The words Small Business and Startup are common terms used in the business industry. While these words are used interchangeably, it will interest you to know that there is a slight difference between them. This you should know as a business owner so that you can tell where your business fall in between the two. We took to the task to write on Building a Small Business Vs. Building a Start-Up in this piece of informative writing to help your understanding about the two terms.
BUILDING A SMALL BUSINESS VS. BUILDING A START-UP
Startup Vs. Small Business is not alien in the business world. Before you venture into Building a Small business or a startup, it is imperative that you learn about what their meaning and differences. We will first of all start by finding out what the two terms mean independently.
- Small Business Definition
Small business is a privately or independently owned business either partnership or sole proprietorship with fewer employees and that is limited in size and in revenue depending than a corporation or regular-sized business.
- Start-Up Business
Startup business on the other hand is perceived as a company or project established by an entrepreneur to seek and develop a product or service for which they consider to be in demand. Startup business refers to new businesses that intend to grow and expand beyond the sole proprietor. Also, Startup faces high uncertainty and has high rates of failure, but a minority of them does go on to be successful and influential
- Startup Vs. Small Business
Having defined both terms above, you can see that there is a clear slight difference in both terms. We know that ideas births businesses, as such it is the nature of your idea and the processes involved defines whether you are on the path of a small business or startup.
With that been said, the cutting difference between the two lies in the objective, aim or goal of the business. We know small businesses to be profit driven with a stable long-term value, while startups on the other hand are focused on top-end revenue and growth potential meaning that a start-up is liable to survive for long years without any form of revenue.
- Differences in Startup Vs. Small Business
As we continue in our discourse on Building a Small Business vs. Building a Start-Up, we deemed it necessary to clearly state the differences between the both. Below are seven differences we spot as a distinguishing factor between startups and small businesses.
- Exit strategy
- #1. Scope/Coverage
The first identifiable difference between startups and small businesses is the coverage. A startup normally has the desire of making a global impact and aim to be disruptive. On the other hand, a small business is a self-content business and there boundaries fixed. Meaning that a startup has an eye for international recognition, a small business is concerned with stability and profit making.
- #2. Funding
As we take a steeper look at Startup Vs. Small Business, we also observe that the source of funding is a notable distinguishing factor between both. Despite the fact that both businesses begins with funding, Startup begins as self-funding or support from family but at the long run, it receive extra funding from Angel investors, Venture capitalist, and an initial public offering (IPO). Small Business on the other hand gets funding from self-savings, friends and family, or a bank loan.
- #3. Risk
Taking us further as we continue to unveil the differences between startups and small business, we identify risk to be another distinguishing factor having observed that both businesses are prone to risk. However, Startups have the higher risk than small businesses. Reason is because startups are liable to fail and collapse faster than small business. This goes to the fact that startups is trying to introduce something new in the market while small business operates a business model that is not new in the market.
- #4. Status
The status of both businesses comes to mind when put Startup Vs. Small Business. Startups status is momentary and it varies as it may either succeed and enlarge or fail and collapse. But small businesses sustain its small status for a very long time.
- #5. Exit strategy
Another distinguishing factor that comes to mind is the exit strategies whereby Startups have an exit strategy either it is acquired or enroll for an IPO. Also, startups may cease to be in existent as an independent entity via a merger or business acquisition which is perceived as a necessary move to sustain seemingly infinite growth. While that is not the case for Small businesses that like to be independent because relinquishing control would defeat the aim of running their own business.
- #6. Originator
As we continue to dig into Startup Vs. Small Business, we also observed that the establisher of the business is also a distinguishing factor between the two. The originator commonly referred to as founder or innovator is the master brain behind the business. Founders of startups usually require the assistance of experts during the initiation stage and possibly continuously while founder of a small business usually takes up a business that is peculiar in the family.
Conclusion on Building A Small Business Vs. Building A Start-Up
As we conclude our discourse on Building a Small Business vs. Building a Start-Up, it is safe to say that a startup vs small business are operated by entrepreneurs, however, the intent, primary function, and funding of their respective business models are eventually different. I believe you have come to the understanding that there is a different between startups and small business even though both words are use concurrently in the business world. In a nutshell we can say that startups are different from small businesses mainly because they are created to grow fast.
We hope you had fun reading through this article and have learnt something new in the process. Ensure you give us feedback.
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