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Monday, June 5, 2017

Are you an Entrepreneur, an Investor or a Business Owner?


This is a very important question to ask and answer especially if you are about to start a business in Nigeria. People often use these three terms interchangeably even when they actually mean different things but can also overlap in meaning such that an entrepreneur can be an investor and a business owner at the same time but it’s important for me to say this that every investor is a business owner but not every business owner is an investor and even more importantly every entrepreneur is an investor but not all investors are entrepreneurs.
 
This play of words could be very confusing indeed but let me lay it bare like this – an entrepreneur who is about to start a business and needs funding will often need an investor and when he succeeds in raising the required funding both he and the investor become business owners even though they are quite different at the onset. In this article we are going to be looking at 3 entrepreneurs and 3 investors and comparing them to make us understand better how they differ from each other. Enough of this boring explanation already let’s set the ball rolling.

Who is an Entrepreneur and how can we identify one?

An entrepreneur is anyone who identifies a business idea and assumes the risks involved in setting up a business to exploit that business opportunity. The risks involved in setting up a business are; potential loss of invested capital, bankruptcy, fall out with creditors and investors, damage to one’s reputation, law suits etc. An entrepreneur organizes the resources needed to setup the business e.g raising funds, finding a suitable location to take off the business, purchase of equipment and machines, hiring workers, marketing etc he must also be prepared to face the potential losses that could come, but his reward is the profit from the business which he can keep to himself or share with his partners if he succeeds. 

An entrepreneur is a brave person, innovative, unique and often independent minded person, willing to dip his leg in untested waters to prove that his burning desire to exploit a business opportunity is very rewarding. So if you find a person who wants to be his own boss, has a unique touch to serving people, isn’t afraid to risk his life savings into a business idea he just can’t stop thinking and talking about even when everybody around him keeps warning him about the danger of losing his savings, you are looking at an entrepreneur. Examples of entrepreneurs are Aliko Dangote, Bill Gates and Jack Ma.

Who is an Investor and how can we identify one?

An investor on the other hand is someone who wants to commit his capital into any business opportunity that will not only guarantee the preservation of his capital but will also offer him returns from his capital in the form of interest, dividend, rent, commission or royalty. Kindly note capital here means any asset that can generate income passively such as cash, houses, machines etc. – without the investor actually putting effort beyond his capital investment. Investors usually don’t care which business they are putting their investment into provided it is legitimate and profitable they are good to go. Examples of Investors are Warren Buffet, Tony Elumelu and George Soros.

What do entrepreneurs and investors have in common?

While entrepreneurs and investors may be different in the way they function they have a few things in common which is why they can often work together to achieve their aims. Here are two things entrepreneurs have in common with investors;

They are both willing to take risks. 
Both entrepreneurs and investors know that nothing in life is guaranteed so there is a chance that they will both lose money in their business venture because of business risks and they accept this from the onset. Entrepreneurs sometimes are willing to risk all but investors almost never risk all to make an investment.

They both want profit. 
The only difference is in how important that profit is. For the Investor it is the main thing and making the highest possible profit within a certain period, but for entrepreneurs it could be becoming number 1 in the industry which doesn't necessarily translate to highest possible profit and the entrepreneur may not mind waiting for years to realize this.

How are entrepreneurs and investors different from each other?

They differ in the following ways;
Entrepreneurs view their business as a mission. 
They are not just in it for the money but also for the fulfilment that comes with exploiting the opportunity. For Dangote he only cares about selling the most affordable product to the highest number of people, Bill Gates wants to make every home and office in the world using a computer or smartphone that makes their world better, Jack Ma wants every Chinese company to sell their products globally. Whereas for investors it’s about making resources count e.g Buffet wants a company’s fundamentals to be above industry average, Tony Elemelu likes impressive growth potentials in small businesses and George Soros likes to trade currencies and takes positions against overvalued currencies

Entrepreneurs tend to be specialists in a particular field, industry or sector. 
Dangote is into manufacturing, Bill Gates is into software development and Jack Ma is into internet marketing. Warren Buffet has his hands in many pies. He has invested in real estate, forex, banking, hospitality etc without being involved in running any of these businesses. He only analyzes their financial ratios then takes positions. George Soros uses hedge funds to acquire shares in different companies while Tony Elumelu uses his Heirs Holdings to buy into companies in different sectors.  

Investors use financial planning and analytical tools to decide what and where to invest in.  
They are good at analyzing the growth potentials, entry and exit positions and the profitability of a company even without being involved in running it and this tells them where to invest and vice versa. Entrepreneurs on the other hand simply follow their interests, passions, skills and experience to decide what and where to invest.

Investors come and go as far as a business opportunity is concerned. 
Dangote has been with his company from the very beginning whereas Warren Buffet usually buys a stake in a company long after it was founded and he has also sold off his stake in many companies.  
I honestly wish I could go on but I must stop here. But I believe you now know where you fall into and if you are an entrepreneur keep in mind though that as an entrepreneur you’ll need investors to commit funds to your business.

If you are an entrepreneur looking to attract investors to fund your business idea, I’m available to write you a compelling business plan they will understand and relate to. Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com

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