The Difference Between Entrepreneurial Startups and Small Businesses
What's The Difference Between A Startup and A Small Business?
Calling a small business a ‘startup’ is a misnomer that is easily understandable. However, though they are related, these entities are not the same thing. A true startup tends to introduce or improves upon a new concept, process, or product that causes disruption in that industry (or creates an entirely new industry altogether). A startup has the potential to impact the way things are done in our society. A small business on the other hand is an entity that is run by someone trying to make a living. Small businesses are also sometimes called “lifestyle businesses”, traditionally represented by shops, restaurants or consulting agencies and most recently can be displayed in the trend of wellness coaching or branding consulting.
The biggest difference between a startup and a small business? The difference is that the goal of a high impact entrepreneur is not to stay small. And I’m not talking reaching for a goal of 6 figures. I’m talking goals of millions of dollars and national and even international reach.
If you are trying to grow a small business, that’s awesome, I’ve been there and it is hard work. Probably the most stressed I’ve ever felt in my life (and I’ve taken the MCAT Exam)! Unfortunately, what you’ll take away from this website isn’t for you. I want to stress that following the buildup of a high-impact entrepreneurial venture will not benefit you in any way. Being a small or even growing business owner requires management skills and hands on work at the service you provide. Being an entrepreneur typically means you don’t run the day to day logistics (trust me I can barely manage my email account). Throughout the blog posts you’ll see that skills and understanding you’ll need to launch a startup doesn’t coincide with what it takes to run a small business.
Startups are Risky Business Literally
One of the biggest aspects of a startup is risk. A lot of the risk you assume as a startup entrepreneur exists in the build out. Anything you do before you officially launch your app or product is subject to change at the drop of a hat. Maybe one day you don’t think there’s another key player and the next you realize you have bigger competition than you originally thought.
There is even a math equation that has been developed to explain the type of risk that a startup founder faces when developing their app or product. No, I will not subject you to an abstract and complicated mathematical model that won’t have any impact on your success.
But I mentioned the complicated mathematical model to emphasize how big the concept of risk is. Someone somewhere with a pretty high-level degree thought that the amount of risk involved in startup development was big enough to give it its own math problem…
If You Aren’t Failing Even Just a Little Bit Are You Even Breathing?
This is a touchy subject for everyone. Remember that small business I mentioned earlier? Yea it failed. Miserably. Like in debt, lost some major connections, and a friendship miserable. All in the course of 1 year.
But man did I learn my lesson and I didn’t need an abstract mathematical equation to learn it.
Failure is so common, you’ve failed (in case you didn’t know) you’ve definitely failed at something. But that doesn’t make you a failure, it makes you educated.
According to the SBA about 50% of all new businesses will survive 5+ years and only 1/3 will survive 10+ years. And did you know that 8/10 entrepreneurs fail within 18 months… Heck I would have loved to have lasted 18 full months! That means entrepreneurs fail a lot, but when they don’t fail, they are like dynamite, breaking down the walls of “the way it’s always been done” and rebuilding to change people’s lives. Yes, failure sucks, but no it doesn’t define who we are and the end results can be exponential.
Would you like to know the key to failure? Resilience. Prodigious leaders fail, but they wear the right gear. A concept I read in a book on leadership in college has stuck with me for years.
Leaders have the ability to regain vital optimism, and are able to navigate challenging situations with a bounce-back attitude.
Knowledge is power, and that is especially true when trying to navigate failures.
Some of the Reasons that Startups Fail
Why do startups fail? You might ask. Well there are a few generic reasons.
1. Lack of a tested business model
2. Mismanagement of resources
3. No accountability in performance and the organization of systems and processes
Your job as a startup founder is to identify anything that will cause you to fail, plan for it if it is inevitable and be genuine in seeking ways to avoid it.
My advice? Find a mentor for every aspect of your business in which you think you might be weak. If you aren’t good at money find a friend who is an accountant or someone you know who IS good at money. Ask them to be on your advisory board and learn what you can from them. This goes for anything you could see yourself failing at.
Do you have a new venture you’ve been thinking about? Here are the three action steps you should take this week to get you going!
1. Figure out if your idea already belongs to an industry, if it does, research new trends in that industry, consume as much content as you can on it, and find any key players (other startups or companies) who are attempting the same or similar concept. Type out a research report with the following headings:
A. A history of my Industry
B. New Trends in my Industry
C. What Can Be Improved on or Added to The Industry
D. Where will the Industry be in 5, 10, and 15 years (make predictions as silly as you think they might be!)
E. Key Players
2. Write or type out the basic business idea (service or product).
3. Write out what makes your idea new, innovative, or how it improves upon something. Think of this as a persuasive essay, this will be the basis for your startup pitch later down the road.
Now that you’ve come to understand the difference between a startup and a small business, take some time this week to see if #startuplife is what you are drawn to. It’s a huge risk, but holds the potential for a huge reward