Stop Calling Your Small Business a ‘Startup’

There is a lot of confusion and misinformation in the world of business surrounding the terms startup and entrepreneur. Lots of people use these terms without knowing exactly what is a startup and who is an entrepreneur. Sometimes, the person who is starting a small business is often termed as an entrepreneur and the small business is wrongly labelled as a startup.

But having a clear idea about these terms and the difference between a startup and small business is crucial for both the person who is starting a small business or that entrepreneur who is thinking of founding a startup.

Without having a clear idea about these subtle issues, a lot of major things will go wrong in the business. All the important things like planning, marketing and selling depend upon having a clear idea of the business’s identity. So, if a small business owner wrongly thinks of themselves as an entrepreneur then they are likely to fall into a lot of messy troubles.

In this regard, here we will discuss the difference between a startup and a small business and will tell you why you should not call your small business a startup.

What Is a Startup?

According to Wikipedia, a startup is “an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing a viable business model around the innovative product, service, process or a platform.”

So, from this definition of startup, we can see that in order for a business to be a startup it has to be entrepreneurial, newly emerged, fast-growing and innovative. Startups are founded by entrepreneurs who seek to grow rapidly by offering a newly invented product or service for solving a problem that their target market faces. A startup needs to have a unique product or service to offer that was not seen till now by the market and it also has to seek faster growth to go public or getting acquired as soon as possible.

Startups seek to become a public company or get merged with larger corporations in order to pay the funders as soon as possible. Angel investors, venture capitalists and others fund a startup with a view to getting their ROI back as soon as possible.

Starting a Small Business

A small business, on the other hand, does not have to be innovative and fast growing. A small business does not seek so big a target market to become a public company any time soon. Nor a small business must have a scalable business model.

A small business can be any business offering an already known product or service to a localized group of the target market. Contrary to a startup, a small business aims at making a source of stable income for themselves and the employees for the foreseeable future instead of keeping growing into a national or an international venture.

Now, let’s exemplify the difference between a startup and small business. Consider Uber. It offered a service that was not seen by their target market before and soon became a global company through the fast pace growth from a new entrepreneurial venture.

On the other hand, take your local coffee shop as an example. It is not offering anything new. It is just looking to serve the local community and make a livelihood out of it for themselves and their employees. So, it is a small business. Although eventually, it could become a national or global coffee shop chain, it will never be a startup as it never offered anything innovative nor targeted rapid business growth.

Why Does It Matter?

Now you might be asking, why is it necessary for you to be so clear about what is what? What will happen if you call your small business a startup?

Yes, it does matter and you are likely to get in trouble if you call your small business startup. Mostly, because the model of business planning, marketing processes and funding procedures are a world apart in the two cases.

While starting a small business, you already know who your target market is and you can market accordingly. But in the case of a startup, you have to take a lot of guesses and keep exploring a lot of marketing messages and methods before you discover who exactly your target is.

So, being a small business if you market like a startup you are likely to miss out a substantial amount of your actual target audience. Besides, unlike startups, a small business also have an upper hand in that it already knows what its business plan or model will be. Moreover, in the case of funding, if you approach the sources that are looking to fund startups, you are likely to become rejected and disappointed.

Besides, there are lots of other reasons why you should not call yourself a startup. Almost 90% of all startups fail and if that amount of small businesses failed then the economy of any democracy is likely to suffer a crash. Small businesses are the fundamental basis of the economy. So, be proud of being what you really are.