If you are a counsellor or teacher for entrepreneurs you should distinguish between at least 4 different types of entrepreneurs. If you don’t, you will probably find it hard to do good counselling.
Each type has different reasons to start, need different advice and learn differently.
The 4 different types of entrepreneurs:
The Traditional Entrepreneur
The Growth Potential Entrepreneur
The Project-Oriented Entrepreneur
The Lifestyle Entrepreneur
Overview of the 4 types of entrepreneurs
- Traditional businesses are those ones that have been around for many years; restaurants, shops, carpenters, hair dressers, mechanics and other companies that help the local community function.
- A growth potential business typically works with software development, applications for smart phones and tablets, consulting, communication and marketing, development of medical equipment, business intelligence. The really good ones are scalable.
- The project oriented businesses are typically owned by well-educated entrepreneurs and they work with tasks close to their education. Fx: translation, design of concepts, exhibitions at museums, they are graphic designers, authors, psychologist, film makers, textile designers …
- The lifestyle entrepreneur doesn’t have an education as a basis for starting the company. It is a “con amora business” – for love of the idea/service. The life style entrepreneur might be selling Aloe Vera or slimming products, be a glass artist, children’s book author, do painting therapy, sell coaching or aura interpretation.
1. The Traditional Entrepreneur
A traditional entrepreneur may have an education as carpenter, mechanic, cook, shop assistant or other skilled education.
He or she has been working in the industry for some years and now feels it is time to start a business like the one he has been working in.
“No need to work so hard for others when you can work for yourself” is often the driver behind the startup.
The most important thing for the traditional entrepreneur is to work, produce something and then make as much money as possible.
No need for too much talk and planning because it is quite clear for all what he does and what he sells.
Many traditional entrepreneurs do not have a skilled education in the industry he works in, but learns on the way. If you are an immigrant you open a restaurant or a shop and learn from others in the same kind of business.
Traditional businesses are those that have been around for many years; restaurants, shops, carpenters, hair dressers, mechanics and other companies that help the local community function.
The way the service or product is made is more or less the same way as yesterday and the way it will be made tomorrow.
A carpenter builds houses, a shop owner sells goods from a shop or a web shop, a restaurant owner sells food from a restaurant, a street kitchen or a van, a mechanic repairs cars and a hairdresser does hair.
It is fairly easy to describe the work functions in a traditional business. If the entrepreneur is skilled in the industry, he is on top of the practical work functions from day one he starts the company.
Many traditional businesses are run by non-skilled owners. They have managed to learn the practical work functions in the business.
Acquiring new knowledge
If the entrepreneur is skilled he feels that he knows everything about the business. If new digital machinery has been introduced after his graduation, he might take a short course at a vocational school to learn about it. Otherwise he gets the knowledge he needs through practical work in the business – and talking to colleagues.
Vocational training is considered a waste of time: “What do teachers or consultants know about real life?”
An entrepreneur with no skills in the area will talk with a friend about how to handle the work functions or just go ahead and find out the hard way: – try it – fail – try again.
The traditional entrepreneur likes to learn about some business issues. Not the strategic part of doing business, just the practical stuff like: How to do accounting, customs regulations, minimizing paying tax and other rules which the government imposes on entrepreneurs.
Development and regeneration of the company is not a high priority. The products or services are based on the owner’s skills and these will only change slowly.
Change does not occur until a younger generation takes over or buys the company.
Some of these traditional businesses, however, are by personal competences, good skills and luck turned into growth companies.
Many machine, electrical, plastic or carpentry companies have become large industrial enterprises because the founder has been able to see the opportunities in the market and develop a product that customers demand. E.g. these international companies:
- LEGO – production of the world-famous LEGO® bricks
- DANFOSS – the world biggest thermostatic expansion valves company
- GRUNDFOS – world leader in production and sales of water pumps
Experience from counselling
Most traditional entrepreneurs have a clearly defined product. E.g.: Selling sandwiches, a fashion shop for women, construction of brick walls or production of bi-cycle wheels.
When the entrepreneur consultant and the traditional entrepreneur meet, the consultant has to focus on practical and governmental imposed regulations. E.g. tax, sales tax, municipality, state and regional rules. Regulations that are obstacles for the entrepreneur who wants to use his skills, to work hard and earn money.
The entrepreneur consultant might see other obstacles for succeeding with the business, fx: Too much competition, obsolete product, wrong location, underestimating the financing or too optimistic customer expectations. But establishing a fruitful relation to the entrepreneur can be difficult so maybe you have to wait till next time you meet to discuss such matters.
Often the traditional entrepreneur wants you to make a budget. The bank or somebody else wants it.
Making a budget together is a great way to find common ground. Budget figures are “common ground”. Discuss the figures in the budget; put them in a spread sheet and the math will bring the two of you together.
