Startups

Is the Austrian School of Economics the secret ingredient for entrepreneurial success?

  • 3 min Read
  • December 23, 2021

Author

Escalon

Table of Contents

For the Austrians, entrepreneurs are an essential part of the economy. This is especially true for those who use prices and interest rates to coordinate economic plans, assess expected future prices and conditions to choose among alternative financial plans, and bear the risk of an uncertain future by taking ultimate responsibility for the success or failure of the chosen plan, according to Investopedia


The Austrian School of Economics, which is different from those of private business theory, was founded in 1871 with the publication of Carl Menger’s “Principles of Economics.” Austrian Economics proposes an alternative approach to understanding the economy that accepts entrepreneurs and entrepreneurship, and believes it to be the driving force of the market. And the market is an undertaking that is never in general equilibrium.


Austrian Economics has entrepreneurship at the core and rarely uses statistical analysis or mathematical modeling. Instead, it focuses on uncertainty, value creation, and how manufacturers constantly regulate and try to meet changing consumer preferences.


Check these four insights from the Austrian School of Economics: 


  1. Sovereignty of the customer

    – As per Austrian Economics, the customer is not just king, but everything is created to ultimately satisfy them in some way, by providing value to them. This value lies in the customer’s full experience and is, therefore, decided completely by them. An entrepreneur can merely offer the goods or services, which in the end help the customer become better off, even if it sometimes requires educating them about the value of the product or service.


  2. Value controls the price, and cost is a choice

    – Since the value of any product or service lies in the experience of the customer, the price they are asked to pay cannot be too high. The entrepreneur needs to figure out at what price their offering is favorable to the customer, and then determine a cost structure that allows for profit. Essentially, the price depends on the value users see in the product or service. The only two things the entrepreneur has a choice over is cost — how they can manufacture at a cost below the selling price to be profitable — and whether to produce.


  3. Entrepreneurship is about creating the future

    – According to Austrian economist Ludwig von Mises, the ultimate origin from which entrepreneurial profit and loss are obtained is the uncertainty of the future demand and supply. This means that an entrepreneur should decide on the cost in the present in order to manufacture a product that will be sold in the future, based on the market situation. It is the entrepreneurs who bear this uncertainty.


  4. Be a monopolist

    – In usual economics, competition comprises offering the same or similar products or services competing on price. However, according to the Austrian School of Economics, this is a disastrous strategy for entrepreneurs, whose primary job is to facilitate value. It is about working out a way to provide the best value experience possible for the customer, even if it involves trying something new and unique. Every innovation is basically a unique offering and, therefore, a monopoly. 

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Accounting & Finance

The Importance of Financial Literacy for Business Owners 

Running a business isn’t just about having a great product or service – it also requires a firm grasp of...

Accounting & Finance

Tax Implications of Remote Work: What SMBs Need to Know 

The rise of remote work has opened exciting possibilities for small and medium businesses – access to a wider talent...

Leadership & Growth

Succession Planning: Preparing for Leadership Transitions 

Change is inevitable in business, and one of the most significant changes a company can face is a leadership transition....

Accounting & Finance

Sales Tax Compliance in the Digital Age: Challenges and Solutions 

The rise of e-commerce and digital business models has revolutionized how companies reach customers, but it has also added new...

Leadership & Growth

Implementing Lean Management Principles in SMBs

“Lean management” might conjure images of big manufacturing plants fine-tuning assembly lines, but the principles of lean are highly relevant...

People Management & HR

Developing a Competitive Compensation Strategy for SMBs

For small and medium-sized businesses, a competitive compensation strategy is key to attracting and retaining the talent needed to grow...

Accounting & Finance

The Role of Financial Reporting in Small Business Growth

Financial reporting often appears to be a routine exercise, but for small businesses, it can be the difference between reactive...

Accounting & Finance

The Impact of Accurate Financial Operations on Business Success

Financial operations encompass the systems and processes that govern every monetary aspect of a business—from managing payables and receivables to...

People Management & HR

The Benefits of Outsourcing Payroll for Small Businesses 

For many small business owners, running payroll is a time-intensive chore that requires meticulous calculation, familiarity with tax codes, and...