Businesses employing less than 500 workers comprise half of American private-sector employment and almost half of American gross domestic product. Yet even these small businesses are an important piece of the U.S. economic pie, because without them the entire economy would be nearly shut down. Small business finance is an ever-changing and often neglected aspect of small business management. Consequently it is necessary for entrepreneurs to understand basic concepts such as business finance, and the importance of properly building and managing small business credit.
As with any type of human endeavor, entrepreneurship starts with a vision and a purpose. Without a clear direction, a small business that is seeking to grow and create wealth must carefully choose its partner, its clients, its products, its marketing strategies, and ultimately its leadership. Without a strong belief in their own ability to succeed, entrepreneurs may also be unwilling to try new and innovative ideas, risking the potential damage to the firm’s finances.
Entrepreneurs take full advantage of the opportunities that internet has presented. The internet has made it possible for small business owners to access information regarding prices and business practices and to implement business plans. This information is available at any time of the day and from any location on the planet. In addition, entrepreneurs have access to millions of dollars in start-up capital that can be quickly leveraged into productive venture. A large number of start-up business programs have been developed by private organizations and the government, and more are being developed every year.
One of the key drivers of entrepreneurship is job creation. As more people look for ways to earn additional income, the need for skilled employees will continually grow. These employees will help business firms to grow. Job creation is the primary driver of entrepreneurial activity. In addition, entrepreneurial firms tend to create jobs when they successfully implement new ideas and business practices.
Another economic principle underlying entrepreneurship is specialization. Not all businesses are generalists, and not all workers are specialists. Entrepreneurs create jobs by finding a specialized niche and filling it with sufficient skills, knowledge, and experience. In this way, the research and development necessary to produce new services and products, as well as new technologies, become cheaper and more readily available to firms operating in more specialized fields.
A third important economic principle underlying entrepreneurship relates to the business cycle. When there is a recession, business cycles tend to be temporary, frequently interrupted. However, when entrepreneurs are active, their activities can be considered “temporary” as well. When a business is not growing or when there is uncertainty about the future, entrepreneurs become much less likely to be involved in that business, which can lead to the loss of jobs.
A fourth principle relates to the relationships between entrepreneurs and investors. When investors make money, small business owners tend to lose money. However, when entrepreneurs make money, they often reinvest their profits in larger businesses or other endeavors that allow them to keep earning more profits. This can keep small business owners from experiencing the fear of dying in business as they had during previous generations, and it can keep the entrepreneurial activity alive and profitable through periods of economic crisis.
Finally, entrepreneurship is important because it boosts overall economic performance. The overall performance of the economy depends upon business organizations, governments, and consumers. Entrepreneurs play a key role by building the infrastructure of businesses and providing jobs. This helps to ensure that a country’s economy is robust enough to absorb the new advances that are made by businesses. In doing so, entrepreneurs contribute to the overall strength of the economy.