How to become an entrepreneur
Becoming an entrepreneur can be daunting. Do you have what it takes? Where do you start? What skills do you need and how do you get them?
“Entrepreneurship isn’t for everyone, but for some people, starting a business feels like what they were meant to be doing,” says Jane Somerville, Director General, Division Services at the National Research Council of Canada, Industrial Research Assistance Program, Canada’s leading innovation assistance program for small and medium-sized businesses, and former Managing Director of District 3, a startup incubator at Concordia University in Montreal.
“You don’t need an MBA or business degree to start a business,” she says. “But it helps if you have certain entrepreneurial traits to start with, and follow up by developing some core entrepreneurial skills as you build and grow your business.”
What is an entrepreneur?
An entrepreneur is someone who starts, owns and operates a business.
Beyond this basic definition of what is an entrepreneur, it is difficult to generalize about the kind of people attracted to the idea of starting their own business.
Entrepreneurs are increasingly diverse. An interesting portrait of Canadian entrepreneurs emerged from a 2019 BDC survey of 1,025 Canadian business owners. Among the findings:
- Twenty-eight percent were women, up from 11% 40 years ago.
- Newcomers to Canada were twice as likely to start a business as their Canadian-born counterparts.
- The number of Canadians under 35 who started a business increased by 80% between 2014 and 2018.
“Entrepreneurs are a heterogenous group, except when it comes to certain specific traits in how they think or feel,” Somerville says. “Then you start seeing some interesting similarities.”
Common entrepreneurial motivations and traits
Entrepreneurs are motivated by much more than money. Most start their business to become their own boss. In BDC’s survey, when asked why they became an entrepreneur, the most popular answer—cited by 70%—was independence, autonomy and flexibility.
About one in two mentioned passion or self-fulfillment. One third cited financial reasons.
Motivation to become an entrepreneur
Somerville adds another motivating factor for many entrepreneurs: a desire to make a difference and have a social or economic impact. “Entrepreneurs often have an idea they think will change the world or save people’s lives,” she says. “I think the ambition to do good is as important a motivator as anything else.”
Key entrepreneurial traits
1. They’re at ease with complex problem-solving. Entrepreneurs tend to be comfortable living in a world where answers come in shades of gray. “As you design your business model, there is no 'right’ answer to the features you might include. As you start operationalizing your idea, there is no one way to do it,” Somerville says. “This uncertainty is difficult for some people to live with.”
2. They have a higher tolerance for risk. Entrepreneurs are prepared to live with greater-than-normal financial risk. “They have no safety net,” Somerville says. “A wrong decision can impact their ability to get paid or pay employees.”
3. They have an independent streak. Entrepreneurs usually enjoy the autonomy and freedom of calling the shots—although, as Somerville notes, “while they are their own bosses, they nevertheless have some serious obligations to clients, investors and employees, to name just a few of their important stakeholders.”
4. They are innovative. Entrepreneurs are often outside-the-box thinkers who have a different way of doing or seeing things, or pioneering an idea they want to bring to life. “They are energized by the idea of doing something that hasn’t been done before,” Somerville says. “They are willing to take the risk of getting it wrong, just to have the chance to try.”
The 2019 BDC survey of business owners sheds additional light on what makes Canadian entrepreneurs tick.
- Three in four said they had to deal with financial insecurity, significant stress and a lack of benefits. Yet, 90% were professionally satisfied.
Self-reported satisfaction among entrepreneurs
BDC offers a free online entrepreneurial self-assessment tool that can help you decide whether or not you’re suited for entrepreneurship. It asks you to rate yourself on how much you agree with several dozen statements, such as:
- I am fairly curious and I am continually in search of discovery.
- Success is mostly luck.
- I like to lead others.
The tool gives a score for motivations, aptitudes and attitudes vis à vis entrepreneurship.
Steps to becoming an entrepreneur
There are no agreed-upon steps that all entrepreneurs must pursue. But in Somerville’s experience, you’ll increase your odds of success if you follow three basic steps:
- Take an entrepreneurial skill self-assessment.
- Acquire what Somerville calls the “just-in-time minimum viable skills” you need for your stage in the entrepreneurial journey.
- Apply those skills with intention, with help from experts and advisors around you.
Here is a breakdown of each step.
1. Do an entrepreneurial self-assessment
Entrepreneurship isn’t for everyone. It can be stressful, demand long hours and require skills you may not have or aren’t sure how to acquire.
A good way to find out how ready you are is to do an entrepreneurial self-assessment. “Start by informing yourself about what you will need to do as an entrepreneur,” Somerville says. “Entrepreneurship is not for the faint-hearted. People should walk into entrepreneurship with their eyes wide open. The more they know about the things they’ll need to do, the easier their entrepreneurial journey will be.”
Somerville developed a basic entrepreneur self-assessment while running District 3. This self-assessment, called the Start-up Entrepreneur Competency Model, includes seven competencies which are roughly divided into two phases.
The first phase is more about the competencies required to validate and frame the business idea; the second is more about executing on that idea. It is important to remember, however, that starting and running a business is anything but linear.
- Phase 1: Validate your start-up
- Identify your customer and market
- Guide your start-up
- Design your minimum viable product
- Phase 2: Grow your start-up
- Build a strong team
- Manage finance and legal
- Grow revenue
- Raise funds
Each of the seven competencies is further broken down into sub-competencies; these describe specific tasks required in each competency. For example, for the first competency, “Identify your customer and market,” the sub-competencies are:
- Explore research-market fit
- Prioritize customer segments
- Prioritize the people in the customer segment
- Define your value proposition
- Interview effectively
- Define your positioning
- Analyze market risk and opportunity
You don’t need to know how to do all these things before you start your business; you can learn them as you go along. You can use this framework both before you jump into entrepreneurship, to decide if you want to acquire these competencies, and after, as a support in your entrepreneurial competency acquisition journey.
