Business creation is the implementation of a new combination of production factors. It is distinct from business takeovers, in which existing means of production are used to pursue an activity.
Entrepreneurs start businesses for a variety of reasons. Some may be attracted to the entrepreneurial lifestyle and seek out good opportunities to exploit; others are motivated by a desire to solve a particular problem or pain point for customers, for example, making it easier to book dental appointments online.
A successful business begins with a solid idea and market research, followed by careful planning and preparation. Depending on the type of business, it is often a good idea to launch a company during a time when demand for its product or service is likely to be higher (e.g. spring or fall).
Ultimately, entrepreneurs are creating wealth by taking major risks in terms of their own equity, time and/or career commitments to develop an innovative business product, process or service. This is what differentiates them from other individuals who may be interested in pursuing an opportunity without the risk or commitment.
Although many start-up ventures fail, a small proportion of them make it to profitability. Policy makers are therefore confronted with the challenge of balancing increased participation in business creation against the social costs of business failures. The rich descriptions of business creation gathered by numerous international studies provide substantial evidence to help answer these questions. This article outlines ten key lessons from these studies, which are relevant for those considering or involved in entrepreneurship as well as those interested in adjusting policy to facilitate the formation of new firms.