In many ways, entrepreneurs are the lifeblood of the economy. They create jobs and provide solutions, contribute immensely to the economy of any country or region. And being an entrepreneur is a very satisfying career path.
5 Types of Entrepreneurship and Their Differences
According to Investopedia, “an entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards.” Entrepreneurs have a burning desire to create value and build wealth in return.
Entrepreneurship refers to the process of creating, developing, and running a business to gain profit. It is the creation or extraction of value. Entrepreneurship is a risky venture where you can either fail or succeed. There is much to learn from failing as an entrepreneur and gaining an understanding of how entrepreneurship works is an equally beneficial task.
Since there are many types of businesses, there are also several types of entrepreneurs. The different entrepreneurship types are a reflection of the varying aspirations, visions, skills, and personality types of different entrepreneurs.
In this article, we will cover the types of entrepreneurship and their differences.
Let’s get started.
Types of Entrepreneurship
Before you call yourself an entrepreneur or continue your entrepreneurship journey, you must take some time out to find out what entrepreneurship type you are practicing.
Here are some common types of entrepreneurship and what sets each of them apart from the others.
1. Small Business and Niche Entrepreneurship
The vast majority of entrepreneurs fall into this category. Many entrepreneurs start with little cash and then grow into bigger businesses. They do not have the financial prowess to become the multinational serial entrepreneurs that trade on the New York Stock Exchange (NYSE) and other global exchanges.
There is nothing wrong with starting from the bottom with little or no capital. Many of the wealthy entrepreneurs today started as small businesses and niche entrepreneurs but grew into the big boys we all want to emulate: Microsoft’s Bill Gates, Google’s Larry Page, and Sergey Brin, just to name a few.
While it is easy to aspire to move from the small business and niche entrepreneurship level to the league of the big boys, the reality is that many entrepreneurs never attain that level. Failing to reach such heights is okay and not a mark of failure.
Many small businesses do not become a highly profitable adventure. However, they serve a unique purpose by helping to support families, entrepreneurs, and their employees.
In every national economy, small business entrepreneurs collectively create the most jobs and contribute the most to the economy than their multinational and wealthier counterparts.
Small and niche businesses enrich the lives of people every day. They play a vital role in the economy by paying taxes that increase government revenues and creating jobs that decrease unemployment rates.
Some examples of small business and niche entrepreneurship include local coffee shops, local restaurants, local cupcake shops, antique shops, local barbershops and salons, and lots more.
This type of entrepreneurship is funded by the pockets of the entrepreneur, family, friends, and in some cases, loans from the bank. This business model will often not see external capital or investments in its coffins.
Many entrepreneurs that fall into this category make the mistake of trying to expand and invest in other ventures that will end up not paying them adequate dividends.
2. Imitative Entrepreneurship
Many new entrepreneurs come into the business world with the idea of creating some extraordinary and revolutionary products and technology that the world hasn’t experienced yet. If you belong to this category, you are living in denial or underestimating what it takes to get a revolutionary product in the market.
Some entrepreneurs will end up successfully introducing breakthrough new technology and products that can change the world. A deeper look at the statistics will show you that only a tiny fraction of entrepreneurs end up succeeding with new revolutionary technology and products.
While entrepreneurs by nature are open to experiments and creativity, they will get better results if they simply imitate what other successful entrepreneurs are doing.
The smartest move is to adopt the business plan of other successful companies and remodel your business around it. The type of entrepreneurship that does this is imitative entrepreneurship.
Imitative entrepreneurship is one of the most productive ways to build a successful business. The idea is to find a thriving space and a successful company, and compete with it. The goal of imitative entrepreneurship is not to take the number one spot but to get a share of the pie.
For example, in the web hosting and website builder industry, new web hosting services and website builders emulate the same style used by successful companies such as Wix. Cheap web hosting services, free domain names, and free website builders are recipes for success.
Beware of lazy imitative entrepreneurship which blindly copies everything their model business does. The best imitative entrepreneurship involves putting your unique brand stamp and sign on the business you are emulating.
3. Visionary Entrepreneurship
The visionary entrepreneur is the opposite of the initiative entrepreneur. They take more risks and are willing disruptors of established systems. While the imitative entrepreneur takes the easy route and models after successful businesses, the visionary entrepreneur takes a different route.
Visionary entrepreneurship is one of the most rewarding types of entrepreneurship if you can pull it off, but its risks and difficulty levels are the highest of any entrepreneur type.
Many visionary entrepreneurs easily get carried away by uninformed optimism and end up quitting when they fail to attain their goals.
Visionary entrepreneurship refers to organizations that offer novel products that revolutionize the way we do things and live. The backbone of visionary entrepreneurship is to create new or better solutions for the masses through their products. It’s common for these types of entrepreneurs to also have product management skills. This is one of the ways such entrepreneurs are able to not only imagine new products but also create them.
In every industry, you can pinpoint visionary entrepreneurship. In the automotive industry, Elon Musk’s Tesla is leading with its attempt to replace conventional cars with electric cars.
In the online shopping industry, Amazon and Shopify are prime examples of visionary entrepreneurship models that revolutionized the world of online shopping. For example, Amazon, through its Amazon FBA seller program, made it easy for individuals and businesses to sell and fulfill goods to their consumers.
While there are many examples of successful visionary entrepreneurship across industries, the vast majority of visionary entrepreneurship models end up as failures.
