Startup Advice: Entrepreneur vs Business Owner

by Jun Loayza on September 1, 2009

punch in the face
Photo by lazaro

What is that 1 special quality that allows one entrepreneur to succeed over another?  Is it hustle, determination, persistence, leadership, or luck?  I have seen many startup teams who have received funding fail because they weren’t able to reach critical mass and ran out of cash.  I have seen many entrepreneurs fail because they had an entrepreneurial seizure and started a company without actually knowing what they were getting themselves into.

If you want to give yourself the best chance at succeeding in the startup roller coaster, then you need to come mentally prepared.  You need to know the edge that a successful entrepreneur has over a Business Owner.  You need to know what kind of entrepreneur you are.

The edge is the Entrepreneurial Mindset.  A successful entrepreneur builds systems and works ON his company, while a business owner works IN his company.  Lets dive into the two different mindsets to examine why the Entrepreneur has the superior mindset.

The Business Owner Mindset

Example: Tony, the SEO professional, excels at his job and works at a large SEO firm

Tony likes his job, is great at what he does, and gets paid a decent $65K salary.  Though he likes his job, he doesn’t like his boss because the boss makes Tony work long hours without getting paid extra.  Fed up with the long hours and the boss taking all the credit for Tony’s hard work, Tony decides to leave his job and start his own SEO company.

Tony’s thinking: “I’ll just start my own company, hire employees, and pay myself much more money than I was ever paid at my old company.”

Tony quickly brings over 5 clients from his previous company and picks up 5 more clients through his connections for a total of 10 clients.  He also hires 2 SEO professionals to join his company and trains them to do client work.  Tony does well for the first couple of months, but then unexpected problems begin to arise:

  • A client is late on a payment so Tony has to personally call the client to handle the situation
  • Tony conducts all of the sales calls because he doesn’t trust his team to sell the services on their own
  • Tony hires more team members, but doesn’t have the time to train them all properly
  • Tony spends time doing all of the logistical work like finances, setting up meetings, and human resources tasks
  • Tony hires more people but has to micromanage all of them because they don’t know what to do on a daily basis
  • Tony has to show up to work everyday to make sure people are doing what they need to do

Though Tony owns his own company, he is no better off than he was at his previous job; in fact, I would argue that Tony is worse off because he is working harder and working more hours and has less time for personal enjoyment.  Tony has become a SLAVE to his business.

The Problem with the Business Owner Mindset

The problem with the Business Owner Mindset is NOT the long hours or the hard work; on the contrary, the Entrepreneur will spend just as many hours working ON his company as the Small Business Owner spends working IN his company.  The following are the key differences between the two mindsets:

  • The Entrepreneur works smarter; The Small Business Owner works harder
  • The Entrepreneur builds systems; The Small Business Owner hires more people
  • The Entrepreneur removes himself from the day-to-day tasks; The Small Business Owner micromanages
  • The Entrepreneur spends time hiring the right people; The Small Business Owner feels that he’s the only one who can do the job the right way
  • The Entrepreneur understands that TIME is the most valuable possession; The Small Business Owner believes that MONEY is the most valuable possession

The Entrepreneur’s Mindset

Example: Same example and set up as the one above

Tony picks up 1 client that will allow him to sustain life for a period of one month.  During this period, Tony focuses on developing systems and processes that will allow him to scale his company and remove himself from day-to-day tasks.  By establishing the systems from the very beginning, Tony ensures that all future employees will become indoctrinated in the system-focused culture.  Here are some systems that Tony focuses on:

  • System for hiring and training employees
  • System for sales
  • System for project management
  • and many other systems that are specific to a company

Once the systems for project management are in place, Tony hires a project management team to do the client work.  This allows Tony to focus on sales and bring in more clients.  Once the systems for sales are in place, Tony hires a sales team and removes himself from all future sales calls.  And so on and so forth…

Just because you start your own company, it does NOT make you an entrepreneur.

Even though you may not own your own company, you CAN still have the entrepreneurial mindset.

Entrepreneurship is not a career; it’s a lifestyle

About the author

Jun Loayza Jun Loayza is the President of Ecommerce Rules. In his entrepreneurial experience, Jun has sold 2 internet companies, raised over $1,000,000 in Angel funding, and lead social media technology campaigns for Sephora, Whole Foods Market, Levi's, LG, and Activision. Find Jun on Google or Twitter

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  • http://www.kyjen.com Kyle Hansen

    Great post, but I think one has to prioritize the bullet points and items in this post during the start-up phase on execute on them one at a time. All of these are not possible if there’s not a focus on sales and bringing in the $’s in order to do all these things.

    • http://junloayza.com JunLoayza

      It is very important to bring in sales and make money. However, I feel it’s more important to establish systems that will allow you to automate many aspects of your company.

      I would rather make $50K/year and work 10 hours per week than make $100K/year and work 60 hours/week.

  • Grace

    Ah…good points. People definitely have to switch their mindset to be a real entrepreneur.

  • http://www.owlsparks.com/ Carlos Miceli

    You hit this one out of the park Jun. It’s hard to disagree or add anything. I do think that you can be an entrepreneur in every area of your life even if you are an employee forever. Most of what you explain here can be applied to most activities, especially projects on the side.

    • http://junloayza.com JunLoayza

      Thank ya Carlos!

      Like Monica said back in her post, it’s all a mindset :D

  • http://blog.monicaobrien.com Monica O’Brien

    I like it. I don’t completely agree with everyone little detail of the post but I see where you’re coming from in terms of big picture.

