7 Differences Between Startups and Small Businesses

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When you think about the differences between startup companies and small businesses, some can seem a little contradictory. There is one very major difference in business models: the way they operate their company. Startups generally don’t have to worry about how much money they are spending because they come from an investor. Besides, when a company goes public, there is generally much more capital involved and a lot more accounting and bookkeeping requirements.

To earn a living, feed the rising demands in markets, or simply introduce a game-changer to existing products, businesses are ever mushrooming. Realistically, who wouldn’t want a swollen pocket all thanks to hard work? Technological advancements and ease in accessibility of fast money in the form of soft loans are proving to be fertile ground for sprouting establishments. Since the world’s scene is dynamic, change is inevitable, and people’s innovation is impressively on the increase. When brilliant ideas are born, the clever take advantage and eventually might turn them into income-generating ventures.

If an individual wants to become an entrepreneur, knowledge of what he wants will shed light on the appropriate direction. In the field of business, startups and small businesses are common vocabularies. Many view the two as interchangeable, but is that the case? Certainly not! Granted, they are small but are east and west as far as their structure is concerned. A look at their definitions could assist in their identification.

Startup

An innovation that seeks to introduce a new product in the market or improve the existing ones. They are commonplace in the world of technology, for example, web and apps developments. They usually grow at a faster rate, and some are short-lived due to the cutthroat competition.

Small business

A stable venture aimed at making a continuous and sustainable income. Its growth is steady, and profits are the end goal. Such include grocery stores, beauty parlors, and eateries.

The differences go beyond the meaning of the words. What else distinguishes them? Read on to find the answers.

Source of funds

A plan without actualization remains a dream. To realize the business, capital is essential. Personal savings or bank loans could help you acquire the basics for a small business. For example, if you’re a hair salon you have settled on, you can pay rent for the premises and buy hair products and machines such as the drier. You can decide how much money you would want to put in. Caution should, however, be taken, especially with debts as the invested money is to be hopefully refunded and, in some cases, with interest.

On the other hand, startups could be funded by the originator of the idea. However, crowdfunding is increasing in popularity whereby others, especially investors, place their money into the project. Their input may be consistent until the business finally picks, and in turn, handsome rewards are reaped. The owner’s share is reduced as the investors increase.

Yields

Profits are the bull’s eye in small businesses. It is often expected that the payback will be soon, maybe as immediate as the opening day. The owners exert themselves so that returns are gained. “I would not want my investments to go down the gutters.”

Startups could be unpredictable. This is because the target market has to be convinced of the new product or service’s value since they most likely have their first choice. Delayed gains are expected, but once sales are at the peak, say hello to large sums of money.

Innovation

While small businesses often involve goods and services that we are used to, startups are designed to make a particular task easier or develop an entirely new product to solve problems. Innovation is the heart of startups hence an endless stream of new services now and then. For instance, the online platform’s introduction for taxi requests as in the likes of the international company Uber.

Technology

Small businesses mainly focus on systems that scale up profits. These include emerging trends in accounting and product promotion.

Startups are majorly a byproduct of innovation; hence are inseparable from relevant technologies. Nonetheless, improved systems are still invaluable to their operations to enhance growth.  

Termination

An entrepreneur could decide to sell the business or pass it on to his children hence becoming family property. The decision could be prompted by several factors, including declining health, advanced age, or accumulated debt. The matter is for the owner or co-founders, if any, to choose.

The transitory nature of startups makes them easily resalable. The original innovators will most likely move on to another project to develop the next big thing. Merging of the startup is also another viable option to gain more customers. Aren’t two better than one?

Effect on lifestyle

It could be easy to juggle between work, family, and recreation when you have a small business. If the individual is a sole proprietor, he could choose working hours or go on vacation.

Startups could be demanding due to delivery pressure, especially from investors hoping to get their shares back with interests. Working round the clock and constantly being available, even if it means forsaking your weekends, could be the norm. It shouldn’t come as a surprise if a close family or circle of friends mention you have turned into a workaholic.

Range of operations

For a small business, customers are key as their consumption rate will determine the profits accrued. The entrepreneurs will hence make the extra effort to ensure quality products. This controls its growth rate as the emphasis is on satisfaction, especially of the regulars.

Startups’ motivation is to be dominant in the market to compete until they possess a significant share. Such a drive is often behind the opening of a series of branches, even spilling into the global space.

The Bottom Line

The seemingly synonymous words are clearly on separate pages as used in entrepreneurship. The intention of the venture is critical in determining the outcome of the endeavor. A small business might be practical after retirement. Interestingly, a startup can be turned into a small business and have profits, or the reverse could happen. Profits from businesses could be used as the capital as the individual looks for additional income from business angels or willing investors.

The money will provide the needed extra boost for the upscaling of the company. Though both have unavoidable risks, startups often involve more as massive losses could ensue if major stakeholders withdraw and affect the firm’s core operations. It’s all about planning and having clear objectives in mind. So, which one will it be for you, a small business, or a startup? Instant Loan will still help you make the right choices regarding the best startup to venture in.

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Julia Borgini

Julia Borgini is a technology writer, copywriter and consultant for B2B technology companies. She helps them connect with people and grow their business with helpful content and copy. Visit her website to see who she’s helping today: www.spacebarpress.com