What is the difference between a startup and a small business?
As the English language contains many confusions about its right tenses and uses of verbs, in the business language the biggest confusion is exactly this – Small business or a startup?
Small businesses are very often misunderstood for startups and vice versa.
However, the truth is there are a lot of major differences between these two.
So, let’s jump right into the contrasts:
When it comes to the relationship with funding, startups, in fact, require a different financial investment than most of the small businesses. Therefore, small businesses mostly reply to grants and loans while the startups tend to rely on their investors’ capital.
This is a very important point and these entities think about growth much differently. Keep this in mind: Startups are designed to grow faster. What I mean when I say a design is that the startups always have something they can sell to a large group of people or a specific large market.
Whilst, on the other hand, most of the businesses cannot. Everyone who owns a business knows that you don’t really need a big market to operate a business. You just need to properly serve those who you are targeting. To simplify, startups are meant to scale. Small businesses are not. As the entrepreneur, Paul Graham said ”That’s the difference between Google and a barbershop. A barbershop doesn’t scale.” I hope this makes sense.
The basic organizational function of one startup is to search for a scalable and repeatable business model. That’s why startups are temporary and the small businesses once stabilized and adjusted for its perfect market, can exist forever.