The main reason why many visionary entrepreneurship models fall is because of the difficulty it takes to convince the market to adopt new products. Oftentimes it is not the lack of quality or life-changing products but the lack of persuasion and marketing. To carry out such models successfully requires an extensive amount of capital and publicity.
If you want to become a visionary entrepreneur, you first need to find a product that fits the disruptive and life-changing characteristics. It must be worth the time and effort you put into it. Furthermore, you should solve a problem your target audience faces better than the existing solutions (if there are any).
As an entrepreneur, you also need to work on your presentation skills as you will be prospecting to clients and investors. The best presentation software can help you create professional and attention-grabbing presentations.
4. Opportunistic Entrepreneurship
The most profitable entrepreneurship type is opportunistic entrepreneurship. Opportunistic entrepreneurs take advantage of the latest opportunities and trends to gain profits. They build their business around trends and opportunities. Another name for an opportunistic entrepreneur is serial opportunists.
The reason why opportunistic entrepreneurship is so profitable is that it involves stepping into an area with a massive target audience and little competition. This entrepreneurship type comes with a lot of profits for users.
For example, during the COVID-19 pandemic, many companies jumped at the opportunity to start producing face masks and hand sanitizers.
There was a vacuum that needed to be filled in terms of creating COVID-19 protection items, and these companies acted hastily to fill in the gap.
As an opportunistic entrepreneur, you have to quickly spot opportunities and act immediately to meet the demand.
Unlike other entrepreneurship types which involve a more viable long-term business plan, opportunistic entrepreneurship involves either a short- or medium-term business plan. It is an adaptable business model that changes with trends.
For example, those companies involved in producing hand sanitizers and face masks will have to switch to another trend once the pandemic is over.
Opportunistic entrepreneurship is a profitable business model but requires a great deal of flexibility and adaptability to succeed. Companies that are selling face masks now will probably have to adjust their business plan when the pandemic ends .
Every business owner looks for opportunities to exploit for their business. By simply knowing the latest trends and what customers need and are buying, they can boost their sales and profits.
An opportunistic entrepreneur delights in organizing their entire business model for the sole purpose of taking advantage of hot trends in the market.
5. Improvement Entrepreneurship
The improvement entrepreneurship is the borderline between imitative entrepreneurship and visionary entrepreneurship.
An improvement entrepreneur does not create a new product like a visionary entrepreneur or imitate an existing one like an imitative entrepreneur. An improvement entrepreneur takes a product or technology and improves it.
The process usually involves identifying the weak points and inefficiencies of the product or technology and implementing changes to improve them.
Improvement entrepreneurship deals with reconstructing existing products. The improvement is a better version of the existing product. Improvement entrepreneurs commonly make products more user-friendly, offer more utility value to users, and lower pricing.
The point-of-sale system used in restaurants illustrates what improvement entrepreneurship is all about . The original model in restaurants was straightforward but did not offer many features other than seating and billing patrons. Restaurants needed a point-of-sale system with more functionalities.
Improvement entrepreneurs learned about the problem and improved on the point-of-sale system. Today, the system is a much-improved one with extra features such as waste management and portion control.
Every entrepreneur should have some elements of improvement entrepreneurship Think about the various products you use or sell, and try to visualize ways you can improve it further.
Differences Between The Five Types of Entrepreneurship
The difference between the five main types of entrepreneurs lies in their definition and characteristics.
- Small business & Niche Entrepreneurship involves building a small business with a particular niche focus that will appeal to a defined target audience. It is the most common type of entrepreneurship. Examples include a coffee shop and a bakery.
- Imitative Entrepreneurship involves copying an already successful business and modeling your entire business model around it. Examples include web hosting services and lemonade or soft drink companies.
- Visionary Entrepreneurship involves great innovation. It involves creating a revolutionary new product and technology. Examples include Tesla (creation of electric cars).
- Opportunistic Entrepreneurship involves spotting and utilizing limited opportunities to gain a profit for your business. A good example is the production of face masks, oxygen tanks, and hand sanitizers during the COVID-19 pandemic,
- Improvement Entrepreneurship involves the reproduction of an existing product but this time to improve it. A good example is the latest version of smartphones, which are always an upgrade on the previous.
What Type of Entrepreneur Are You?
Becoming an entrepreneur exposes you to a world of possibilities. Apart from having entrepreneurial thinking skills, you need to know what entrepreneurship type you want to pursue.
Do you have limited capital and want to open your own business? The small business and niche entrepreneurship model is right for you.
Do you lack the skills needed to invent your product? The imitation entrepreneurship model is the perfect choice for you. You can copy already successful companies’ business plans and use them to create your company.
If you have an eye for identifying business opportunities when other businesses are still blind to them, the visionary and opportunistic entrepreneurship models are best for you.
And finally, if you have the skills needed to make existing products and technology better, consider the improvement entrepreneurship model.
The failure rate in the entrepreneurship world is alarmingly high. You can help boost your chances of success by identifying the best type of entrepreneurship that works for you and modeling your business after it.
Jeff Solomon is currently co-founder of Markup Hero, a screenshot & annotation SaaS tool. He is a 5x founder of bootstrapped & venture-backed companies with several exits and a few failures under his belt. He is an avid writer and content marketer and Jeff is launching a comprehensive customer development course in early 2021.