Is there a difference between a startup and a small business?
Whether you’re considering starting your own entrepreneurial venture or just curious, it’s a good question to ask.
Startups and small businesses do share some commonalities. But for the most part, they’re quite different.
Here’s a breakdown that’ll help you understand a startup vs. small business.
What Is a Startup?
A startup business is a company designed to scale up very quickly. Today, more often than not, startups refer to technology companies. Places like Silicon Valley and other U.S. cities like Austin, Nashville, Miami, and Seattle also have large startup scenes.
In the startup business model, a group of people work hard to bring one product or service to market. Typically, there is lots of money invested to help make this happen.
The payoff can be quite substantial if they are successful. However, millions of dollars are often exchanged before a physical product ever exists. Much more risk is involved and if a product doesn’t test well or things fall apart, seed funders may be out of their investment altogether.
What Is a Small Business?
A small business is a privately owned corporation or solo venture. Company owners typically generate a smaller amount of revenue, but the amount is consistent.
Small business owners may sell one product (such as private label skin care manufacturers), but could also sell a whole selection of items. In some cases, they may simply be a distributor of other products and make a profit that way.
Small businesses employ nearly 59 million people in America. Many “mom and pop” type shops fall into this category.
Startup vs. Small Business
So, in the startup vs. small business conversation, what’s the difference?
There are several. First, the goal of a startup is to take it from the idea stage to a viable product as quickly as possible. The actions taken and startup business funding that’s acquired can be very substantial. Time is of the essence.
A small business, whether it’s a private label or owned by a small group of people, aims to be profitable and steady. Instead of making lots of money all at once, a small business aims to be profitable for years to come.
Startups hope to remain profitable—but in many cases, the end goal is to sell the company or use the profits from a successful launch to steer the company in a specific direction.
If there’s one major difference, it’s scale. Startups tend to go from small to very large quickly while small businesses tend to expand slowly and stay consistent over the years.
The Difference Is Clear
We hope this helps you understand the startup vs. small business differences.
Startups tend to be more volatile and can be incredibly profitable. Small businesses tend to be consistent, more involved in their community, and more rounded in terms of which items they sell.
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