Startup versus small business

There is a lot of discussion on startups and small business that I encounter on a daily basis. There are same same but different as there is overlap.

Lets resolve the confusion about what these two are.

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Small Business

1. Goal: In the case of small business, the usual intent is to start the business with the hope of making money almost immediately.
2. Market: It’s a small business that addresses a market need in a niche or a geographic area, catering to some specific needs of people in that specific area. Usually, it’s a super niche, constrained by geographical limitation.
3. Risk: Despite the assumption of a lower risk the risk of business failure is high there is a wide range of measures that you will encounter all around the globe and some will put it to as high as 97% in the first ten years.
4. Business Model: And in terms of processes and procedures, they are limited in nature, just to cater to the needs of the area that they are targeting or the niche that they’re targeting.Is well known much in advance. or at least the elements of it; how the value will be created and appropriated is crystal clear at the onset or at least there is clarity on the elements of it.
5. Funds: with your own money, your own savings, or family funds and start generating revenue pretty much straight away.

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Startup

1. Goal: On the contrary, in case of a startup we start a business with the perception of creating a unicorn or a dragon or pretty much a billion-dollar or our company where the entire fund is returned. So we are hoping to build a large organization.
2. Market: we are targeting a niche for a very large geographical area. So that need might exist among people with a similar type of persona, but we targeting the globe, or the entire population will give us a very large target market and opportunity to grow. Either our market is large, our perception of this market is very large.
3. Risk: As there is a large possibility of business failure because the business model; because you’re trying to grow into a unicorn or dragon and if you are not on the right path, or if you are unlikely to reach that or if there is a competition or change in the business model, the chances of business failure is extremely high. As the risks are similar to small business but there is a highly likely chance of much higher reward for similar risk.
4. Business Model: Business model, though it’s known, it needs to be defined constantly, which is usually called pivoting or changing the direction as you go along. Or some of my literary friends might call it creating a story on the fly based on how you are experiencing a particular part of the journey. The other aspect of a startup is the processes that need to be tightened from early on. There is a lot of uncertainty there. The businesses growing there is a constant need for refinement of the process while targeting a very large chunk of customers. So that is again a focus on acquiring customers at a rapid rate compared to what you would do in a small business.
5. Funds: As the goal is higher, the requirements of funds are higher and the people who are funding your business might decide that there is no longer need to fund the business because there is a greater risk or perceived risk in the business model.

These are the key themes that set the small business and startups apart.

As there are similar risks in both there is value to uncovering a unicorn or dragon in a small business.

So these are some of the key differentials that highlight the difference between a startup and a small business.

© Sameer Babbar

http://www.sameerbabbar.com