Start-ups and Small Businesses are Different

A few months ago I wrote about how Dude, It's Marketing would become more focused on the different strategies and tactics that can be used to launch your start-up and put it on the map. While this allows me to cover a variety of marketing topics, I thought this focus was helpful because a start-up has a different set of challenges than a larger company in terms of being a young company with fewer resources (both people and money) and the pressure to make sales now. OK that last point is true for companies large and small.

However, I got to thinking recently about whether a start-up is the same as a small business or not. I know a lot of people may treat them as one and the same because both are small. I believe that they are fundamentally different and thought it would be good to explore this topic and see how strong the differences are between the two and what you think (which you can tell me in the comments below).

First let’s quickly take a look at what Wikipedia says about each:

• Startup: “A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets.” More…

• Small business: “A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales.” More…

In looking at both of these definitions, two things immediately jump out as fundamental differences. First and foremost, almost all start-ups, but especially those in the technology space, have aspirations to be large companies some day and some may even wish to pursue world domination. On the other hand, most small businesses don’t want to grow much bigger than a few locations (at most) or a small staff, although there are always exceptions. So while both begin as small companies, I’ve never seen a start-up business plan that did not talk about becoming bigger and generating millions of dollars in revenue some day.

The other big difference is where the funding comes from. Small businesses are privately funded, often by the owner or a close circle of friends, with maybe some help in the form of a loan from a bank or similar institution. While start-ups may start that way with some founders providing the initial funding, most will eventually turn to venture capitalists or angel investors to help take it to the next stage. And, for most that stage is ultimately an IPO or purchase by a larger competitor, which rarely happens to the small business.

Obviously there are other differences, including the fact that start-ups tend to be technology companies in many cases whereas small business are in many more industries, but the two differences above are the key ones and what I’d like to explore in terms of their impact on how the company is launched and run.

Because it will take more words than what I should put in this post, I’ll leave the discussion for a subsequent blog post to look at what the growth and funding differences do to a start-up in terms of marketing strategies. I would really appreciate a guest post from the other perspective about what these differences mean to a small business as I’m far from an expert in that area. Let me know below if you’re interested in helping me in the comments below or email me at bziolo [at] yahoo.com. Stay tuned…

Comments

[Jordan Flipsyde]

A very well written article I must say.
Personally I am rather new cause I have only been listening to electronic music for only the past 1.5 years.

[Aysu]

Thanks for hosting!! Thanks for stpnpiog by and commenting on my photo box. Ya know I have had a camera in my hands since high school (yes I was on the yearbook staff....I was one of those annoying ones too!!!) I never thought of the poster board idea either. It amazes me how great everything looks on it. It's so simple, it's just silly!! I love the name of the original post on Etsy. The guy called it Lightbox...Schmightbox!! HAHA!