Find good tools:
A good advice for a traditional entrepreneur is to make him or her find ways to handle the administration in the company. Mismanagement of accounting and other governmental restrictions kill many traditional entrepreneurs. If they find somebody to manage administration they can spend all their time on what matters for them: to work hard with the product.
2) The Growth Potential Entrepreneur
If you meet a growth potential entrepreneur he or his team has a wish to start a business that will grow, attract a lot of customers and generate a lot of money.
Maybe they hope that one day they can sell the business and live happily ever after.
They are ambitious, work hard and long hours and hardly have time to socialise outside the entrepreneurial environment.
The entrepreneurs come from a technical or science education from universities and sometimes they start directly after graduation.
Others might have some years of experience from an industry and have fostered the business idea together with colleagues.
When a growth potential entrepreneur meet an entrepreneurship counsellor, he – and yes, it is almost always a male entrepreneur – has often described the business project and often in form of a business plan.
The company is typically built on a technical or digital idea but also consultants that spin off from bigger consultant houses will make growth potential businesses.
At best the business idea is scalable – i.e. when the first product/service is produced it can with no further expenses be scaled to be sold to the rest of the world. Facebook and Dropbox are examples of scalable businesses.
Typical business fields are software development, applications for smart phones and tablets, communication and marketing companies, development of medical equipment, business intelligence and the like.
Acquiring new knowledge
When meeting a problem, the growth potential entrepreneur will investigate the cause and then search for the solutions. He will search the internet or in reference books, or find people who are specialists in that specific area.
He doesn’t tend to attend long courses, but a tree-hour seminar on a specific topic is OK. “Brief, concise and onto the next challenge” could be his motto.
He is proactive, so if he can sense that environment and customers are changing attitudes and buying patterns, he will begin to adjust or completely change the business so that it can meet the new requirements.
Experience from counselling
The growth potential entrepreneur often forwards a very detailed business plan, with emphasis on a description of the product to be implemented.
Some research in relation to customer segment and potential customers has been made, but it is mostly based on statistics and other information from secondary sources.
Few have direct contact with customers or much knowledge about the market and its needs from previous jobs.
Different budgets are prepared and often projected three years ahead. The figures though, are often built on loose assumptions.
The biggest weakness in the growth potential entrepreneur’s business is often lack of insight, knowledge and realistic assessments of market size, customers and penetration time in the market.
Therefore, effort must be made to find primary market data. He must talk to business people with knowledge of the customer segment and to the customers themselves. When the customer base is estimated, the growth ambitions will often be downgraded – or disappear.
Another problem for many growth potential entrepreneurs is the inability to think holistically, i.e. be able to look at the entire company and not only at their product.
The business model – which mean: How does the company earn its money? – is often also an issue that have to be looked at.
The advice to the growth potential entrepreneur will be to focus more on the market and customers than on the product.
Good tools for the entrepreneur:
3) The Project-Oriented Entrepreneur
A project-oriented entrepreneur has education and expertise in a predominantly humanistic discipline.
Maybe he or she has a bachelor or masters in Arts or psychology, is an actress with experience in role-playing groups , a midwife who will help first-time mothers prepare for birth or he or she might be a graphic designer.
The company often reflects what a person finds interesting, gives the owner personal development and opportunity to work in ways that are ethically correct.
If a project-oriented entrepreneur could get a 9-5 job working with things he likes it might be just as good, but often that job doesn’t exist.
The motivation to start may be dissatisfaction with the conditions employers make available to clients or customers and the entrepreneur wants to make it better. Or he is temporarily vacant and can see that it is now, he has to live out his dream of being able to make money on the knowledge and experience he has within his area.
The project-oriented entrepreneur does not think of himself as a “business”, but rather as one who earns money in a different way than as an employee. The project-oriented entrepreneur has no plans to hire people; you would rather work with various freelancers.
She or he may have a couple of kids, a husband / wife and hobbies that have a high priority in his life.
When project-oriented entrepreneurs meet an entrepreneurship counsellor they do not exactly know what they want to sell. They often sell ideas and concepts and not specific products. This makes it difficult to identify the core of the business – but often it can be done.
Making a good profit in the business is not the most important issue to this entrepreneur. The important thing is that the idea and the service the entrepreneur will offer to the community is of excellent quality.
The businesses in this category are translation agencies, concept designers, exhibition consultants, event-making, graphic artists, authors, art communication, interior art designers, psychology, film maker, textile designers, sculptural light, proof-readers – and many more.
Acquiring new knowledge
The project-oriented entrepreneurs are professional in their area so they are following the debate within their industry.
Ideally, they would like to focus on their own desire for personal as well as professional development rather than having to gain revenue for the company.
Professional discussions with colleagues happen often and the knowledge gained is used in the company.
They like to acquire business knowledge by participating in different courses. The more courses the better. The internet is the place to find factual knowledge, but it cannot stand alone. Coaching and counselling is good and it can be done with anyone as long as the approach to the problem is constructive.