    I think we are saying the same thing – that entrepreneurship is a mindset. Because if you start a company and it’s a set of golden handcuffs, you are not really an entrepreneur. Likewise, if you don’t start a company but have an entrepreneurial mindset, you can be an entrepreneur.

    At least that’s how I read it ;)

    • http://junloayza.com JunLoayza

      Yup yup! I was actually going to argue your post completely, but while writing I realized that I actually agree with your point.

      I had to delete like half the post and rewrite it after my epiphany! ahahaha… all worth it if someone found value in it

  • http://brianlinton.com Brian Linton

    Jun, good article and I agree with a lot of what you’ve written. I do agree that you can have the entrepreneurial mindset and not be a business owner…but I disagree with you slightly when saying that if you start your own company it does not make you an entrepreneur…I think anyone who starts a company is in fact an entrepreneur – but the catch is that many people will start something they call a “company” that is not really a company, but rather, an elaborate freelance or consulting operation in which they are the key player that all operations are based upon. Like you’ve illustrated with your example of Tony, over time, a company should be able to survive without the entrepreneur.

    • http://junloayza.com JunLoayza

      That’s a very important point. The company must be able to survive w/o the entrepreneur. If the entrepreneur has to be present at all times, then you really become a slave to your own company.

      I think a freelancer can be an entrepreneur if he has the right mindset.

  • http://dshan.me/blog DShan

    This is great stuff. I think a lot of young business owners run into that moment in which you realize you are spending time on the wrong endeavors; a realization that as one person you have finite capabilities, but everything still needs doing.

    There is a remarkable difference between these mindsets, no matter what your employment status is.

    • http://junloayza.com JunLoayza

      Yo, good to hear from you bro! Been watching the growth of 20sb. Great job with it!

      Do you think this mentality can be learned or is it innate?

  • Diana Wei

    Nice! Really like this post. Work smarter not harder. =)

  • http://markfrisk.com Mark Frisk

    Some good advice here.

    You should probably think about crediting Michael Gerber, creator of the E-Myth books and programs, because it’s obvious that you were inspired by his work.

    • http://junloayza.com JunLoayza

      Definitely much props to Michael Gerber! I read E-Myth Mastery about 4 years ago and I still remember the principles!

      woohoO!!!

      Now to apply them

  • http://twitter.com/mehta1p Pritesh

    Jun:

    Nice write up. The best thing about yr write up is you always give real life examples and summarize your points to them. It becomes very easy to understand then what you are trying to say. I think you can carry forward this post and write down a second post in this series on how to make a smooth transition from business owner’s mindset to entrepreneur’s mindset.

    Cheers,
    Pritesh
    http://twitter.com/mehta1p

  • http://caseypeters.com CP

    Sounds like Tony needs to read The E-Myth Revisted

    When launching my first business/organization one of my mentor’s suggested this book. The author does a great job of clearly depicting the roles of an entrepreneur, manager, and a technician. I believe your post above illustrates how Tony bounces around between roles and has a hard time adjusting.

  • http://anitalobo.posterous.com/ Anita Lobo

    Hi Jun
    This the clearest iteration of the entrepreneur vs business owner big picture I’ve read in a long time.
    High on content and context, low on romanticising and preachery!
    Just the way it should be!
    Cheers,
    @Anita_Lobo

  • http://www.lifestyle-y.com Brian Smith

    Great post, Jun! I think you hit the nail on the head. In my experience, the entrepreneur mindset you’ve described is one that is really picked up by Gen-Y, rather more “experienced” folks. As you wrote, I believe there is a significant difference between an entrepreneur and a business owner – buying a business doesn’t make you an entrepreneur, nor does recreating an established business model or lifestyle. I think that entrepreneurs bring their own spin to either the business model or the lifestyle. If you’re just going to poach someone else’s established idea, why bother?

  • http://www.olinaqian.com Olina

    Great blogpost! I recently read a book talks about the company. It says third class company are backed by human capital, if they recruited the best people, it can work out perfect. Or else it is a nightmare. 2nd class company are backed by the system. They build the perfect system and everyone follows it. 1st class company are backed by culture. Like Zappos, like Alibaba. Together, I hope we can build a great culture for Viralogy!

    I strongly agree that Entrepreneurship is a state of mind. We have our own vision, we see things happen, we work hard, then we make things happen. Everyday, we are moving closer to our goal!

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  • melissa

    Good article! I have a question though. Isn’t this similar to a good business owner vs bad business owner? (without any assumption to meaning of “business owner”) Because god business owners definitely should stay on top level, see big directions and prepare for development… the things First Tony did were things good business owners shouldn’t be doing. Can you explain that for me?
    :)

    • http://Viralogy.com Jun Loayza

      I agree with you Melissa, this is the difference between a good and a bad business owner.

      In my post, I substitute “good business owner” as a “good entrepreneur”

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  • http://www.linkedin.com/companies/western-dental-services Western Dental

    Great article.

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  • http://www.breakthruthink.com Ted Whetstone

    The entrepreneur is CLEAR about what they’re trying to CAUSE – beyond the business.
    It’s not just about making money or even having more free time (both GOOD).
    It’s about MAKING THE DIFFERENCE in the world that inspired the entrepreneur in the first place.
    Being sucked into the business kills that vision. The Business Owner doesn’t care (as much) because that’s not what called them in the first place.

  • http://www.houstonfinestmovers.com J,z.

    Hi Jun I enjoy reading your post very interesting, and I love the pic, keep on the good work and thank you.

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