Not Every Business Owner is an Entrepreneur

Not Every Business Owner is an Entrepreneur

by Nicholas Tart

Just because you start a business, doesn’t mean you’re an entrepreneur. In fact, I consider a very small percentage of business owners to be entrepreneurs.

There are four distinct types of start-up ventures: non-profit organizations, lifestyle businesses, salary-substitute businesses and entrepreneurial businesses.

Non-Profit Organizations

Not only are non-profit organizations not entrepreneurial, they’re not businesses. A business is intended to make a profit. Obviously, non-profit organizations are not.

This doesn’t mean we, as entrepreneurs, should think less of non-profits. In fact, they often have the purest intentions. Unlike businesses, they aren’t directed and driven by profit margins. Thus, these organizations have the capability to contribute to the common good more than an everyday business.

Over the next year or so I’m going to be working with two of these outstanding non-profits with audiences of young entrepreneurs (Junior Achievement and Lemonade Day). You should check ‘em out!

Lesson: If you start and run a non-profit organization, you’re not an entrepreneur.

Why? Because you’re not making a profit.

Lifestyle Business

Let’s say you love to bake cakes. And you notice that other people enjoy baking cakes, but they’re just not as good at it. So, you start a cake baking service and a class to help these people. Also, this provides you with an income by doing something you love. This is an example of a lifestyle business.

Lifestyle businesses provide the owner with a way to make a living by doing something they love. They aren’t meant to be outrageously profitable. But this doesn’t mean lifestyle business owners are thwarted from becoming entrepreneurs.

So, you own a cake baking service that also holds classes. In the daily grind of baking cakes you develop a new way to bake a cake with pockets of frosting on the inside. Your customers love this cake. You start a webinar detailing how to make this cake and sell admissions to other cake baking agencies across the country. Now, you’re an entrepreneur.

Lesson: If you just want to start a simple business to pursue a particular lifestyle, you’re not an entrepreneur.

Why? Because you’re not offering anything new or innovative.

Salary-Substitute Businesses

Dry cleaning, restaurants, hair salons and most services are classic examples of salary-substitute businesses. These types of businesses provide their owners with a similar level of income to what they would earn in a conventional job. The vast majority of small businesses fit into this category.

Additionally, the vast majority of young businesses fit into this category. If you’re offering a gutter cleaning service, initially you’re not trying to clean every gutter in America. You’re goal should be a small percentage of households in your neighborhood. Just enough so you won’t have to flip burgers, right?

Luckily most of these types of businesses are scalable, to the point that they can become entrepreneurial. For example, you clean a few gutters in your neighborhood the first year. The next, you expand to other neighborhoods. After that, you spread your services across town. Then you expand into other cities and subcontract that work. All of the sudden you’re business is too big to handle yourself. Now, you’re an entrepreneur.

Lesson: If all you want to do is replace your steady income, you’re not an entrepreneur.

Why? Because you’re not trying to grow your business.

Entrepreneurial Business

Everyone has junk. People have three options when it comes to their junk: keep it, throw it away, or try to sell it. Selling it sounds good! One way they can sell it is through a garage sale. But these people don’t want to have to deal with a garage sale. This is where an entrepreneur (i.e. Ben Weissenstein) comes in.

The problem: People don’t want to manage their own garage sales.

The solution: Offer to organize and run the garage sale for a cut of the sales.

However, Grand Slam Garage Sales was only a salary-substitute business. Until… they began selling franchises. What started as a simple service has become an entrepreneurial business as they are selling their services across the country.

Lesson: If you bring a new product or service to the market by seizing an opportunity, you’re an entrepreneur.

Why? Because you’re intending to make a profit, you’re offering something new, and you’re trying to grow your business.

And when you’re rich, consider taking that $1 salary.

So, what if I’m not an Entrepreneur?

The difference between an entrepreneur and a business owner usually comes down to the mindset. And when you consider yourself to be an entrepreneur, you are more likely to start thinking like an entrepreneur – that means big, innovative ideas.

So don’t be afraid to tag yourself with the ‘entrepreneur’ label, even if your business doesn’t technically count: it might be a self-fulfilling prophecy.

More: 3 Ways Entrepreneurs Differ From Business Owners

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Photo by: danorbit