In cooperation with their like-minded they discuss the challenges they face.
If customers and the surrounding society wish for something else than what the project-oriented entrepreneurs sell, performance may be adjusted slightly, but to change the service completely would feel like compromising professionalism and ethics.
Experience from counselling
Project-oriented entrepreneurs often present a very wide service they want to sell, for example: “Consultant in China” or “Integration consultant”.
It is often difficult for the entrepreneur to tell a client what he or she sells or who the customers are. Therefore much time must be used to help concretize the ill-defined idea into a commercial viable idea. The counsellor must help them develop their elevator pitch.
Though it can be difficult to spot the commercial idea it is often there. You are dealing with professional and intelligent persons that are novices in business. Together you might find the right startup path.
The budget is usually relatively simple to prepare, because overheads are small and fairly predictable. The income from one sale is often quite high, so on an annual basis the project-oriented entrepreneur does not have to sell much before the expected revenue is reached.
This tool will inspire the project-oriented entrepreneur:
Furthermore, it is typical for this type of start-ups that they do not require a large start-up capital. The production equipment is “knowledge and experience” and a computer. The project-oriented entrepreneur already has these.
If the service is commercially viable, the entrepreneur must often be animated to have greater economic ambitions on behalf of the company.
4) Lifestyle Entrepreneur
A lifestyle entrepreneur is probably an adult woman that at this time in life has discovered a creative gene or insight of life.
She might have had or have a career as teacher, art director or secretary.
The children have grown up and there is room to develop other sides of life beside raising children and focusing on career.
The lifestyle entrepreneur has a great desire that the business must be a part of her life because the business represents the “new person”.
The business is not the essence of life – that is still family and other important personal activities.
She seldom depends on the business income to survive.
The lifestyle entrepreneur often has a good education, but she does not use it as the basis for her business activities. Knowledge for the new business has often been developed through part time training or week end courses.
A special branch of lifestyle entrepreneurs are in the USA called “Moms in Business”. However, this type start traditional or project oriented businesses, the aim of starting is to combine strong focus on being with the family and have an interesting life.
The income from the business moms business must be able to support the family income.
The lifestyle entrepreneur is probably a woman.
Often the lifestyle entrepreneur doesn’t have an education as a basis to start the company and probably doesn’t have years of work experience in the industry. It is a “con amora business” – for love of the idea/service.
She works with something she simply believes that other people should enjoy. And if one can earn money at the same time – or survive at least – it will be fine.
The life style entrepreneur might be selling Aloe Vera or slimming products, be a glass artist, a children’s book author, do painting therapy and sell coaching or aura interpretation.
The typical American Business Mom will choose to open a web shop, start as a personal trainer, do medical transcription service or be a virtual assistant for other small businesses.
Acquiring new knowledge
The life style entrepreneur goes to courses and other gatherings where she has the opportunity to listen to and discuss with like minded entrepreneurs.
It is important for the life style entrepreneur to get as much knowledge as possible and she likes events and participates in online forums, where she can discuss the service or product she sells.
The business knowledge will be found on the internet and by talking to other small business owners. She might participate in free entrepreneurship courses, but developing the commercial part of the business is not that important.
A Business Mom looks more thoroughly for business courses and professional business counsellors because she has to make a living on the business.
The development of the company´s service or product takes place in close cooperation with like-minded entrepreneurs. Customers and others are not invited into the discussion.
The lifestyle entrepreneur likes to improve her product or service and will participate in courses and gatherings that give her deeper insight of the service. Whether it is of any benefit for the commercial development of her business is another matter.
Business Moms listen to the market and change accordingly.
Experience from practical advice
Many lifestyle entrepreneurs are very enthusiastic about their product or service and believe that everyone else must be exited too.
Many people are interested in the topic, but few will actually pay the price for the service. Maybe because there will often be a black market for the services sold, or the service is found performed for free by volunteers. This is particularly true in the alternative treatment industry, where there are many who practice at “domestic level”.
As a consultant, it can be hard to help find a business platform that can generate a reasonable income for the entrepreneur. But as this is not the main issues, one has to accept it and help the entrepreneur succeed within the boundaries of her personal goals.
Lifestyle entrepreneurs may have to either live on a second income and / or only work with the company as a side-line business.
Moms in Business have chosen that being with the family while making money is the main priority, so the advice given must optimize profit in the business with the fact that it has to unfold within the close family environment.
This article is based on analysis of 100 personal entrepreneurial guidances and other research studies. The authors are
- Professor Henrik Mariendal Andersen
- Entrepreneurship Consultant Mogens Thomsen.
Author bio: Mogens Thomsen is an Entrepreneurship Evangelist. He turns difficult business issues into practical usable knowledge that make business owners and entrepreneurs able to act. He does this in books like The Dynamic Business Plan