Often time people use the word small business or start-up interchangeably, while a start-up might be a small business, a small business is not necessarily a start-up. The idea behind a start-up and a small business differs in terms of business growth and structure among other things. Start-ups are designed to grow fast and also sell to a very large market which may not be the case for other businesses.
While some business owners have the intention of owning a business for a very long time, most people create startups with the intention of owning it for a very short time bearing liquidation in mind. Therefore, start-ups are created with the intention of growth over a very short period of time. Their operations are usually largely built around or backed up by technology.
Apart from the fact that small businesses and start-ups are both small, there are differences between startups and small businesses, in the way they operate among other differences. The core difference between small businesses and start-ups are stated below.
Small Business or Start-Up core differences
How both businesses are funded differs, while small businesses get business grants and loans from banks and other formal organizations start-ups rely on investments from venture capital groups and individual investors. They are not expected to produce steep revenue projections in the near future and also do not need rounds of funding.
Also read: 6 WAYS TO GROW YOUR BUSINESS
Startups lifecycle are much shorter when compared with small businesses. While small businesses come into existence with the intention to last forever, startups are built to have shorter lifecycle. Startups are built with the intention of either driving growth fast enough so it turns into a big organization or be acquired by a larger business. They consider liquidation an opportunity for the expansion of the business.
While both businesses start small, startups have the intention of scaling up and rapid growth in the nearest future. They do this because they have the expertise and strategies with tested marketing strategies that boost business growth. Small businesses on the other hand do not have the necessary strategy to boost business growth.
Approach to experimental methods when compared to tried and tested methods
Startups focus on testing new business models and product ideas, they aim at creating something new and making it market-ready in record time. Small businesses use already existing best practices and proven means that work. Startups take more risk by testing the new models as opposed to the careful and calculated approach taken by small businesses.
When it is time to decide if you should build a small business or a startup, there are also a couple of other things you can consider;
Leadership styles: The leadership style you want to adopt will influence the kind of business to create. In startups, with their intention to achieve organizational goals; people are motivated to also reach for their goals. This is not always the case with small businesses; People are not pressured to have a visionary mindset.
Associated risk: Most startups are generally trying their hands on new products they do not have other products they are modeling after, therefore, they are considered riskier. While starting a small business comes with its risks, they have a higher likelihood of survival when compared to startups.
Business ideas: If you’re looking for ways to make your creative and original ideas come alive, then you should consider building a small business, while a startup might be the best way to bring your innovation to life.
While your preference to build either a startup or a small business is important other external factors like the industry or the market also should be considered. Deciding on which business you should build depends on certain factors and the mindset of the entrepreneur.