Queries Solved in this article: Difference Between A Startup and A Small Business, Startup definition, Small Business definition, Small Business, and startup meaning, Distinguish between a startup and small business.
What is Startup?
The word startup is made up of two words: Start and Up, which literally means to set something in motion. In business terms, a newly established business is called a startup which is usually started by a set of one, two, or more founders or entrepreneurs. These companies are usually designed to capitalize on the growth strategy in the future and they usually tend to be in need of funding in their initial stage for that initial growth. e.g Cred, Zerodha, etc
What Is Small Business?
Small businesses are types of partnerships, corporations that are usually small in size. They focus on profit on day to day basis with consistency. The future growth aspiration is usually not desired there and they tend to be serving in their local area. They are generally bootstrapped and they rarely need any external funding. e.g local hotels in your area, mom and pop Shops, etc.
Difference Between A Startup and A Small Business
There are many significant differences between a startup and a small business. Let’s find out, the difference based on different criteria.
Difference with Respect to Growth Opportunities
There is a significant difference between a startup and a small business based on the growth intent they have.
A startup is generally intended to grow exponentially by leveraging the new technology and some disruptive & efficient business model. Since they need to work hard initially, to set up an efficient system that can be leveraged for further growth, they usually need some external funding for their operation and support. They have the quench inside them to grow in a large area, ay a country, or the globe.
On the other hand, a small business operated with the intent to be profitable very soon. They are just quite satisfied working in their local area. They are happy serving them and are usually satisfied with the traditional methods to do business. They are grown on personal capital and don’t intend extensive growth and gain from the global opportunity.
Difference with Respect to Funding
Due to the structure of startup and their whole intention to capitalize on future growth, they usually require a considerable sum of funding to develop the prototype or the initial efficient system that can be used on the top for leverage.
While a small business is limited to its local area, its personal capital seems to be sufficient for the whole process and all. They do not usually raise funds from investors.
Difference with Respect to Exit Strategy
A startup is initially funded by investors & VCs and in return, they get some equity. There are a number of shareholders in a startup which makes it a bit easy for the investors or the founders due to ample options to which it can be sold. The exit can also be possible in the funding rounds that might happen in the future for the startup.
A small business is generally 100% owned by the business owner as of the whole employed capital initially is the personal capital and the founder thus owns the total equity of the company. If they want to take an exit there is less opportunity. The only opportunity lies if there comes a full buyer of the company.
Difference with Respect to End Vision
This is a quite important point of distinction between a startup and a small business. A startup is generally intended to do something phenomenal in the world, do some drastic positive change in the behavior, efficiency, easiness, etc.
While a small business is just focused on a small sum of profit without any phenomenal change to make. They just want to gain some small profits so that they can sustain themselves. Usually, there is a lack of vision at the end in the mind of small business owners.
FAQs
Is every new business a startup?
No! every newly establishes business is not a startup. A newly established business can be a traditional business too lacking vision, innovation, etc. A startup usually is innovative, visionary, phenomenal, and disruptive while traditional businesses are not.
Why make a distinction between startup and small business?
It is necessary for founders to have a clear vision of their end goal and mission. Making distinction make it easy for the founder to keep themselves aligned with the characteristics of either a startup or a small business. This makes it easy and reduces clashes of ideas and understanding.
