Startup vs. Small Business: What’s the Difference?

Aaron Vick - Startup vs. Small Business: What's the Difference?

As your business idea grows you’ll have to determine what your business model is. Take a look at the difference between a startup vs a small business to see which fits your idea best.

The entrepreneurial spirit can take many forms. Driven by its vision, it can lead to the creation of a small business, a corporation, or a startup.

But wait a minute, doesn’t that statement sound a little redundant? Often when people talk about new companies, they use the terms “small business” and “startup” interchangeably.

Yet while the two have their share of similarities, there is a significant difference between a startup vs small business.

The distinguishing factors start with the company’s objective.

Understanding Startup vs Small Business Mentalities

While all businesses start with an idea, what that idea is and how it’s execution determines whether you embark on the path of a small business or startup.

The difference between the two lies within your objective: are you planning to create a stable business that ramps up its profit each year or are you intending to introduce an industry-changing product or service that will change the way people do things?

Although both paths hold their share of risks, one chooses a steady course of growth while the other chooses the big risk, big reward gamble.

Startups are the game-changers. They use grants and shareholder investments to produce a product or service that projections show will take its industry by storm. It’s a big stakes game where you know if you succeed the payout will be incredible.

The end result is less about building a successful business or corporation as it is about creating a successful product or service. In fact, many startup founders end up selling the license to their product or even their company to industry competitors after it achieves success.

These kinds of entrepreneurs may end up becoming serial startup creators not because they constantly fail, but because once one idea achieves the success they sought after, these founders move on to the next big idea.

And why not? Statistics show that after an entrepreneur creates one successful business, the second projections show will have a 30 percent chance of success. That’s significantly higher than the 18 percent chance of success for your first go-around.

Small businesses, on the other hand, are a bit more conservative in their approach. They seek stable, steady growth through a business plan geared toward reaching a profit goal.

The Benefits of Small Business Plans

There are multiple advantages to building a small business. For many entrepreneurs, this path becomes their starting point. By creating a small business, you learn the ropes of entrepreneurship while pursuing a business plan with a bit less risk involved.

While startups gamble on the idea that their product or service will have a substantial impact on their industry, small businesses focus on building a solid customer base that brings in a steady profit.

The comparison here is that small businesses usually don’t discover the large-scale success of a well-executed startup. Their growth is slower but often less risky.

Sometimes startup founders actually fund their startups from the profits gained from a reliable small business, while using the experience they gained in the process of building that business to make their second entrepreneurial venture more successful.

The Benefits of Startup Plans

As I stated before, the simplest way to define a startup is that it utilizes a bigger risk, bigger reward approach. With the “global takeover” mentality of producing a product or service that will revolutionize his or her industry, a startup founder really goes for the gold.

Those who choose the startup route can’t be afraid of taking risks. After all, you’re aiming to create something that has never been done before. The stakes are higher, as is the likelihood of failure.

But you never know what could happen until you try. Smart entrepreneurs explore the potential of an idea prior to beginning the startup itself. This could be months or even years of research weighing the cost and payout of bringing their concept to life.

This includes exploring not only how to bring that concept into reality, but also its effectiveness. A good startup leader embraces the test phase and invites others with insight to play devil’s advocate.

It’s almost like being a mad scientist in a lab creating, testing, and refining your idea until the creation and execution seem flawless.

Sometimes you explore this avenue only to discover that it won’t work. That’s part of the risk of this innovative pursuit. However, this process of creating new solutions to modern day problems, testing them, and then introducing them into the world is the heart of a startup’s purpose.

Which is Better: A Small Business or Startup?

Both of these business plans are worthy paths for hungry entrepreneurs. Neither a startup nor a small business is necessarily better than the other. What matters is simply choosing the right business path for your ambitions.

If your goal is to create a steady business that reaps a growing, long-term profit as it builds upon its customer base, a small business route may be the best course for you.

However, if your passion is in the creation or something innovative and rocking the industry with its introduction in a way that reaps large financial and influential benefits, then you have the potential to be a startup founder.

If you are taking your first steps into entrepreneurship and you don’t know where to start, your efforts should begin with finding a mentor. Seek out a professional with proven success in building a startup or small business.

Many offer consulting services or programs to help aspiring entrepreneurs succeed in bringing their businesses or innovations to life. Choose the right expert to learn from and the investment will be worthwhile.

After all, it’s more affordable to learn from others experiences and failures than to make them yourself.

Seize the Startup Mentality

Now that you know the difference between a startup vs small business, have you decided what kind of entrepreneur you intend to be?

If you have the desire to be a market disrupting success, talk to me about how to launch a successful startup. My consultation services will help you uncover and utilize knowledge and resources that will bring your concept to fruition.