“Business owner” and “entrepreneur” are often used interchangeably. However, many owners are hesitant to call themselves entrepreneurs because they feel like they have yet to meet some mysterious, unwritten financial growth metric. Similarly, some entrepreneurs — typically solopreneurs who have their hands in many ventures — are hesitant to call themselves business owners. So when is each title appropriate? Let’s take a closer look at the differences between these two types of businesspeople.
Who is a “business owner?”
Someone Whose Name Is On the Paperwork
You can start differentiating business people by looking at the technical aspects of owning a company. The earliest stages of becoming a business owner involve obtaining an EIN (an employer taxpayer ID) filing articles of incorporation, choosing a name, and a number of other official filings at the state and federal levels. Also, almost all companies are required to maintain a license in order to legally operate. Naturally, these require the name of an owner.
Perhaps you inherited a family business, but don’t intend to run the day-to-day operations. Alternatively, you may have purchased a profitable business venture and have no intention of running it hands-on. These people are definitely business owners, but they’re probably not entrepreneurs.
Someone Who Practices Business Skills
We can also define ownership versus entrepreneurship by looking at skillsets business owners regularly use. Business owners wear a different hat on any given day and in order to be successful, they need to have basic competency in all of these skills:
- People management and human resources basics
- Sales effectiveness and operations
- Marketing, both email, digital, and in-person
- Financial management and recordkeeping
- Law/legal basics
Even if an owner is operating as a team of one, skills like human resources come into play when working with vendors, looking for growth opportunities, and even properly paying themselves. If a business owner pays themselves without accounting for the proper taxes — or if they pay late — they can still get into a lot of trouble when annual filings come around. Both owners and entrepreneurs eventually delegate these tasks to team members or contracted professionals, but in order to grow and manage the business, these skills need to be inherent initially.
Someone who takes advantage of a valuable business opportunity, regardless of whether they’re novel, and turns it into a working business plan.
Business owners, when starting a business, tend to find access to capital through SBA loans or ROBS processes. They may even use non-retirement personal savings if they have them.
Business owners tend to value financial security, whereas entrepreneurs are known for being comfortable with more risk.
Who is an “entrepreneur?”
Entrepreneurship is trickier to define than business ownership. For starters, you can be an entrepreneur who is a business owner, or not. You don’t need to meet the requirements defined above for “business owners” in order to be an “entrepreneur,” though many business owners are both.
Whereas most business owners run their business full time (at least in the beginning), entrepreneurship is not necessarily a job (though successful entrepreneurs can certainly pay the bills). We often tend to think of entrepreneurs as the faces we see on the cover of Fortune magazine or even TV personas making their mark on Silicon Valley, such as Jeff Bezos or Mark Zuckerberg. In reality, entrepreneurship is more subtle.
Someone Taking a Risk on a New Idea
Entrepreneur.com points out that entrepreneurs may not necessarily be working on a proven service or product. Instead, it can be anyone — in any role — harnessing an entrepreneurial mindset to look for innovative solutions. This is a key difference.
Entrepreneurial ventures are known for trying to disrupt the market status quo. This often involves taking a unique, untested business model and turning it into something workable and sustainable.
Someone Comfortable with Back-Breaking Stress
Because entrepreneurs are usually attempting to cause major or minor shifts in a certain marketplace — think the huge shift Uber caused in the public transport space, or Venmo and Square in the payment market — entrepreneurship is usually associated with some element of risk.
This is largely because such huge shifts require their companies to grow at an alarming pace. This business expansion is often fueled by venture capitalists and requires handling larger amounts of capital than some owners may be used to.
When you’ve got a board and an entire venture firm breathing down your neck, “stressed” is probably an understatement!
Someone Busting their Butt
Sometimes entrepreneurship is all about attitude. Maybe you know someone who is a serial side-hustler. These people create software or other collateral they can leverage to create passive income. Do this enough times and you’ll have a reliable source of income even if you don’t have a “job.”
Someone Chasing the Newest Thing
There are many types of entrepreneurs. While some entrepreneurs build a company from scratch and stick with it from beginning to end, many entrepreneurs wind up with a hand in more than one company. Some entrepreneurs even deliberately stick around for the company creation process, but take off once the company is stable and can be sold. These are usually referred to as serial entrepreneurs.
How are business owners and entrepreneurs the same?
Business ownership and entrepreneurship aren’t mutually exclusive. The picture becomes a lot clearer when you look at the two as a Venn diagram rather than separate skill sets. Here are a few similarities:
- Optimism. Whether your ventures are business-oriented or entrepreneurial in nature, it’s essential to maintain an optimistic outlook in order to succeed.
- Risk Management. Some argue that business owners are risk-intolerant and entrepreneurs are risk-tolerant. In truth, both understand that success is a matter of managing risk and understanding how much risk and what kinds of risk your business and/or project can tolerate.
- Strategic thinking. Whether you’re using management skills or harnessing your entrepreneurial mindset, chances are you’re going to need to think about the long term. The path may look different, but smart, thought-out decisions will be a part of the journey.
Which kind of businessperson are you?
If you’re a business owner, don’t count yourself out as an entrepreneur and vice-versa. Many people face imposter syndrome in this area, but there’s no financial requirement for entrepreneurship. Whether your business is running in the red or the black, chances are you’re regularly tapping into your entrepreneurial spirit. And on the flip side, even if you don’t own a business in the traditional sense yet, don’t be intimidated – if ownership is important to you and you’re regularly practicing entrepreneurship in other parts of your life, you just haven’t found the right fit yet. It’s only a matter of time!