Written By: Dina Marei
We live in the age of the Entrepreneurship, surrounded by some tremendously innovative, fast growing, and game changing startups.
This series of articles is to help you to understand lots of entrepreneurship concepts and perspectives and guide entrepreneurs to develop their entrepreneurial mindset and find their place and live their revolutionary dream.
You may be familiar with “startups and entrepreneurship” words, and you have probably known some entrepreneurs who have launched and grown their startups, but have you ever taken a step back and asked yourself what a startup actually is?
“Startups” Is it just a vogue word for a fast developing company? Or maybe there is a real difference between what a startup is and how small business is identified?
Is there a real and important distinction between what constitutes a startup, and what qualifies a small business?
For years, investors treated startups as smaller versions of large companies; this was problematic because there is a vast ideological and organizational differences, which necessitates different funding strategies and KPIs.
Let us see some differences between Startups and Small Business:
Growth and Scope:
Small business makes progress within limits established by a business owner
himself/herself. He/She put limitations on the growth of the company and focus
on service of a certain circle of clients.
A
startup, as a rule, does not put any limitations on its
growth and focused on winning over as much market share as possible. The
founder is ready to increase influence until he/she become a leader in the
industry.
Gaining Profits:
Small business is focused on getting earnings and profit from the very first day.
A Startup is focused on creating a product, which customers will like and will take on a market. If this target will be achieved, profit of the company will be huge even it take months or even years.
Funding methods:
Both a startup and a small business will likely start with funding from the founder’s savings, friends and family savings, or a bank loan.
Small business typically turn to dept financing through small business loans to meet its funding goals. Banks offer amounts of capital, and charge interest for the funding.
A Startup is always seeking to receive additional funds from angel investors, venture capitalist, and with an initial public offering (IPO). With each extra funds, the startup founder gives up a part and shares of his/her company in terms of equity and who has it becomes a co. Owner and of the startup.
Sustainability and Life time:
Small business: 20% of small businesses are shut down in the first three years.
A Startup: 92% of startups are shut down during the first three years.
Exit strategy and End vision:
Small business keeping it and turning it to a family business or selling it.
A Startup moving toward new stage through large deals of merger, acquisition, or selling out to a larger company or IPO – Initial public offering.
Finally; it is very important to understand the differences between startups and small businesses and to realize what suits you best and to understand the possibilities and to take the best decision and start your business plan to achieve your desired goals.