try.
Common Mistake
- Do not write that an entrepreneur is somebody with a good idea.
- An idea costs nothing, and having one is not enterprise.
- Enterprise is acting on the idea by organising the resources and accepting the risk of losing money.
Self review
- What is meant by enterprise?
- How is an entrepreneur different from enterprise?
- Give three things an entrepreneur does when setting up a business.
- Why is a paid manager not supplying enterprise?
- Write a full description of what an entrepreneur is.
