In the 1800s, French economist Jean Baptiste Say coined the term "entrepreneur" to define an individual "who undertakes an enterprise, especially a contractor acting as the intermediary between capital and labour."
But what this description fails to acknowledge is that there are different types of entrepreneurship--each with specific characteristics, different levels of risk, and requiring different strategies. They're not mutually exclusive, since one type of business can evolve based on the entrepreneur's vision.
If you're hungry to pursue your own business idea, first understand the landscape you're about to enter and set clear expectations for the type of entrepreneurship you want to pursue.
Here are three of the most common entrepreneur categories:
1. Independent or self-employed. The traditional path to self-employment involves mastering a specific skill set and commercializing it privately, instead of renting your services to a larger corporation. In a corporate 9-to-5 setting, you perform a function and receive remuneration for it. But when self-employed (which also includes working as an independent consultant or sole proprietor), you cut out the middleman and deal directly with clients.
Self-employment means more autonomy and the ability to enhance your value. The downside, however, is an unsteady paycheck. You'll have to procure your clients actively, and you won't have the branding or logistical support that you'd have available as an employee of a larger company. Scaling is limited as an independent, since there are only so many clients that you alone can serve at any given time.
Still, the lines that separate the different types of entrepreneurship are blurred, and many great start-ups have been built by a single person.
2. Small business owner. The small business owner is the classic entrepreneur. Small businesses make up 99.7 percent of all U.S. companies, according to the Small Business Administration. Small businesses are "lifestyle" operations, which allow you to maintain a livelihood by selling well-established services or products. In this instance, the market already exists and the product is understood and adopted by the mass market, which typically leads to predictable returns on investment.
Many of these small businesses tend to be service-oriented, including convenience stores, franchises, and dry cleaners. Succeeding as a small business owner is about good execution of well-understood steps and careful management. Most small business owners don't aspire to build a global empire; instead, they define success as having a profitable business that offers earning power and flexibility.
3. Start-up founder. This type of entrepreneurship often gets the spotlight, even though it's the riskiest of the three. As a founder, you're typically swinging for the fence--you either hit a home run or find yourself striking out. Start-ups operate differently than other businesses because they are unprecedented innovations. The market for their new product is uncertain and risky, and success is not a given.
Start-up founders sprint for growth. They usually require outside investment, since they won't be able to generate revenue early or fast enough to scale. Start-up entrepreneurs must be visionary storytellers, capable of establishing basic premises for their concepts (i.e., proof or validation) while simultaneously projecting a grand vision that will presumably generate a generous return for potential investors. Even more so, some start-up founders eventually become serial entrepreneurs who found multiple businesses in their lifetime, thanks to breakthrough business ideas and hopeful investors on their side. Remember, of course, that these titles are fluid. One person can switch between all three of these throughout a lifetime.
Satisfy your business hunger. Which type of entrepreneurship is right for you? It's a personal choice, based on the level of risk you're capable of or willing to take, as well as which monetary and lifestyle outcome you desire. Be honest with yourself. If you simply want flexibility, you don't necessarily have to found a start-up. Similarly, if you can't see yourself operating the same business for 20 years, then a small business might not be the right choice for you.
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