Entrepreneurship and business ownership are often conflated and mixed into being one thing. Plenty of people associate the two because each role is part and parcel of creating a business. While there may be many overlapping skillsets for entrepreneurs and business owners, there are also plenty of apparent and delineated differences between the two roles. When starting your own business, you must understand the difference between these positions before you begin so that you can effectively hire the appropriate candidates. Knowing what you’re looking for in a candidate is of utmost importance to fill up your company with proper help.
It can be helpful to understand that even the words have disparate definitions despite their constant confusion. According to the oxford dictionary, entrepreneurs are “a person who organizes and operates a business or businesses taking a greater than the normal financial risk to do so.” This differs significantly from a business owner defined by “an individual or entity who owns a business entity in an attempt to profit from the successful operation of the company.” Even in the textbook declarations of what each role is, it’s relatively straightforward the immediate differences.
First, note that entrepreneurship tends to include greater financial risk. Those who work in the world on entrepreneurial activities tend to be willing to take risks and always have skin in the game when it comes to the companies development. Sometimes this comes with potential back-end benefits, so when working with an entrepreneur, be clear upfront about what they can expect to receive should the company succeed (and it’s probably best to have that agreement be legally binding).
Where you want someone more willing to take risks as an entrepreneur, you may want someone a little more conservative as a business owner. A business owner tends to center on profitability and sustainability and maybe more risk-averse than an entrepreneur. As their job is to sustain the business, risks come across as more dangerous to these individuals. Further, entrepreneurs tend to have big ideas and want to plan, while business owners tend to focus on sustaining one great idea in the present.
There is also a legal difference between an entrepreneur and a business owner. Business’s legal status’ tend to be the difference-maker here. Entrepreneurs tend to be incorporated, while small business owners tend to be unincorporated. In the process of determining your legal status, remember that “incorporated business owners reported an increase f $6,600 in median annual earnings compared to their previous salaries when they became entrepreneurs”.
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