“As an entrepreneur, you can’t just be focused on marketing, you can’t just be focused on fundraising—you need to know enough about all operational aspects of a business to be able to weigh in on strategic decisions related to those functions,” Somerville says. “You need to know if you’d like to do the things you need to do as an entrepreneur. That’s the first step. To make an informed decision on whether you want to be an entrepreneur, you need to know all the things you’ll need to do.”
She says prospective entrepreneurs are relieved when they take the self-assessment. “They don’t know what their entrepreneurial journey might look like. It’s terrifying for many of them. The self-assessment tells them it’s not so terrifying after all,” she says, adding that these skills can be developed over time.
2. Start learning
The next step is to start learning. But where to begin? Don’t be discouraged by the list of skills you’ll need, says Somerville, whose mantra for entrepreneurs is to focus only on the skills needed for your specific stage of the entrepreneurial journey.
What does this mean? If you want to “identify your customer and market,” for example, you need to be able to do practical things like prioritize customer segments and define your value proposition.
“Every bit of knowledge or skill development has to serve your business,” Somerville says. “Your goal is to minimize the noise, and to focus on the skill development you need at that time to accelerate your idea or company through your next important milestone.”
You don’t need to learn all the skills at once. The idea is to focus on learning just what you need right now. “As much as you might enjoy learning about equity funding, if you’re three years away from an equity financing round, there’s no point in spending a lot of time on that right now,” Somerville says.
The same learning process applies both to start-ups and established businesses. “We always have to be thinking about where we’re going next,” Somerville says. “Whether you’re starting a business, reinventing one or launching a new business line within your company, the first thing you do is validate the market need—does any potential customer segment care?” She adds that there are core skills you’ll need to be able to answer that question with confidence. “You don’t want to jump right into execution.”
“Typically, the key focus of a new business is around three types of business traction—customer acquisition, funding and product,” she says. “Funding and product milestones are typically in support of that all-important customer acquisition. But the balance of getting sufficient funding to keep the lights on until acquiring those first customers and first revenues is a challenge. There are many important skills to develop to enable an entrepreneur to get to those milestones faster and better.”
3. Apply your learning with support
Practice makes perfect. Once you have developed a new skill, you want to practice until it becomes second nature—a reflex. For example, if you’ve developed your business model and something changes in the market environment, be sure to go back to your business model to see if it needs tweaking to reflect the new market realities.
“You don’t have to go it alone. There is support in the ecosystem, so take advantage of it,” Somerville says.
Support can come from other entrepreneurs in your network, mentors and mentor networks, programs offered by accelerators and incubators, even your accountant or banker. You can also create an advisory board for your business or hire an outside expert to help you with such things as operational efficiency or strategic planning.
Is entrepreneurship right for everyone?
No, not everyone is meant to be an entrepreneur. To decide if entrepreneurship is right for you, think about the traits that most entrepreneurs have, and the skills you will need to develop, and whether they’re a good fit for you. An entrepreneurial self-assessment may help.
But even if you decide you weren’t meant to be a business owner, learning about what’s involved is still useful. “That knowledge of what it takes to run a business is valuable for everyone,” Somerville says.
“It’s important to know how you fit into the success of an organization. No matter what role you have, you may still need to deliver a service or raise funds for a project or manage others. Everyone can benefit from having an entrepreneurial mindset and knowing the language that goes with it.”
What makes a good entrepreneur?
Somerville says business owners often overlook the importance of honing their skills. “Many entrepreneurs jump into executing on their business idea without doing enough of the thinking work first—like validating that their business idea is truly desirable, feasible and viable,” she says.
While she says most entrepreneurs have great intuition, “it’s important to intentionally develop your entrepreneurial skill set.” Ironically, jumping in too quickly, she says, can end up slowing you down and make you spend money unnecessarily.
Entrepreneurial skills are closely connected to business success. BDC’s survey found that entrepreneurs who have better managerial and technical skills see payoffs in two areas:
- Improved business performance. A one-point increase in managerial skills (on a scale of one to 10) increased the probability of having a high-performing business by 3.1%, according to the BDC survey. A similar increase in technical skills increased this probability by 2.9%.
- Increased sense of satisfaction. A one-point increase in managerial skills boosted by 10.7% the probability of being highly satisfied.
Average managerial and technical scores, by level of satisfaction
Resources for becoming an entrepreneur
For basic entrepreneurial knowledge, there are vast amounts of free information online. Somerville recommends starting with:
- BDC’s website, which includes hundreds of free articles on topics such as how to start a business, how to manage your finances and how to be an effective leader. The site also offers many free ebooks, tools and templates for financial statements, business models and other areas.
- District 3’s Start-up library, which includes many free articles on the skills that entrepreneurs need to run a business.
- MaRS Discovery District’s Start-up toolkit—free articles on starting a business from North America’s largest urban innovation hub.
The non-profit organization, and BDC partner, Futurpreneur Canada, is another good resource for information, mentorship and start-up financing.
Also look for online or in-person workshops, seminars and other learning opportunities offered by local business incubators, accelerators and university or college entrepreneurship programs.
What to study to become an entrepreneur?
When it comes to entrepreneurial education, Somerville suggests simply focusing on the skills you need to get to your next business milestone. She also says a business degree or other types of formal education isn’t needed to start a business. “Education is always wonderful, but most entrepreneurs learn along the way. There is a lot of applied learning.”
Take part in our free online learning course, How to start a business, which covers business plan writing, financial management, human resources, and sales and marketing.