Know how to use the capital and a strong business plan can help an enterprise grow. Entrepreneurs need to understand what capital is and how it can be best utilized. When you, as an entrepreneur, hit on some fantastic idea and step into the process of actively turning an idea or product into a business enterprise, it is not too tough to observe that everything around you and in the world for entrepreneurs revolves more or less with "money". Capital is an essential entity for the development or investment in a business. Entrepreneurs keep on constantly raise and spend money on making more money hence profit but in a planned manner.
What is Capital?
When entrepreneurs need wealth in the form of assets or money, they take it as a sign of a venture's monetary potency or building an enterprise. In entrepreneurship, capital can be defined as the entity that positively impacts the region's economic output.
Types of Capital in Enterprise
The more the entrepreneurship capital is, the higher is the productivity and output. There are three forms of capital that a new venture needs for acquiring success. These are:
- Social Capital: This is defined as an actual as well as potential resource associated with a network of mutually valuable relationships or which is also said as "it is not what you know; it is more about who you know". Social capital is all about the personal and professional network, which comprises family, team members, friends, employees, colleagues, corporate managers, journalists, investors, and high-level executives.
- Economic Capital: In this type of capital, the economic resource is scaled concerning finance that is ultimately used by entrepreneurs in doing business and helps in the production of goods and other products or facilitates the service provided by the business.
- Cultural capital: In this type of capital, attributes owned by individuals such as personality, intelligence, educational qualification as well as job experience comes undercounting. To create value by the attainment of human capital, particularly in building a management team, is liable to be the primary challenge for startup founders and their investors for making a new venture a successful company.