Entrepreneurship: concepts and the entrepreneur

Last updated November 202610 sectionsabout 13 min read

This chapter sets out what entrepreneurship is, who an entrepreneur is, and the environment an entrepreneur operates in. Every later chapter, opportunity spotting, venture creation, expansion, planning, marketing, builds on the vocabulary and the character traits introduced here.

Key terms

Types of entrepreneurs

Entrepreneurs are commonly classified by how they respond to innovation and change.

Entrepreneurs and small business owners

The two overlap in practice, most entrepreneurs start out running a small business, but they are not the same thing. A small business owner runs an enterprise mainly to earn a living: growth is incidental, the business model is usually copied from an existing pattern (a shop, a salon, a transport business), and risk-taking is kept to a minimum. An entrepreneur is distinguished by growth orientation and innovation: the venture is built around a new or significantly improved product, process or market, is deliberately scaled beyond a single owner's labour, and is undertaken in the expectation of above-average returns in exchange for above-average risk.

The difference between an entrepreneur and a small business owner is one of intention rather than size. A small business owner aims to run a stable enterprise that provides an income, and may be perfectly content for it to stay the same size for decades. An entrepreneur aims to exploit an opportunity and usually to grow, accepting more risk and more change in order to do so. The same shop can be either, depending on what its owner intends to do with it, which is why the distinction is drawn from behaviour rather than from the balance sheet.

Characteristics of entrepreneurs

• Opportunity-seeking: actively scans the environment for unmet needs and gaps rather than waiting for one to appear.
• Risk-taking: willing to commit time and capital to an uncertain outcome, though a calculated risk rather than a reckless one.
• Innovativeness and creativity: generates new ideas or new combinations of existing ideas.
• Self-confidence and internal locus of control: believes outcomes are shaped by their own effort and decisions rather than by luck or circumstance.
• Perseverance and resilience: persists through setbacks and failed attempts instead of abandoning the venture at the first difficulty.
• Initiative and self-starting: acts on an idea without waiting to be instructed or authorised.
• Result and achievement orientation: is driven by measurable success (sales, growth, market share) rather than by the activity alone.
• Leadership and persuasiveness: can mobilise employees, investors and customers behind the venture's direction.
• Independence: prefers to set their own goals and standards rather than work under someone else's.
• Networking ability: builds and uses relationships with suppliers, customers, financiers and mentors.

Entrepreneurial environment

The entrepreneur's role

• Identifies a viable business opportunity and converts it into a working venture.
• Mobilises and organises the capital, labour, land and technology the venture needs.
• Bears the commercial risk of the venture and absorbs the loss if it fails.
• Innovates: introduces a new product, process or way of reaching customers.
• Creates employment, directly within the venture and indirectly through its suppliers.
• Coordinates the day-to-day management of the enterprise until it is established enough to delegate.

Rewards of entrepreneurship

• Independence: the entrepreneur sets their own goals, hours and direction rather than reporting to an employer.
• Unlimited earning potential, tied directly to the venture's performance rather than a fixed salary.
• Personal fulfilment from building something and solving a real problem.
• Flexibility to pursue an idea the entrepreneur is personally passionate about.
• Wealth and asset creation, including an equity stake that can itself be sold later.
• Community standing and the opportunity to mentor and employ others.

Entrepreneurship and development

• Job creation, particularly through micro, small and medium enterprises, which absorb far more labour than large firms as a share of the economy.
• Wealth creation and a widening of the tax base as new ventures generate income and pay taxes.
• Innovation and the diffusion of new products, services and technology through the economy.
• Regional and rural development, where a local venture can anchor economic activity outside the main urban centres.
• Poverty reduction, by giving individuals a route to income that does not depend on formal employment.
• Utilisation of local resources and raw materials that would otherwise remain idle.
• Improved standards of living, as competition among ventures widens the choice and lowers the cost of goods and services to consumers.

Current trends and issues

• Digital and online entrepreneurship: ventures built entirely around e-commerce, mobile money and social-media storefronts.
• The gig and platform economy: ride-hailing, delivery and freelance platforms that let an individual trade without owning a conventional business premise.
• Social entrepreneurship: ventures deliberately structured to solve a social or environmental problem alongside making a return.
• Green and sustainable entrepreneurship: ventures built around renewable energy, waste recycling and other environmentally responsible business models.
• Youth and women entrepreneurship funds: government-backed financing such as the Youth Enterprise Development Fund, the Uwezo Fund and the Women Enterprise Fund, aimed at lowering the capital barrier to starting a venture.
• Growth of business incubators and accelerators, and of remote, digitally enabled work such as freelancing through platforms promoted under initiatives like Ajira Digital.

Several trends are reshaping entrepreneurship in Kenya and are worth being able to discuss:

• Mobile money has lowered the cost of accepting payment and of reaching customers far from a branch.
• Digital platforms let a very small business sell nationally.
• Youth and women enterprise funds and county programmes have widened access to start-up finance.
• The growth of the green economy has created opportunities in solar power, waste recycling and agro-processing.

Each trend lowers a barrier that once confined enterprise to those with capital or connections.

Challenges faced by entrepreneurs

• Limited access to start-up and growth capital, and the high cost of the credit that is available.
• Inadequate business management and technical skills, particularly in the earliest stage of a venture.
• Stiff competition, both from established firms and from other new entrants in the same space.
• Poor or costly infrastructure, including electricity, transport and internet connectivity.
• A demanding regulatory and tax compliance burden relative to the size of a small venture.
• Market unpredictability and changing customer tastes.
• Corruption and bureaucratic delay in licensing, land access and public procurement.
• Limited access to markets and to reliable, up-to-date market information.

Many of the challenges entrepreneurs face are interconnected, which is why solving one in isolation rarely works. Limited access to finance forces a business to operate at a small scale; small scale weakens its bargaining power with suppliers and its ability to win large customers; and weak revenue in turn makes finance harder to obtain. Breaking the cycle usually means attacking the point where it is weakest for that business, whether by joining a group that buys collectively, by securing a single anchor customer, or by using records good enough to satisfy a lender.