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If you have ever worked in technology or are familiar with it, you most likely know entrepreneurs who launch new startups non-stop. Have you ever asked yourself what a startup actually is though? 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 a small business is identified. Innovational startups and small businesses are like a child and a midget. They both are small and meet the definition of small and medium-sized business acts. This is where their similarity ends. Let us see the differences between Startups and Small Businesses!
10 differences between startups and small business
One of the most important differences between startups and small businesses is product or service innovation.
Small business does not make any claims as to uniqueness. Your business is one out of many businesses alike (for example, a hairdressing salon, restaurant, law office, blog/video blog etc.). Starting a business, you may easily follow out-of-the-box solutions.
Innovations are the most important things for a startup. Startups are meant to create something new and to improve what already exists. For instance, one may develop a new class of goods (wearable device), a new business model (Airbnb) or a technology no one knows as of yet (3D printing).
To what scopes your business will come up to?
Small business makes progress within limits established by a businessperson themselves. In other words, you put limitations on the growth of the company and focus on the service of a certain circle of customers.
A startup, as a rule, does not put any limitations on its growth and focused on winning over as much market share as possible. You are ready to increase your influence until you become a leader in the industry.
3. Rate of growth
How fast will your business grow?
Small businesses, of course, should grow fast but a high-priority task is to make a profit. When a business opens benefits, its growth happens as and when necessary.
Startups should always grow within the shortest possible time creating a reproducible business model. You should be able to reproduce the success of the company worldwide.
How soon business will be paid off and how much it is possible to earn?
Small business is focused on getting earnings and, if possible, a profit from the very first day. A closing gain of the company depends on a chief`s appetites let alone plans for business expansion.
It might take months or even years for a startup to gain first cents. A top target is to create a product, which consumers will like and will take on a market. If this aim will be achieved, profits of the company will be millions. (For instance, the present evaluation of Uber company is 50 billion dollars).
How much are you to invest?
Small business. In order to start one’s own business, as a rule, private savings, and investments on the part of one`s family, and friends, banking credits and/or investor funds will do. However, your goal is to be self-sufficient, which is why you need to be attentive when it comes to contracting debts as long as all this money is to be returned someday with interest.
Startup. Many projects are run by private means or with the help of family members and close ones. However, crowdfunding is becoming more and more popular. Financial borrowings from business angels, venture capitals, and investors remain the most common version. Startups should reach the stage of development, which is why it requires additional capital before the company begins making profits. It is useful to remember that investors wait for an extra financial return, which creates additional pressure on the company.
Are there any technologies used to run a business?
Small business. There are no special technologies required. There are many out-of-box technological solutions, which are to be applied to achieve main business goals. Technologies in the sphere of marketing, accountant`s solutions, etc.
Startup. Technologies are oftentimes the main product of startups. But even if it is not so, startups cannot help but use new technologies to achieve fast growth and scale-up.
For how long will your business run?
Small business. 32% of enterprises are shut down in the first three years, which is not bad compared to startups…
Startup. 92% of enterprises are shut down during the first three years.
8. Team and management
How many workers are to hire?
For a small business as many workers are usually hired, as needed so a company operates within the established limitations of growth.
A startup manager should develop a leader and managing qualities from the very beginning as long as the startup should grow as fast as possible. As the company develops, you are to work with an increasing amount of staff, investors, directors, and other concerned parties.
9. Way of life
How your work and private life will be combined?
Small business, compared to startups, takes less risk and duties. Which makes where it is possible to combine work and personal life well enough. At the same time, a life of a businessperson is full of calls unknown for those who work 9AM-6PM. Thus, in a very elementary stage, any business will require high effort. But in time work and personal life ratio has to be balanced.
Startup. If there are investors` funds, the company will start making a profit earlier. Considering it, there is no time to lose. There are people next to you who wait until you create something unbelievable. So, a balance between work and personal life is out of the question. Work, work, and work again!
10. Exit strategy
And last but not least in our list of main differences between startups and small businesses is an exit strategy.
What your business will end up with?
Small business. Two versions here: make it a family business or sell it.
Startup. Usually moves towards the next stage via a large deal on sale or IPO – Initial public offering.
Is it possible for a small business to become a startup or vice versa? Yes, probably but everything depends on a chief`s decision. Sometimes it depends on a founder`s intentions (meaning whether a company is wished to be seen in another role), and sometimes – is conditioned by external factors (a product demand change, market conditions).
Either way, it is very important to understand the differences between startups and small businesses and to realize what fits you best of all. This Ability will allow you to correlate one`s possibilities and expectations to choose the best plan for achieving desired goals.
About the Author
Melisa Marzett works for Big Essay Writer. She is great at writing guest posts about startups. She enjoys the process and hopes her readers find her articles useful.
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