A ‘small business’ and a ‘startup’. Don’t these two terms mean the same thing?

No, they don’t and it’s best you know the differences if you want to avoid running your company into the ground!

Establishment and Stability

Man and woman in suits
(Photo: rawpixel via Unsplash)

If small businesses were the well-put together lawyer in their mid-30s, with a stable income, a partner and kids, and who never skips their Saturday morning jog, startups would be the rambunctious, job-hopping, idealistic young person in their early-20s.

Small businesses are usually established organisations that utilise existing business models that have already been proven to possess potential for long-term success. They are thus usually structured more rigidly.

Startups, on the other hand, are looking for their big break, seeking to differentiate themselves and create a unique business model. Startups are usually a lot more innovative and open to risk-taking because of this. Unfortunately, this also leaves them wide open and more prone to bankruptcy and financial instability.

Eventual Scale

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(Photo: Mikito Tateisi via Unsplash)

Ideologically, startups want to grow and small businesses are content with the size of their businesses.

Small businesses are the self-content child at the playground that has drawn four lines into the sand around him, declared the space to be his and then proceeded to build a sandcastle within his self-declared confines – never seeking to go beyond his sandbox.

Small businesses start small and continue existing small, with little intention to expand beyond what they initially set out for themselves.

Startups are the child that draws three lines and then proceeds to draw the fourth wherever they want – the sky’s the limit! Unless mother comes along and demands they come home for dinner.

Startups have a variety of paths – although growth, preferably exponential growth, is typically the aim. Startups usually do this by shaking up the industry through innovation and disruption. Since startups walk on unchartered territory, chances of both abject failure and grand success are higher.

Funding

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(Photo: Ibrahim Rifath via Unsplash)

Both startups and small businesses tend to secure initial funding from bank loans, the founder’s savings, or friends and family. However, when a startup is successful, there’s a great tendency for additional funding to come in from venture capitalists, angel investors and maybe even an initial public offering (IPO) because there’s an opportunity for this new idea to disrupt the economy, carve out and dominate a new market niche.

With these additional investors come increased diversification of the company’s ownership. While this would be a nightmare for a small business owner, it’s usually entirely necessary for a startup to accept these changes if it seeks growth (unless the founder happens to be extremely rich), even if it means a loss of independence through merger or an acquisition.

Pathfinder? Or path follower?

(Photo: Alex Wong via Unsplash)

Undoubtedly, much larger risk is involved in trying to create a startup as opposed to setting up a small business but the potential for growth is so much greater in a startup.

More than just the potential for growth, however, are the ideological values behind creating a startup versus a small business. Are you trying to start up something new that might shake up the world or are you only interested in going down the beaten path?

If you’re trying to create something new, it’s incredibly important that you get the fundamentals right to establish a strong skillset and increase your chances of success.

Whether you’re trying to break into the world of tech and have no idea where to start, or you have an amazing earth-shattering tech idea in your head, the team here at UpCode Academy has got you covered.

We’re launching a little something for those of you who identify as startup owners very soon. Make sure you keep your eyes peeled for it!


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Featured image: Stanislav Kondratiev via Unsplash